What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-12 · 267 added, 273 removed, 217 unchanged (71% of the section changed)

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(Amounts in thousands, except share and per share amounts)

September 30,

Current assets:

Cash and cash equivalents

Tax credit and other receivables

Prepaid expenses

Prepaid expenses and other current assets

Total current assets

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Operating lease right-of-use asset

Security deposit

Security deposits and other non-current assets

Property, equipment and leasehold improvements, net

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Accrued expenses

Term loan - current portion

Operating lease liability - current portion

Total current liabilities

Term loan - long term portion

Term loan derivative liability

Operating lease liability - long term portion

Total liabilities

Commitments and contingencies (Note 11)

Stockholders’ equity (deficit):

Stockholders’ equity

Preferred stock:

$0.001 par value;

5,000,000 shares authorized at March 31, 2021

and December 31, 2020;

no shares issued or outstanding at March 31, 2021 or

December 31, 2020.

Common stock:

$0.001 par value;

200,000,000 shares authorized at September 30, 2020

and December 31, 2019, respectively;

200,000,000 shares authorized at March 31, 2021

and December 31, 2020;

and 19,914,407 and 18,546,786 shares

issued and outstanding at September 30, 2020 and December 31, 2019, respectively.

Preferred stock:

$0.001 par value;

5,000,000 shares authorized at September 30, 2020

and December 31, 2019, respectively;

no shares issued or outstanding at

September 30, 2020 or December 31, 2019.

issued and outstanding at March 31, 2021 and December 31, 2020, respectively.

Additional paid-in capital

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Total liabilities and stockholders’ equity

See accompanying notes.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Trevi Therapeutics, Inc.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

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Loss from operations

Other income (expense):

Change in fair value of obligation for loan success fee

Other (expense) income:

Change in fair value of term loan derivative liability

Interest income

Interest expense

Total other income (expense), net

Total other (expense) income, net

Loss before income tax benefit

Income tax benefit

Accretion of redeemable convertible preferred stock

Dividends accrued on redeemable convertible preferred stock

Adjusted net loss attributable to common stockholders

Basic and diluted net loss per common share outstanding

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attributable to common stockholders, basic and diluted

See accompanying notes.

Trevi Therapeutics, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Amounts in thousands, except share amounts)

Stockholders’

Preferred Stock

Balance at June 30, 2020

Stock-based compensation

Issuance of common stock from exercise of stock

Issuance of common stock under the at-the-market sales

agreement, net of commissions and fees

Balance at September 30, 2020

Balance at June 30, 2019

Stock-based compensation

Balance at September 30, 2019

See accompanying notes.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Trevi Therapeutics, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Condensed Consolidated Statements of Stockholders’ Equity

(Amounts in thousands, except share amounts)

Stockholders’

Preferred Stock

Balance at December 31, 2020

Stock-based compensation

Issuance of common stock from exercise of stock

Issuance of common stock from employee stock

purchase plan

Issuance of common stock under the at-the-market sales

agreement, net of commissions and fees

Balance at September 30, 2020

agreement, net of commissions and allocated fees

Balance at March 31, 2021

Balance at December 31, 2019

Stock-based compensation

Issuance of common stock from exercise of stock

Issuance of Series C redeemable convertible preferred

stock, net of issuance costs

Dividends accrued on redeemable convertible preferred

Accretion (amortization) of premium (discount) on

issuance of redeemable convertible preferred

Accretion of discount on investor rights/obligation

Adjustment for excess (shortfall) of fair value over

liquidation value of redeemable convertible

preferred stock

Accretion of issuance costs on redeemable convertible

preferred stock

Conversion of redeemable convertible preferred stock to

common stock in connection with initial public

Issuance of common stock upon completion of initial

public offering, net of underwriting discounts and

commissions and issuance costs

Issuance of common stock upon completion of private

placement, net of private placement agent fees

Balance at September 30, 2019

See accompanying notes.

Balance at March 31, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

Trevi Therapeutics, Inc.

1 unchanged sentence

(Amounts in thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Changes in fair value of obligation for loan success fee

Accretion/accrual of term loan discounts and debt issuance

Change in fair value of term loan derivative liability

Accretion/accrual of term loan discounts and debt issuance costs

Stock-based compensation

Changes in operating assets and liabilities:

Prepaid expenses

Prepaid expenses and other current assets

Accounts payable

Accrued expenses and other expenses

Accrued expenses and other

Net cash used in operating activities

Investing activities

Acquisitions of property, equipment and leasehold improvements

Net cash used in investing activities

Financing activities

Payment of loan success fee

Proceeds from term loan

Financing costs of term loan

Proceeds from at-the-market sales, net commissions and fees

Proceeds from exercises of stock options

Proceeds from the employee stock purchase plan

Proceeds from sale of Series C redeemable convertible preferred stock, net of

issuance costs

Proceeds from issuance of common stock upon completion of initial public offering, net

of underwriting commissions and discounts

Proceeds from private placement, net of private placement agent fees

Proceeds from at-the-market sales, net of commissions

Payments of offering costs

Net cash provided by financing activities

Net cash increase (decrease)

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information

Interest paid

Supplemental disclosure of non-cash financing activities

Offering costs included in accounts payable and accrued expenses

Financing costs included in accounts payable and accrued expenses

Accretion on redeemable convertible preferred stock

Dividends accrued on redeemable convertible preferred stock

See accompanying notes.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Trevi Therapeutics, Inc.

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Trevi Therapeutics, Inc.

(“Trevi” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of Haduvio (nalbuphine ER) to treat serious neurologically mediated conditions.

The Company is currently developing Haduvio for the treatment of chronic pruritus, chronic cough in patients with idiopathic pulmonary fibrosis (“IPF”), and levodopa-induced dyskinesia (“LID”) in patients with Parkinson’s disease.

(“Trevi” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of the investigational therapy Haduvio (nalbuphine ER) to treat serious neurologically mediated conditions.

The Company is currently developing Haduvio for the treatment of chronic pruritus associated with prurigo nodularis and chronic cough in patients with idiopathic pulmonary fibrosis (“IPF”).

The Company is also developing Haduvio in levodopa-induced dyskinesia (“LID”) in patients with Parkinson’s disease.

These conditions share a common pathophysiology that is mediated through opioid receptors in the central and peripheral nervous systems.

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Nalbuphine is currently the only opioid approved for marketing that is not classified as a controlled substance in the United States and most of Europe.

On April 22, 2019, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a one-for 9.5 reverse stock split of the Company’s common stock, which resulted in a proportional adjustment to the existing conversion ratios for each series of the Company’s redeemable convertible preferred stock.

Accordingly, all share and per share amounts in the Condensed Consolidated Financial Statements have been retrospectively adjusted, where applicable, to reflect the effect of the reverse stock split and adjustments of the redeemable convertible preferred stock conversion for all periods presented.

The accompanying financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

Since inception, the Company has financed its operations primarily through private placements of its redeemable convertible preferred stock and convertible notes as well as borrowings under term loan facilities, with proceeds from the Company’s initial public offering (“IPO”) and concurrent private placement completed in May 2019, and with sales of common stock under the Company’s sales agreement with SVB Leerink LLC (the “ATM Sales Agreement”).

The Company has incurred recurring losses since inception, including net losses attributable to the Company of $23.2 million for the nine months ended September 30, 2020 and $26.1 million for the year ended December 31, 2019.

In addition, as of September 30, 2020, the Company had an accumulated deficit of $137.5 million.

The Company expects to continue to generate operating losses for the foreseeable future.

As of November 12, 2020 , the issuance date of these Condensed Consolidated Financial Statements, the Company expects that its cash and cash equivalents of $53.3 million as of September 30, 2020, will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these Condensed Consolidated Financial Statements.

In accordance with Accounting Standards Update (“ASU”) No.

2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) (“ASU No.

2014-15”) , management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

The Company’s Condensed Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

Since inception, the Company has financed its operations primarily through private placements of convertible preferred stock and convertible notes prior to its initial public offering, borrowings under its prior term loan facility, proceeds from its initial public offering and concurrent private placement completed in May 2019, sales of its common stock pursuant to the sales agreement with SVB Leerink LLC it entered into in June 2020 (the “ATM Sales Agreement”) (Note 7) and the term loan facility with Silicon Valley Bank that the Company entered into in August 2020.

The Company has incurred recurring losses since inception, including net losses of $8.4 million for the three months ended March 31, 2021 and $32.8 million for the year ended December 31, 2020.

As of March 31, 2021, the Company had cash and cash equivalents of $41.6 million.

The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $155.3 million as of March 31, 2021.

The Company expects to continue to generate losses for the foreseeable future.

As of May 13, 2021, the date of issuance of these Condensed Consolidated Financial Statements, the Company expects that its cash and cash equivalents as of March 31, 2021, will not be sufficient to fund its current business plan including related operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these Condensed Consolidated Financial Statements.

The Company plans to seek to address this condition by raising additional capital to finance its operations.

The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing.

Therefore, it is not considered probable, as defined in ASU No.

2014-15, that the Company’s plans to raise additional capital will alleviate the substantial doubt regarding its ability to continue as a going concern.

To execute its business plans, the Company will need substantial funding to support its continuing operations and pursue its growth strategy.

Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of common stock in public offerings and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.

The Company may not be able to obtain financing when needed, on acceptable terms or at all.

The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

If the Company is unable to obtain funding, the Company could be forced to delay, reduce or abandon its product development programs or commercialization efforts, which could adversely affect its business prospects.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2020 and 2019 included herein, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim information.

Certain information and footnote disclosure typically prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations.

The accompanying unaudited Condensed Consolidated Financial Statements and notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report on Form 10-K”).

In the opinion of management, the unaudited Condensed Consolidated Financial Statements reflect all adjustments, which include normal recurring adjustments necessary for the fair presentation of the Company’s interim financial statements presented.

The results of operations for the interim periods are not necessarily indicative of the results expected for the full year or any subsequent period.

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three months ended March 31, 2021 and 2020 included herein, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim information.

Certain prior year balances have been reclassified to conform to the current year presentation.

Such reclassifications did not affect loss from operations or net loss.

Certain information and footnote disclosures typically prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations.

The accompanying unaudited Condensed Consolidated Financial Statements and notes should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Report on Form 10-K”).

The accompanying Condensed Consolidated Financial Statements include the accounts of Trevi Therapeutics, Inc.

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All amounts presented are in thousands of dollars, except share and per share amounts, unless noted otherwise.

The Company has evaluated events occurring subsequent to September 30, 2020 for potential recognition or disclosure in the Condensed Consolidated Financial Statements and concluded there were no subsequent events that required recognition or disclosure other than those provided.

The Company has evaluated events occurring subsequent to March 31, 2021 for potential recognition or disclosure in the Condensed Consolidated Financial Statements and concluded there were no subsequent events that required recognition or disclosure.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of the expenses during the reporting periods.

Significant estimates and assumptions reflected in these Condensed Consolidated Financial Statements include, but are not limited to, the recognition of research and development (“R&D”) expenses and the valuation of redeemable convertible preferred stock, common stock and stock-based awards.

Significant estimates and assumptions reflected in these Condensed Consolidated Financial Statements include, but are not limited to, the recognition of research and development (“R&D”) expenses, the valuation of stock-based awards and the valuation allowance of deferred tax assets resulting from net operating losses.

In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.

On an ongoing basis, management evaluates its estimates in light of changes in circumstances, facts and experience.

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Actual results could differ from those estimates.

The inputs into the Company’s estimates also considered the economic implications of COVID-19 on the Company’s estimates.

Unaudited Interim Financial Information

The accompanying interim Condensed Consolidated Balance Sheet as of September 30, 2020, the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 are unaudited.

The unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the Company’s opinion, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statements of its financial position as of September 30, 2020, the results of its operations for the three and nine months ended September 30, 2020 and 2019, and its cash flows for the nine months ended September 30, 2020 and 2019.

The results for the three and nine months ended September 30, 2020 and 2019 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim period, or any future year or period.

The accompanying interim Condensed Consolidated Balance Sheet as of March 31, 2021 and the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Stockholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 are unaudited.

The unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the Company’s opinion, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statements of its financial position as of March 31, 2021 and the results of its operations and its cash flows for the three months ended March 31, 2021 and 2020.

The results for the three months ended March 31, 2021 and 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2021, or any other interim period, or any future year or period.

Cash Equivalents

The Company classifies short-term, highly liquid investments with an original term of three months or less at the date of purchase as cash equivalents.

Fair Value Measurements

The Company’s financial instruments have consisted of cash and cash equivalents, tax credit and other receivables, accounts payable, accrued expenses, term loans, term loan derivative liability and obligation for loan success fee (Note 6).

The Company’s financial instruments have consisted of cash and cash equivalents, other current assets, accounts payable, accrued expenses, term loans and term loan derivative liability (Note 6).

Fair value estimates of these instruments are made at a specific point in time, based on relevant market information.

The carrying amounts of cash and cash equivalents, tax credit and other receivables, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

The carrying amounts of cash and cash equivalents, other current assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

The carrying amount of the term loan approximates its fair value due to its floating market-based interest rate.

The fair value of the term loan derivative liability is estimated utilizing a probability-weighted cash flow approach (Note 6).

The term loan derivative liability is recorded at fair value, which is estimated utilizing a probability-weighted cash flow approach (Note 6).

Current accounting guidance defines fair value, establishes a framework for measuring fair value in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures , and requires certain disclosures about fair value measurements.

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Level 3—Unobservable inputs—includes amounts derived from valuation models where one or more significant inputs are unobservable and require the company to develop relevant assumptions.

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of September 30, 2 020 and the basis for that measurement, by level within the fair value hierarchy (Note 6).

There were no such financial liabilities as of December 31, 2019 :

September 30,

Financial liabilities

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis and the basis for that measurement, by level within the fair value hierarchy (Note 6):

March 31, 2021

Financial assets carried at fair value:

Money market funds (1)

Financial liabilities carried at fair value:

Term loan derivative liability

December 31, 2020

Financial assets carried at fair value:

Money market funds (1)

Financial liabilities carried at fair value:

Term loan derivative liability

(1) Included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

The following table represents a roll-forward of the fair value of Level 3 instruments (significant unobservable inputs):

September 30,

Financial liabilities

Balance at beginning of year

Term loan derivative liability

Unrealized loss on Series C redeemable convertible preferred stock liability

Unrealized loss on obligation for loan success fee

Net settlements (2)

Change in fair value of term loan derivative liability

Ending balance

The balance at January 1, 2019 relates to the $460 obligation for the loan success fee and the $1,096 fair value of the Series C redeemable convertible preferred stock liability at the time of the third tranche of the Series C Preferred Stock financing in January 2019.

The net settlements for the year ended December 31, 2019 relate to the $1,096 fair value of the Series C redeemable convertible preferred stock liability at the time of the third tranche of the Series C Preferred Stock financing in January 2019 and the payment of the $675 obligation for the loan success fee in May 2019.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements (consisting of furniture, computer and office equipment and leasehold improvements) are stated at cost, net of accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets (three years for computer equipment, five years for furniture and office equipment, and the shorter of the term of the lease or useful life for leasehold improvements).

Impairment of Long-Lived Assets

ASC 360, Property, Plant, and Equipment, addresses the financial accounting and reporting for impairment or disposal of long-lived assets.

The Company reviews the recorded values of long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable.

Foreign Currency Transactions

The Company, at times, contracts with vendors and consultants outside of the United States, resulting in liabilities denominated in foreign currency.

The transactions are recorded in U.S.

dollars on the transaction dates and any currency fluctuation through the payment date is recorded as currency gains or losses in the Condensed Consolidated Statements of Operations.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.

After consummation of an equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.

After consummation of an equity financing, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering.

Should the planned equity financing no longer be considered probable of being consummated, the deferred offering costs are expensed immediately as a charge to operating expenses.

Deferred offering costs relating to the Company’s ATM Sales Agreement were $291 as of September 30, 2020, excluding $77 which has been recorded as a reduction to stockholders’ equity (deficit) in connection with sales under the agreement.

The Company’s IPO was completed in May 2019 and IPO costs incurred in 2019 were recorded as a reduction to stockholders’ equity (deficit).

As a result, deferred offering costs were $0 as of December 31, 2019.

Basic and Diluted Net Income (Loss) per Common Share

Basic and diluted net loss per common share outstanding is determined by dividing net loss, as adjusted for accretion and accrued dividends on redeemable convertible preferred stock, by the weighted average common shares outstanding during the period.

For all periods presented, outstanding shares of Series A redeemable convertible preferred stock, shares of Series B redeemable convertible preferred stock, shares of Series C Preferred Stock, if any, and shares issuable upon exercise of stock options have been excluded from the calculation because their effects would be anti-dilutive.

Therefore, the weighted average common shares used to calculate both basic and diluted net loss per share are the same for each of the periods presented.

Recently Adopted Accounting Pronouncements

There have been no new accounting pronouncements adopted during the nine months ended September 30, 2020.

Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements during the nine months ended September 30, 2020, as compared to the recent accounting pronouncements described in Note 2 to the Company’s audited consolidated financial statements for the year ended December 31, 2019 included in the Annual Report on Form 10-K, which could be expected to materially impact the Company’s unaudited Condensed Consolidated Financial Statements.

Prepaid Expenses

Prepaid expenses consist of the following:

September 30,

Prepaid R&D payments

Prepaid corporate insurance

Effective March 1, 2013, the Company entered into a lease for office space in New Haven, CT and commencing March 1, 2018, the Company entered into the First Amendment to the lease.

The leased space approximates 5,600 square feet and the lease has a term of 60 months.

The lease requires monthly payments ranging from approximately $10 to $11 through February 1, 2023 and provides for two designated months of free rent.

Deferred offering costs relating to the Company’s ATM Sales Agreement were $162 and $284 as of March 31, 2021 and December 31, 2020, respectively, excluding $279 and $105, respectively, which has been recorded as a reduction to stockholders’ equity in connection with sales under the agreement.

Research and Development Expenses

All of the Company’s research and development expenses consist of expenses incurred in connection with the development of Haduvio.

These expenses include certain payroll and personnel expenses, including stock-based compensation, consulting costs, contract manufacturing costs and fees paid to clinical research organizations (“CROs”) to conduct certain research and development activities on the Company’s behalf.

The Company does not allocate its costs by each indication for which it is developing Haduvio, as a significant amount of the Company’s development activities broadly support all indications.

In addition, several of the Company’s departments support the Company’s Haduvio drug candidate development program and the Company does not identify internal costs for each potential indication.

The Company expenses both internal and external research and development expenses as they are incurred.

Accrued Research and Development Expenses

The Company has entered into agreements with CROs, contract manufacturing organizations (“CMOs”) and other companies that provide services in connection with the Company’s research and development activities.

The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs.

The estimated costs of research and development provided, but not yet invoiced, are included in accrued expenses on the Condensed Consolidated Balance Sheets.

If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly.

Payments made to CROs, CMOs and other companies under these arrangements in advance of the performance of the related services are recorded as prepaid expenses or as non-current deposits, as applicable, and are recognized as expenses as the goods are delivered or the related services are performed.

All patent-related costs in connection with filing and prosecuting patent applications are expensed to general and administrative expense as incurred, as recoverability of such expenditures is uncertain.

Stock-Based Compensation

The Company accounts for stock-based compensation arrangements with employees and non-employees for consultancy services in accordance with ASC 718, Stock Compensation (“ASC 718”).

ASC 718 requires the recognition of compensation expense, using a fair value based method, for costs related to all stock-based payments including stock options.

The Company’s determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option-pricing model for stock options with time-based and performance-based vesting, and is impacted by the price of its common stock as well as changes in assumptions regarding a number of complex and subjective variables.

These variables include expected term that options will remain outstanding, expected common stock price volatility over the term of the option awards, risk-free interest rates and expected dividends.

The fair value is recognized over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period (usually the vesting period) on a straight-line basis.

For performance-based vesting, the fair value is also recognized on a straight-line basis over the requisite service period based on whether the performance conditions are probable.

The Company reassesses the probability of achieving the performance conditions at each reporting date.

Forfeitures are accounted for as they occur.

Estimating the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of complex variables.

Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized.

These inputs are subjective and generally require analysis and judgment to develop.

Expected Term—The expected term assumption represents the weighted average period that the stock-based awards are expected to be outstanding.

The Company has elected to use the “simplified method” for estimating the expected term of the options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

Expected Volatility—For all stock options granted to date, the volatility data was estimated based on a study of publicly traded industry peer companies.

For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies.

Expected Dividend—The Black-Scholes valuation model calls for a single expected dividend yield as an input.

The Company currently has no history or expectation of paying cash dividends on its common stock.

Risk-Free Interest Rate—The risk-free interest rate is based on the yield available on U.S.

Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award.

Prior to the Company’s IPO in May 2019, the estimated fair value of the common stock underlying the Company’s stock options was determined at each grant date by the Company’s board of directors, with input from management.

All options to purchase shares of common stock were intended to be exercisable at a price per share not less than the per share fair value of the Company’s common stock underlying those options on the date of grant.

In the absence of a public trading market for the Company’s common stock prior to the Company’s IPO in May 2019, on each grant date, the Company developed an estimate of the fair value of its common stock based on the information known to the Company on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the common stock, and in part on input from an independent third-party valuation.

As is provided for in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Company generally relied on valuations for up to twelve months unless the Company had experienced a material event that would have affected the estimated fair value of its common stock.

The valuations of the Company’s common stock performed prior to the Company’s IPO in May 2019, were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).

The methodology to determine the fair value of common stock included estimating the fair value of the enterprise using a market approach, which estimates the fair value of the Company by including an estimation of the value of the business based on guideline public companies under a number of different scenarios.

The assumptions used to determine the estimated fair value of the Company’s common stock were based on numerous objective and subjective factors, combined with management judgment, including external market conditions affecting the pharmaceutical and biotechnology industry and trends within the industry;

the Company’s stage of development;

the rights, preferences and privileges of the Company’s convertible preferred stock relative to those of the Company’s common stock;

the prices at which the Company sold shares of convertible preferred stock;

the Company’s financial condition and operating results, including the Company’s levels of available capital resources;

the progress of the Company’s research and development efforts, stage of development and business strategy;

equity market conditions affecting comparable public companies;

market conditions;

and the lack of marketability of the Company’s common stock.

The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date.

In accordance with the Practice Aid, the Company considered the following methods:

Option Pricing Method (“OPM”)—The OPM treats common stock and convertible preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

Under this method, the common stock has value only if the funds available for distribution to stockholders exceed the value of the liquidation preferences at the time of a liquidity event, such as a strategic sale or merger.

The common stock is modeled as a call option on the underlying equity value at a predetermined exercise price.

In the model, the exercise price is based on a comparison with the total equity value rather than, as in the case of a regular call option, a comparison with a per share stock price.

Thus, common stock is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value

immediately after the convertible preferred stock liquidation preference is paid.

The OPM uses the Black-Scholes option-pricing model to price the call options.

This model defines the securities’ fair values as functions of the current fair value of a company and uses assumptions, such as the anticipated timing of a potential liquidity event and the estimated volatility of the equity securities.

Probability Weighted Expected Return Method (“PWERM”)—Under the PWERM methodology, the fair value of common stock is estimated based upon an analysis of future values for the company, assuming various outcomes.

The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock.

The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock.

Hybrid Method—The hybrid method is a PWERM where the equity value in one of the scenarios is calculated using an OPM.

In the hybrid method used by the Company, it considered an IPO as the other potential future liquidity event.

The equity value for the IPO scenario was determined using the guideline public company (“GPC”), method under the market approach.

The relative probability of the IPO scenario was determined based on an analysis of market conditions at the time and expectations as to the timing and likely prospects of the IPO at each valuation date.

In application of the GPC method, the Company considered publicly traded companies in the biopharmaceutical industry that had a similar profile to the Company’s as well as recently completed IPOs as indicators of estimated future value in an IPO.

The Company then discounted that future value back to the valuation date at an appropriate discount rate.

In determining the estimated fair value of the Company’s common stock prior to Company’s IPO in May 2019, the board of directors considered the fact that the Company’s stockholders could not freely trade the Company’s common stock in the public markets.

Accordingly, the Company’s board of directors applied discounts to reflect the lack of marketability of common stock based on the weighted-average expected time to liquidity.

The estimated fair value of the Company’s common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

Subsequent to the completion of the Company’s IPO in May 2019, the fair value of the Company’s common stock has been determined based on the closing price of the Company’s common stock as reported on the date of grant on the primary stock exchange on which the Company’s common stock is traded.

The Company accounts for income taxes using the asset and liability method.

Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Deferred income tax assets are reduced, as necessary, by a valuation allowance when management determines it is more likely than not that some or all of the tax benefits will not be realized.

The Company applies the provisions of ASC 740, Income Taxes (“ASC 740”), which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.

These Condensed Consolidated Financial Statements reflect expected future tax consequences of such positions presuming the taxing authorities possess full knowledge of the position and all relevant facts.

Under ASC 842, the Company determines if an arrangement is a lease at its inception.

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As the Company’s leases do not provide an implicit rate within the lease, the Company uses its incremental borrowing rate, which is updated periodically, based on information available at the commencement date of the lease to determine the present value of the lease payments.

The incremental borrowing rate used on existing leases as of September 30, 2020 was 13.0%.

Basic and Diluted Net Loss per Common Share

Basic and diluted net loss per common share outstanding is determined by dividing net loss by the weighted average common shares outstanding during the period.

For all periods presented, shares issuable upon exercise of stock options have been excluded from the calculation because their effects would be anti-dilutive.

Therefore, the weighted average common shares used to calculate both basic and diluted net loss per share are the same for each of the periods presented.

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted ASU No.

2019-12- Income Taxes (Topic 740) , which simplifies the accounting for income taxes.

The adoption of the new guidance did not affect the Company’s Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements during the three months ended March 31, 2021, which could be expected to materially impact the Company’s unaudited Condensed Consolidated Financial Statements.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

Prepaid corporate insurance

Prepaid R&D payments

Effective March 1, 2013, the Company entered into a lease for office space in New Haven, CT and commencing March 1, 2018, the Company entered into the First Amendment to the lease.

The leased space approximates 5,600 square feet and the lease has a term of 60 months.

The lease requires monthly payments ranging from approximately $10 to $11 through February 1, 2023 and provides for two designated months of free rent.

The incremental borrowing rate used on existing leases as of March 31, 2021 was 13.0%.

The right-of-use asset also includes any lease payments related to initial direct costs and prepayments, and excludes lease incentives.

Lease expense is recognized on a straight-line basis over the lease term.

The Company had no new leases during the nine months ended September 30, 2020.

The Company’s operating leases consist of real estate and equipment, and have remaining terms ranging from approximately 3 months to 2 years and 6 months.

The Company had no new leases during the three months ended March 31, 2021.

The Company’s operating leases consist of real estate and equipment, and have remaining terms of approximately 2 years.

The Company has no financing leases.

The following table summarizes the Company’s operating leases as presented on its Condensed Consolidated Balance Sheet:

September 30,

The following table summarizes the Company’s operating leases as presented on its Condensed Consolidated Balance Sheets:

Operating lease right-of-use asset

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Total operating lease liabilities

Future minimum lease payments under the operating leases are as follows as of September 30, 2020 :

September 30,

Future minimum lease payments under the operating leases were as follows:

Total lease payments

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Carrying value of operating lease liabilities

Lease expense under operating leases, including leases of office equipment, was $31 for each of the three-month periods ended September 30, 2020 and 2019, and $93 for each of the nine-month periods ended September 30, 2020 and 2019.

Lease payments made in the three months ended September 30, 2020 and 2019 were $23 and $34, respectively, and $103 and $91 for the nine months ended September 30, 2020 and 2019, respectively, with such amounts reflected in the Condensed Consolidated Statement of Cash Flows in operating activities.

Lease expense under operating leases, including leases of office equipment, was $30 and $34 for the three months ended March 31, 2021 and 2020, respectively.

Lease payments made in the three months ended March 31, 2021 and 2020 were $34 and $45, respectively, with such amounts reflected in the Condensed Consolidated Statements of Cash Flows in operating activities.

Accrued Expenses

Accrued expenses consist of the following:

September 30,

Accrued research projects

Accrued expenses consisted of the following:

Accrued R&D projects

Accrued consulting and professional fees

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The SVB Term Loan and related obligations under the SVB Loan Agreement are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property (which is subject to a negative pledge under the SVB Loan Agreement).

If the Company fails to meet certain equity raise requirements under the SVB Loan Agreement, it will be required to deposit unrestricted and unencumbered cash equal to 100% of the principal amount of the SVB Term Loan then outstanding in a cash

collateral account with SVB, which can be used by SVB to prepay the SVB Term Loan at any time.

The SVB Loan Agreement contains customary representation s, warranties, events of default and covenants.

If the Company fails to meet certain equity raise requirements under the SVB Loan Agreement, including raising $12.0 million by June 30, 2021, the Company will be required to deposit unrestricted and unencumbered cash equal to 100% of the principal amount of the SVB Term Loan then outstanding in a cash collateral account with SVB, which can be used by SVB to prepay the SVB Term Loan at any time.

The SVB Loan Agreement contains customary representations, warranties, events of default and covenants.

The occurrence and continuation of an event of default could cause interest to be charged at the rate that is otherwise applicable plus 5.00% (unless SVB elects to impose a smaller increase) and would provide SVB with the right to accelerate all obligations under the SVB Loan Agreement, and exercise remedies against the Company and the collateral securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including foreclosure against assets securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including the Company’s cash.

In August 2020, in connection with the SVB Term Loan, the Company paid $57 in financing costs to a third party, which were recorded as deferred charges—loan and will be amortized over the life of the SVB Term Loan using the effective interest method.

Amortization of these deferred financing charges totaled $3 for each of the three and nine-month periods ended September 30, 2020, and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

Loan discount—unamortized deferred charges totaled $53 for the nine months ended September 30, 2020, and is included as a direct reduction of the carrying value of the term loan payable on the Company’s Condensed Consolidated Balance Sheet.

Amortization of these deferred financing charges totaled $6 for the three months ended March 31, 2021 and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

Loan discount—unamortized deferred charges totaled $42 and $48 at March 31, 2021 and December 31, 2020, respectively, and is included as a direct reduction of the carrying value of the term loan payable on the Company’s Condensed Consolidated Balance Sheets.

In August 2020, in connection with the execution of the SVB Loan Agreement, the Company paid $27 in financing costs to SVB, which were recorded as loan discounts.

These loan discounts are included as a reduction in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheet and will be accreted over the life of the SVB Term Loan using the effective interest method.

Accretion of these loan discounts totaled $1 for each of the three and nine-month periods ended September 30, 2020, and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

At September 30, 2020 the loan discount-financing costs balance was $26.

These loan discounts are included as a reduction in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheets and will be accreted over the life of the SVB Term Loan using the effective interest method.

Accretion of these loan discounts totaled $3 for the three months ended March 31, 2021, and is included in

interest expense in the Company’s Condensed Consolidated Statements of Operations.

At March 31, 2021 and December 31, 2020 , the loan discount-financing costs balance was $ 2 0 and $ 23 , respectively.

In connection with the SVB Loan Agreement, the Company is obligated to pay a final payment fee of $1.2 million upon repayment in full of the SVB Term Loan.

The final payment fee is being accrued over the life of the SVB Term Loan using the effective interest method and is included as an increase in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheet.

For the nine months ended September 30, 2020, $64 was accrued for the final payment fee, with such amount included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

At March 31, 2021 and December 31, 2020, $301 and $183 was accrued for the final payment fee, respectively.

Upon the occurrence of the Phase 3 Event, the interest rate on the SVB Term Loan will increase by 2.00% (the “Contingent Interest Rate Increase”) as described above.

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Accordingly, the Company accounted for the Contingent Interest Rate Increase as a derivative under ASC 815, Derivatives and Hedging, and therefore, recorded a term loan derivative liability for the Contingent Interest Rate Increase at its fair value of $187 on the Effective Date of the SVB Loan Agreement.

The Company adjusts this liability to fair value at each reporting date it remains outstanding, with such adjustments recorded as non-cash charges in other income (expense) in the Company’s Condensed Consolidated Statements of Operations.

The change in fair value of the term loan derivative liability as of September 30, 2020 as compared to the fair value at its last measurement date (its date of inception) was not significant.

Upon recording such term loan derivative liability, the Company also recorded an offsetting term loan discount – interest, to be amortized to interest expense in the Company’s Condensed Consolidated Statements of Operations through the SVB Term Loan’s maturity date.

Such amortization was insignificant in the three and nine month periods ended September 30, 2020.

The term loan discount – interest is included as a reduction in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheet as of September 30, 2020.

The term loan derivative liability is presented as a non-current liability in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2020.

The Company adjusts this liability to fair value at each reporting date it remains outstanding, with such adjustments recorded as non-cash charges in other (expense) income, net in the Company’s Condensed Consolidated Statements of Operations.

The total fair value of this liability was determined to be $202 and $196 at March 31, 2021 and December 31, 2020, respectively.

The change in fair value of the term loan derivative liability as of March 31, 2021 as compared to the fair value at its last measurement at December 31, 2020 date was $6.

The term loan derivative liability is presented as a non-current liability on the Company’s Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020.

Such amortization was $18 in the three months ended March 31, 2021.

At March 31, 2021 and December 31, 2020, the balance of the term loan discount – interest was $140 and $158, respectively, and is included as a reduction in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheets.

Fair values of the term loan derivative liability are estimated utilizing a probability-weighted cash flow approach, including variables for the timing of the Phase 3 Event and other probability estimates.

For the fair value calculations of the term loan derivative liability at its inception and at September 30, 2020, significant inputs included the Contingent Interest Rate Increase of 2.00%, a discount rate of 12.0%;

For the fair value calculations of the term loan derivative liability at March 31, 2021 and December 31, 2020, significant inputs included the Contingent Interest Rate Increase of 2.00%, a discount rate of 12.0%;

and the SVB Term Loan maturity date of February 1, 2024.

For each of the three and nine-month periods ended September 30, 2020, interest expense under the SVB Term Loan totaled $148, which includes amortization of deferred financing charges, accretion of loan discount-financing costs, accrual of the final payment fee, amortization of the term loan discount-interest and the stated interest on the SVB Term Loan, all as described above.

There was no such interest expense on the SVB Term Loan for either of the three and nine-month periods ended September 30, 2019.

As of September 30, 2020, the Company had outstanding borrowings of $14.0 million under the SVB Term Loan and the term loan

payable balance as presented in the Company’s Condensed Consolidated Balance Sheet as of September 30, 20 20 was comprised as shown below.

There were no outstanding borrowings under the SV B Term Loan as of December 31, 2019.

September 30,

For the three-month period ended March 31, 2021, interest expense under the SVB Term Loan totaled $294, which includes amortization of deferred financing charges, accretion of loan discount-financing costs, accrual of the final payment fee, amortization of the term loan discount-interest and the stated interest on the SVB Term Loan, all as described above.

There was no such interest expense on the SVB Term Loan for the three-month period ended March 31, 2020.

As of March 31, 2021 the Company had outstanding borrowings of $14.0 million under the SVB Term Loan and the term loan payable balance as presented on the Company’s Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 was comprised as shown below.

Principal outstanding under term loan

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Term loan payable, non-current

Interest expense on SVB Term Loan, which is comprised of interest payments, amortization of financing costs and the accrual of the final payment fee, is shown below for the three and nine months ended September 30, 2020.

There was no such expense under the SVB Term Loan for the three and nine months ended September 30, 2019.

Three Months Ended September 30,

Nine Months Ended

September 30,

Interest expense on the SVB Term Loan, which is comprised of interest payments, accretion and amortization of term loan discounts and the accrual of the final payment fee, is shown below for the three months ended March 31, 2021.

There was no such expense under the SVB Term Loan for the three months ended March 31, 2020.

Three months ended March 31,

Interest payments

Amortization of financing costs

Accretion and amortization of term loan discounts

Accrual of the final payment fee

Solar Capital Term Loan

On December 29, 2014, the Company entered into a loan and security agreement (the “Solar Loan Agreement”) with Solar Capital, Ltd.

and Square 1 Bank (together, “Solar”), which provided $15.0 million in debt financing (the “Solar Term Loan”).

On June 29, 2018, the maturity date of the Solar Loan Agreement, the Company made its final payments of principal and interest due to Solar in connection with the Solar Term Loan, as well as $450 in full payment of the final fee and $82 in full payment of the amendment fee.

As a result, there were no outstanding borrowings under the Solar Term Loan as of September 30, 2020 or December 31, 2019, and the Company’s obligations to Solar under the Solar Loan Agreement were terminated.

Under the terms of the Solar Loan Agreement, the Company was obligated to pay Solar a Success Fee (“Success Fee”) under a Success Fee Agreement (“Success Fee Agreement”) upon the first occurrence of an Exit Event, as defined.

The Exit Event included, among other things, the completion of a public offering of common stock.

The amount of the Success Fee was equal to 4.5% of the $15.0 million Solar Term Loan funded.

The Success Fee Agreement was scheduled to terminate on the earlier to occur of (a) payment in full of the Success Fee pursuant to its terms, or (b) December 29, 2021.

The completion of the IPO on May 9, 2019 (see Note 7) triggered the Success Fee payment obligation and the Company made payments to Solar totaling $675 in May 2019.

Upon such payments, the Success Fee Agreement terminated.

The Success Fee Agreement represented a free-standing financial instrument.

Accordingly, the Company accounted for the Success Fee provision as a derivative under ASC 815, Derivatives and Hedging, and therefore recorded an obligation for the Success Fee at its fair value on the closing date of each advance under the Solar Loan Agreement.

Upon recording such obligations for the Success Fee, the Company also recorded an offsetting loan discount, which was accreted to interest expense in the Company’s Statements of Operations through the Solar Term Loan’s maturity date.

The Company adjusted these liabilities for the Success Fee to fair value at each reporting date they remained outstanding.

As discussed above, the Success Fee was paid in May 2019;

and therefore, the total fair value of the Success Fee liabilities was $0 at each of September 30, 2020 and December 31, 2019.

The Company recorded non-cash charges in the amount of $0 for each of the three months ended September 30, 2020 and 2019, and $0 and $215 for the nine months ended September 30, 2020 and 2019, respectively, representing the changes in the fair value of these liabilities since their last measurement date.

The fair values of the obligation for the Success Fee were estimated utilizing a probability-weighted cash flow approach, including variables for the timing of the Exit Event and other probability estimates.

The non-cash charges are included in other income (expense) in the Company’s Condensed Consolidated Statements of Operations.

Stockholders’ Equity

Redeemable Convertible Preferred Stock

Upon the closing of the IPO, the Company’s outstanding redeemable convertible preferred stock, including the accrued dividends thereon, automatically converted into an aggregate of 10,381,234 shares of the Company’s common stock.

Upon such conversion of the redeemable convertible preferred stock, the Company reclassified the carrying values of the redeemable convertible preferred stock to common stock and additional paid-in capital.

As of September 30, 2020 and December 31, 2019, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 200,000,000 shares of common stock, respectively, with a par value of $0.001 per share.

As of September 30, 2020 and December 31, 2019, the Company had reserved 3,674,484 shares and 2,778,812 shares of common stock, respectively, for the exercise of outstanding stock options and the number of shares of common stock remaining available for future stock-based awards under the Company’s 2012 Stock Incentive Plan, 2019 Stock Incentive Plan and 2019 Employee Stock Purchase Plan, as shown in the table below:

September 30,

Preferred Stock

As of March 31, 2021 and December 31, 2020, the Company’s restated certificate of incorporation authorized the Company to issue 5,000,000 shares of preferred stock.

As of March 31, 2021 and December 31, 2020, the Company’s restated certificate of incorporation authorized the Company to issue 200,000,000 shares of common stock with a par value of $0.001 per share.

As of March 31, 2021 and December 31, 2020, the Company had reserved 4,573,538 shares and 3,646,200 shares of common stock, respectively, for the exercise of outstanding stock options and the number of shares of common stock remaining available for future stock-based awards under the Company’s 2012 Stock Incentive Plan, 2019 Stock Incentive Plan and 2019 Employee Stock Purchase Plan, as shown in the table below:

Shares of common stock reserved for future issuance under the 2012 Stock Incentive Plan

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Purchase Plan

Initial Public Offering and Concurrent Private Placement

On May 9, 2019, the Company completed its IPO and a concurrent private placement in which it issued and sold an aggregate of 7,000,000 shares of common stock at an offering price of $10.00 per share, for net proceeds of $62.1 million, after deducting aggregate underwriting discounts and commissions and private placement agent fees of $4.9 million and other offering expenses of $3.0 million.

The Company’s common stock began trading on The Nasdaq Global Market on May 7, 2019 under the ticker symbol “TRVI”.

At-the-Market Offering

In June 2020, the Company entered into the ATM Sales Agreement with SVB Leerink LLC, under which the Company may issue and sell shares of its common stock, from time to time, having an aggregate offering price of up to $12.0 million.

In June 2020, the Company entered into the ATM Sales Agreement, under which the Company may issue and sell shares of its common stock, from time to time, having an aggregate offering price of up to $12.0 million.

Sales of common stock under the ATM Sales Agreement may be made by any method that is deemed an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended.

The Company is not obligated to make any sales of its common stock under the ATM Sales Agreement.

The Company began making sales pursuant to the ATM Sales Agreement in July 2020, and as of September 30, 2020, the Company had issued and sold an aggregate of 466,758 shares of common stock for gross proceeds of $2.5 million, before deducting estimated commissions and fees of $0.2 million.

The Company began making sales pursuant to the ATM Sales Agreement in July 2020.

During the three months ended March 31, 2021, the Company issued and sold an aggregate of 1,367,621 shares of common stock for gross proceeds of $4.4 million, before deducting estimated commissions and allocated fees of $0.3 million.

As of March 31, 2021 the Company had issued and sold an aggregate of 2,055,497 shares of common stock for gross proceeds of $7.6 million, before deducting estimated commissions and allocated fees of $0.5 million.

Stock-Based Awards

In April 2019, the Company’s board of directors adopted the 2019 Stock Incentive Plan (the “2019 Plan”), which became effective on May 7, 2019.

The 2019 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards.

The 2019 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards.

The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2019 Plan.

The 2019 Plan is administered by the Company’s board of directors.

As of September 30, 2020, awards may be made under the 2019 Plan for up to such number of shares of the Company’s common stock as is equal to the sum of i) 1,578,947 shares;

plus ii) the number of shares (up to 1,157,894 shares) equal to the number of shares of the Company’s common stock subject to outstanding awards under the Company’s 2012 Stock Incentive Plan (the “2012 Plan”), as amended that expire, terminate or are otherwise cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right;

plus iii) an annual increase to be added on the first day of each fiscal year,

beginning with 2020 and continuing through 2029, equal to the least of (a) 2,105,623 shares of common stock, (b) 4% of the number of outstanding s hares of the Company’s common stock on such date, and (c) an amount determined by the Company’s board of directors.

The number of shares reserved for issuance under the 2019 Plan increased, pursuant to the terms of the 2019 Plan, by an additional 713,383 s hares, equal to 4% of the Company’s then-outstanding Common Stock, effective as of January 1, 2020.

The total number of shares of common stock that may be issued under the 2019 Plan and the 2012 Plan was 4,060,617 as of March 31, 2021, of which 815,416 shares remained available for grant under the 2019 Plan.

As of March 31, 2021, awards may be made under the 2019 Plan for up to such number of shares of the Company’s common stock as is equal to the sum of i) 1,578,947 shares;

plus ii) the number of shares (up to 1,157,894 shares) equal to the number of shares of the Company’s common stock subject to outstanding awards under the 2012 Stock Incentive Plan (the “2012 Plan”) that expire, terminate or are otherwise cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right;

plus iii) an annual increase to be added on the first day of each fiscal year, beginning with 2020 and continuing through 2029, equal to the least of (a) 2,105,623 shares of common stock, (b) 4% of the number of outstanding shares of the Company’s common stock on such date, and (c) an amount determined by the Company’s board of directors.

Effective January 1, 2021 and January 1, 2020, respectively, t he number of shares reserved for issuance under the 2019 Plan increased, pursuant to the terms of the 2019 Plan, by an additional 741,871 shares and 713,383 shares, equal to 4% of the Company’s then-outstanding common stock .

The 2012 Plan was adopted by the Company’s board of directors and stockholders.

The 2012 Plan provides for the issuance of stock-based awards to the Company’s employees, officers, directors, consultants and advisors.

The Company’s board of directors administers the 2012 Plan.

The 2012 Plan provides for the issuance of stock-based awards to the Company’s employees, officers and directors, as well as consultants and advisors to the Company.

Options granted under the 2019 Plan and the 2012 Plan have a maximum term of ten years .

Options vest over four years based on varying vesting schedules including:

Options granted to employees, officers and non-employee s generally vest over four years based on varying vesting schedules that primarily includ e :

25 % vesting on the first anniversary date of grant and the balance ratably over the next 36 months or vesting in equal monthly or quarterly installments over four ye ars.

As of September 30, 2020 and December 31, 2019, respectively, options to purchase 1,302,133 shares and 631,234 shares of common stock were granted and outstanding, net of cancelations, under the 2019 Plan.

As of September 30, 2020 and December 31, 2019, respectively, options to purchase 1,025,649 and 1,043,992 shares of common stock were granted and outstanding, net of cancelations, under the 2012 Plan.

Options granted to directors generally vest over one to two years .

As of March 31, 2021 and December 31, 20 20 , respectively, options to purchase 2,323,377 shares and 1,249,653 shares of common stock were granted and outstanding, net of cancelations, under the 2019 Plan.

As of March 31, 2021 and December 31, 20 20 , options to purchase 921,824 shares of common stock were granted and outstanding, net of cancelations, under the 2012 Plan.

In April 2019, the Company’s board of directors adopted a resolution effective on May 7, 2019 that no further stock options or other equity-based awards may be granted under the 2012 Plan.

During the nine months ended September 30, 2019, stock options to purchase 674,602 shares of the Company’s common stock were granted.

During the nine months ended September 30, 2019, stock options were exercised for 14,736 shares of common stock.

During the nine months ended September 30, 2019, stock options to purchase 35,745 shares of the Company’s common stock were forfeited.

During the nine months ended September 30, 2019, stock options to purchase 6,359 shares of the Company’s common stock expired.

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the nine months ended September 30, 2020 is as follows:

(in thousands)

In February 2021, the compensation committee of the Company’s board of directors approved the grant of stock options with performance-based vesting (“PSOs”) to employees of the Company.

The PSOs granted in February 2021 vest based on the timing and successful results of the Company’s PRISM or CANAL clinical trials.

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the three months ended March 31, 2021 is as follows:

Outstanding as of December 31, 2020

Outstanding as of September 30, 2020

Options exercisable as of September 30, 2020

Options unvested as of September 30, 2020

Outstanding as of March 31, 2021

Options exercisable as of March 31, 2021

Options unvested as of March 31, 2021

In April 2019, the Company’s board of directors adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”), which became effective on May 7, 2019.

The 2019 ESPP is administered by the Company’s board of directors.

During the nine months ended September 30, 2020, 1,397 shares of common stock were issued and sold under the 2019 ESPP.

The Company recognized $1 and $2 of stock-based compensation expense for the 2019 ESPP during the three and nine months ended September 30, 2020, respectively.

As of September 30, 2020, the aggregate number of shares of the Company’s common stock that may be issued under the 2019 ESPP is equal to the sum of i) 155,106 shares plus ii) an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2020 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2029, equal to the least of (a) 526,315 shares of common stock, (b) 1% of the number of outstanding shares of the

Company’s common stock on such date, and (c) an amount determined by the Company’s board of directors.

The aggregate number of shares of the Company’s common stock that may be issued under the 2019 ESPP increased, pursuant to the terms of the 2019 ESPP, by an addit ional 178,345 shares, equal to 1% of the Company’s then-outstanding common stock, effective as of January 1, 2020.

The total number of shares of common stock that may be issued under the 2019 ESPP Plan was 518,918 as of March 31, 2021, of which 512,921 shares remained available for issuance.

The number of shares of the Company’s common stock that have been approved to be issued under the 2019 ESPP is equal to the sum of i) 155,106 shares plus ii) an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2020 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2029, equal to the least of (a) 526,315 shares of common stock, (b) 1% of the number of outstanding shares of the Company’s common stock on such date, and (c) an amount determined by the Company’s board of directors.

Effective January 1, 2021 and January 1, 2020, respectively, the aggregate number of shares of the Company’s common stock that may be issued under the 2019 ESPP increased, pursuant to the terms of the 2019 ESPP, by an additional 185,467 shares and 178,345 shares, equal to 1% of the Company’s then-outstanding common stock.

All of the Company’s employees are eligible to participate in the 2019 ESPP, provided that:

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development expense

General and administrative expense

During the three and nine months ended September 30, 2020 and 2019, the Company maintained a full valuation allowance on deferred tax assets.

During the three months ended March 31, 2021 and 2020, the Company maintained a full valuation allowance on deferred tax assets.

Therefore, the Company has not recorded a provision for income taxes.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Accretion of redeemable convertible preferred stock

Dividends accrued on redeemable convertible preferred stock

Adjusted net loss attributable to common stockholders

Weighted average common shares used in net loss per share

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Basic and diluted net loss per common share outstanding

Accretion and dividends included in the table above were calculated through the IPO date.

The Company’s potential dilutive securities, which include stock options and redeemable convertible preferred stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders whenever the effect of including them would be to reduce the net loss per share.

The Company’s potential dilutive securities, which include stock options, have been excluded from the computation of diluted net loss per share attributable to common stockholders whenever the effect of including them would be to reduce the net loss per share.

In periods where there is a net loss, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The following potential shares of common stock, presented based on shares outstanding as of September 30, 2020 and 2019, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Shares as of September 30,

Outstanding stock options

The common shares underlying stock options, based on stock options outstanding as of March 31, 2021 and 2020, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect.

Collaborative and Licensing Agreements

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Under the license agreement, the Company paid Penwest a non-creditable, non-refundable upfront license fee of $25.

The Company may also become obligated to make milestone payments to Endo of $250, which would become due upon the successful completion of the first Phase 3 clinical trial of a licensed product candidate, such as the PRISM trial, and $750, which would become due upon the marketing approval of a licensed product in the United States, and to pay mid-single-digit royalties based on net sales of the licensed products by the Company, its affiliates and sublicensees.

The Company may also become obligated to make milestone payments to Endo of $250, which would become due upon the successful completion of the first Phase 3 clinical trial of a licensed product candidate, such as the Phase 2b/3 PRISM trial, and $750, which would become due upon the marketing approval of a licensed product in the United States, and to pay mid-single-digit royalties based on net sales of the licensed products by the Company, its affiliates and sublicensees.

In addition, the Company is obligated to pay Endo a low-to-mid double-digit percentage of certain income it receives from sublicensees, based on the date of the definitive agreement under which the sublicense was granted.

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Both the Company and Endo have the right to terminate the agreement if the other party materially breaches the agreement and fails to cure the breach within specified cure periods.

Endo also has the right to terminate in the event the Company undergoes specified bankruptcy, insolvency or liquidation events, and the Company has the right to terminate the agreement at its convenience at any time on 180 days’ notice to Endo.

any time on 180 days’ notice to Endo.

Additionally, if the Company or any of the Company’s sublicensees challenge the validity or enforceability of any licensed patent rights covering a licensed product, and that challenge is not terminated within a specified period, the agreement will immediately terminate and all licenses granted under the agreement shall be revoked.

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Exclusive License Agreement with Rutgers

On November 6, 2018, the Company entered into an agreement with Rutgers, The State University of New Jersey (“Rutgers”) for an exclusive, worldwide, sublicensable license under certain patent rights controlled by Rutgers and for a non-exclusive, worldwide, sublicensable license under certain know-how controlled by Rutgers, in each case to develop and commercialize products incorporating nalbuphine for any human or animal use.

In November 2018, the Company entered into an agreement with Rutgers, The State University of New Jersey (“Rutgers”) for an exclusive, worldwide, sublicensable license under certain patent rights controlled by Rutgers and for a non-exclusive, worldwide, sublicensable license under certain know-how controlled by Rutgers, in each case to develop and commercialize products incorporating nalbuphine for any human or animal use.

Upon entering into the license agreement, the Company paid Rutgers a minimal upfront license issue fee, which was recorded as R&D expense in 2018, and agreed to pay Rutgers a minimal annual license fee.

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The Company has also agreed to pay Rutgers a low single-digit percentage of certain income it receives from sublicensees and to pay tiered low single-digit royalties based on net sales of licensed products by the Company and its affiliates and sublicensees.

The Company’s royalty obligation with respect to each licensed product in each country commences on the date of the first commercial sale of the licensed product in that country following receipt of marketin g approval and extends until the later of the date of expiration, unenforceability or invalidation of the last valid claim of any licensed patent or patent application covering the licensed product in the country and 10 years after the first commercial sal e of the first licensed product sold anywhere in the world, which period is referred to as the royalty term.

Upon the expiration of the royalty term for a licensed product in a country, the license granted to the Company under the agreement shall become pe rpetual, fully paid-up, irrevocable and royalty-free in such country.

The Company’s royalty obligation with respect to each licensed product in each country commences on the date of the first commercial sale of the licensed product in that country following receipt of marketing approval and extends until the later of the date of expiration, unenforceability or invalidation of the last valid claim of any licensed patent or patent application covering the licensed product in the country and 10 years after the first commercial sale of the first licensed product sold anywhere in the world, which period is referred to as the royalty term.

Upon the expiration of the royalty term for a licensed product in a country, the license granted to the Company under the agreement shall become perpetual, fully paid-up, irrevocable and royalty-free in such country.

The royalty is subject to reduction in certain circumstances.

Restructuring Agreement with MentiNova, LLC

On November 6, 2018, concurrent with the signing of the agreement with Rutgers described above, the Company entered into a restructuring agreement with MentiNova, LLC (“MentiNova”) for the purchase of specified information and know-how, specified contractual rights and benefits, and all books and records of MentiNova related thereto (collectively, the “Acquired Assets”).

In November 2018, concurrent with the signing of the agreement with Rutgers described above, the Company entered into a restructuring agreement with MentiNova, LLC (“MentiNova”) for the purchase of specified information and know-how, specified contractual rights and benefits, and all books and records of MentiNova related thereto (collectively, the “Acquired Assets”).

Upon entering into the license agreement, the Company paid MentiNova an aggregate upfront payment of $119, which was recorded as R&D expense in 2018, subject to specified closing adjustments.

The Company may become obligated to make milestone payments to MentiNova in the aggregate of up to $1,188 based on the achievement of certain clinical and regulatory milestones as well as tiered low single-digit royalties based on net sales of products containing nalbuphine as the sole active pharmaceutical ingredient that are developed by the Company using the Acquired Assets or the intellectual property licensed to the Company under the Rutgers agreement described above (the “Rutgers IP”) for indications that are within the scope of the Rutgers IP.

The Company may become obligated to make milestone payments to MentiNova in the aggregate of up to $1.2 million based on the achievement of certain clinical and regulatory milestones as well as tiered low single-digit royalties based on net sales of products containing nalbuphine as the sole active pharmaceutical ingredient that are developed by the Company using the Acquired Assets or the intellectual property licensed to the Company under the Rutgers agreement described above (the “Rutgers IP”) for indications that are within the scope of the Rutgers IP.

The royalty is subject to reduction in certain circumstances.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements