What changed in this filing

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Item 1. Financial Statements

2021-08-12 compared with 2021-05-13 · 154 added, 105 removed, 379 unchanged (41% of the section changed)

16 unchanged sentences

Term loan - current portion

Term loan derivative liability - current portion

Operating lease liability - current portion

1 unchanged sentence

Term loan - long term portion

Term loan derivative liability

Term loan derivative liability – long term portion

Operating lease liability - long term portion

4 unchanged sentences

$ 0.001 par value;

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

5,000,000 shares authorized at June 30, 2021

and December 31, 2020;

no shares issued or outstanding at March 31, 2021 or

no shares issued or outstanding at June 30, 2021 or

December 31, 2020.

1 unchanged sentence

$ 0.001 par value;

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

200,000,000 shares authorized at June 30, 2021

and December 31, 2020;

and 21,459,498 and 18,546,786 shares

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

issued and outstanding at June 30, 2021 and December 31, 2020, respectively.

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

Operating expenses:

5 unchanged sentences

Change in fair value of term loan derivative liability

Other expense

Interest income

1 unchanged sentence

Total other (expense) income, net

Loss before income tax benefit

Loss before income taxes

Income tax benefit

7 unchanged sentences

Stockholders’

Balance at December 31, 2020

Balance at March 31, 2021

Stock-based compensation

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

agreement, net of commissions and allocated fees

Issuance of common stock under the at-the-market sales agreement, net of commissions and allocated fees

Issuance of common stock from Employee Stock Purchase Plan

Issuance of common stock to Lincoln Park Capital Fund (see Note 7)

Balance at June 30, 2021

Balance at March 31, 2020

Stock-based compensation

Issuance of common stock from exercise of stock options

Issuance of common stock from Employee Stock Purchase Plan

Balance at June 30, 2020

Stockholders’

Balance at December 31, 2020

Stock-based compensation

Balance at March 31, 2020

Issuance of common stock under the at-the-market sales agreement, net of commissions and allocated fees

Issuance of common stock from Employee Stock Purchase Plan

Issuance of common stock to Lincoln Park Capital Fund (see Note 7)

Balance at June 30, 2021

Balance at December 31, 2019

Stock-based compensation

Issuance of common stock from exercise of stock options

Issuance of common stock from Employee Stock Purchase Plan

Balance at June 30, 2020

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

2 unchanged sentences

(Amounts in thousands)

Three Months Ended

Six Months Ended

Operating activities:

2 unchanged sentences

Accretion/accrual of term loan discounts and debt issuance costs

Other expense related to transaction with Lincoln Park Capital Fund, LLC

Stock-based compensation

2 unchanged sentences

Accounts payable

Accrued expenses and other

Accrued expenses and other liabilities

Net cash used in operating activities

Investing activities:

Purchases of property, equipment and leasehold improvements

Net cash used in investing activities

Financing activities:

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

Proceeds from exercises of stock options

Proceeds from employee stock purchase plan

Payments of offering costs

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

13 unchanged sentences

Haduvio is an oral extended-release formulation of nalbuphine.

Nalbuphine is a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist that has been approved and marketed as an injectable for pain indications for more than 20 years in the United States and Europe.

The κ- and μ-opioid receptors are known to be critical mediators of itch, cough and certain movement disorders.

Nalbuphine’s mechanism of action also mitigates the risk of abuse associated with μ-opioid agonists because it antagonizes or blocks, the μ-opioid receptor.

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.

Parenteral nalbuphine is not classified as a controlled substance in the U.S.

and most of Europe.

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

6 unchanged sentences

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.

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 (“IPO”), borrowings under its prior term loan facility, proceeds from its IPO and concurrent private placement completed in May 2019, sales of its common stock pursuant to the at-the-market Sales Agreement (the “ATM Sales Agreement”) (Note 7) with SVB Leerink LLC that the Company entered into in June 2020 and the term loan facility with Silicon Valley Bank (“SVB”) that the Company entered into in August 2020.

The Company has incurred recurring losses since inception, including net losses of $ 18.2 million for the six months ended June 30, 2021 and $ 32.8 million for the year ended December 31, 2020.

As of June 30, 2021, the Company had cash and cash equivalents of $ 36.4 million compared to $ 45.0 million of cash and cash equivalents as of December 31, 2020.

The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $ 165.1 million as of June 30, 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.

As of August 12, 2021, the date of issuance of these Condensed Consolidated Financial Statements, the Company expects that its cash and cash equivalents as of June 30, 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.

10 unchanged sentences

Basis of Presentation

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.

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 and 2020 included herein, have been prepared in accordance with accounting principles generally accepted in the U.S.

(“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.

6 unchanged sentences

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 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.

The Company has evaluated events occurring subsequent to June 30, 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

7 unchanged sentences

Unaudited Interim Financial Information

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.

The accompanying interim Condensed Consolidated Balance Sheet as of June 30, 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 and six months ended June 30, 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 June 30, 2021 and the results of its operations and its cash flows for the three and six months ended June 30, 2021 and 2020.

The results for the three and six months ended June 30, 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

13 unchanged sentences

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

June 30, 2021

Financial assets carried at fair value:

9 unchanged sentences

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

June 30, 2021

December 31, 2020

Financial liabilities

Balance at beginning of year

Balance at beginning of period

Change in fair value of term loan derivative liability

Ending balance

Balance at end of period

Property, Equipment and Leasehold Improvements

5 unchanged sentences

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 Company, at times, contracts with vendors and consultants outside of the U.S., resulting in liabilities denominated in foreign currency.

The transactions are recorded in U.S.

4 unchanged sentences

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 $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.

Deferred offering costs relating to the Company’s ATM Sales Agreement were $ 162 and $ 284 as of June 30, 2021 and December 31, 2020, respectively, excluding $ 508 and $ 105 , respectively, which has been recorded as a reduction to stockholders’ equity in connection with sales under the agreement.

Research and Development Expenses

20 unchanged sentences

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.

13 unchanged sentences

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 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 the 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;

3 unchanged sentences

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 progress of the Company’s research and development efforts;

the stage of development and business strategy;

the equity market conditions affecting comparable public companies;

the general U.S.

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.

26 unchanged sentences

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.

Under ASC 842, Leases (“ASC 842”), the Company determines if an arrangement is a lease at its inception.

If an operating lease has a term greater than one year, the lease is recognized in the balance sheet as a right-of-use asset and an operating lease liability at lease commencement.

The Company elected the short-term lease practical expedient;

therefore, if an operating lease has a term less than one year, the Company will not recognize the lease on its balance sheet.

The Company elected the short-term lease practical expedient, therefore, if an operating lease has a term less than one year, the Company will not recognize the lease on its balance sheet.

The operating right-of-use asset represents the Company’s right of use to an underlying asset for the term of the lease and the operating liability represents the Company’s obligation to make lease payments arising from the lease.

10 unchanged sentences

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.

There have been no new accounting pronouncements during the six months ended June 30, 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:

June 30, 2021

December 31, 2020

Prepaid corporate insurance

Prepaid R&D payments

Prepaid other and other current assets

Prepaid R&D costs

Total prepaid expenses and other current assets

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 leased space is approximately 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 incremental borrowing rate used on existing leases 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 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 had no new leases during the six months ended June 30, 2021.

The Company’s current operating leases consist of real estate and the remaining term is approximately 1.7 years .

The Company has no financing leases.

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

June 30, 2021

December 31, 2020

Operating lease right-of-use asset

2 unchanged sentences

Total operating lease liabilities

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

Future minimum lease payments from June 30, 2021 until the expiration of the operating leases are as follows:

Total lease payments

1 unchanged sentence

Carrying value of operating lease liabilities

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.

Lease expense under operating leases, including leases of office equipment, was $ 30 and $ 31 for the three months ended June 30, 2021 and 2020, respectively and $ 61 and $ 62 for the six months ended June 30, 2021 and 2020, respectively.

Lease payments made in the three months ended June 30, 2021 and 2020 were $ 35 and $ 35 , respectively and $ 69 and $ 80 for the six months ended June 30, 2021 and 2020, respectively, with such amounts reflected in the Condensed Consolidated Statements of Cash Flows in operating activities.

Accrued Expenses

Accrued expenses consisted of the following:

June 30, 2021

December 31, 2020

Accrued R&D projects

Accrued consulting and professional fees

Accrued compensation and benefits

Silicon Valley Bank Term Loan

On August 13, 2020 (the “Effective Date”), the Company entered into a loan and security agreement (the “SVB Loan Agreement”) with Silicon Valley Bank, as lender (“SVB”), pursuant to which SVB provided a term loan to the Company in the original principal amount of $14.0 million (the “SVB Term Loan”).

Accrued consulting and professional fees

Accrued other

Total accrued expenses

SVB Term Loan

On August 13, 2020 (the “Effective Date”), the Company entered into a loan and security agreement (the “SVB Loan Agreement”) with SVB, as lender, pursuant to which SVB provided a term loan to the Company in the original principal amount of $ 14.0 million (the “SVB Term Loan”).

The Company may use the proceeds from the SVB Term Loan for working capital and general corporate purposes.

7 unchanged sentences

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, 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.

On July 6, 2021, the Company and SVB entered into a First Amendment (the “Loan Amendment”) to the SVB Loan Agreement.

The Loan Amendment modifies the conditions under which the Company is required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement .

Under the Loan Amendment, if the Company fails to receive positive data in its Phase 2b/3 PRISM trial or to meet certain equity raise requirements, including raising at least $ 15.0 million in net proceeds from the sale of equity securities during the period from June 1, 2021 through October 31, 2021 and raising by June 30, 2022, sufficient additional net proceeds from the sale of equity securities to finance its planned second phase 3 clinical trial of Haduvio for prurigo nodularis and its ongoing operations (each a “Milestone Condition”), 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.

In addition, the Loan Amendment provides that if the Company fails to maintain at least $ 20.0 million in unrestricted and unencumbered cash in its accounts with SVB at any time prior to the satisfaction of all the Milestone Conditions, the Company will be required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement .

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

Amortization of these deferred financing charges totaled $ 5 and $ 11 for the three and six months ended June 30, 2021, respectively and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

The SVB Term Loan

discount - unamortized deferred charges totaled $ 36 and $ 48 at June 30, 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 Sheet s .

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 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.

Accretion of these loan discounts totaled $ 2 and $ 5 for the three and six months ended June 30, 2021 and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

At June 30, 2021 and December 31, 2020, the loan discount-financing costs balance was $ 18 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 Sheets.

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

At June 30, 2021 and December 31, 2020, $ 420 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.

2 unchanged sentences

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.

The total fair value of this liability was determined to be $ 162 and $ 196 at June 30, 2021 and December 31, 2020, respectively.

The change in fair value of the term loan derivative liability as of June 30, 2021 as compared to the fair value at its last measurement at December 31, 2020 date was $ 34 .

The term loan derivative liability is presented as a current liability on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2021 and as a non-current liability as of December 31, 2020.

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 using the effective interest method.

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.

Such amortization was $ 19 and $ 37 in the three and six months ended June 30, 2021, respectively.

At June 30, 2021 and December 31, 2020, the balance of the term loan discount – interest was $ 121 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 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 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.

For the fair value calculations of the term loan derivative liability at June 30, 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.

As of June 30, 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 June 30, 2021 and December 31, 2020 was comprised as shown below.

June 30, 2021

December 31, 2020

Principal outstanding under term loan

5 unchanged sentences

Term loan payable, non-current

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,

There was no such expense under the SVB Term Loan for the three and six months ended June 30, 2020.

Three months ended June 30,

Six Months Ended

Interest payments

2 unchanged sentences

Stockholders’ Equity

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:

As of June 30, 2021 and December 31, 2020, the Company had reserved s hares of common stock for the exercise of outstanding stock options and 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

Shares of common stock reserved for future issuance under the 2019 Stock Incentive Plan

Shares of common stock reserved for future issuance under the 2019 Employee Stock

Purchase Plan

Shares of common stock reserved for future issuance under the 2019 Employee Stock Purchase Plan

At-the-Market Offering

3 unchanged sentences

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.

During the three and six months ended June 30, 2021, the Company issued and sold an aggregate of 1,365,871 and 2,733,492 shares of common stock, respectively, for gross proceeds of $ 3.0 million and $ 7.4 million, respectively, before deducting estimated commissions and allocated fees of $ 0.2 million and $ 0.6 million, respectively.

As of June 30, 2021, the Company had issued and sold an aggregate of 3,421,368 shares of common stock for gross proceeds of $ 10.6 million, before deducting estimated commissions and allocated fees of $ 0.8 million.

Equity Purchase Agreement

On June 18, 2021, the Company entered into a common stock purchase agreement (“LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”).

The LPC Purchase Agreement provides that, subject to the terms and conditions therein, the Company has the right, but not the obligation, to sell, at its discretion, to Lincoln Park up to $ 15.0 million of shares of common stock over a 24 -month period commencing on July 23, 2021.

In addition, under the LPC Purchase Agreement, the Company issued 170,088 shares of common stock to Lincoln Park as consideration for Lincoln Park’s commitment to purchase shares of the Company’s common stock under the LPC Purchase Agreement.

The purchase price per share of the shares sold will be based on the market prices prevailing immediately preceding the time of sale as computed under the LPC Purchase Agreement.

Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s common stock.

The agreement may be terminated by the Company at any time, at its sole discretion, without any additional cost or penalty.

Stock-Based Awards

3 unchanged sentences

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

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;

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 June 30, 2021, of which 858,240 shares remained available for grant under the 2019 Plan.

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 .

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 lesser 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, the 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.

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

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

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

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.

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.

As of June 30, 2021 and December 31, 2020, respectively, options to purchase 2,316,959 shares and 1,249,653 shares of common stock were granted and outstanding, net of cancellations, under the 2019 Plan.

As of June 30, 2021 and December 31, 2020, options to purchase 885,418 and 921,824 shares of common stock, respectively, were granted and outstanding, net of cancellations, 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.

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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:

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the six months ended June 30, 2021 is as follows:

Outstanding as of December 31, 2020

Outstanding as of March 31, 2021

Options exercisable as of March 31, 2021

Options unvested as of March 31, 2021

Outstanding as of June 30, 2021

Options exercisable as of June 30, 2021

Options unvested as of June 30, 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.

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 total number of shares of common stock that may be issued under the 2019 ESPP Plan was 518,918 as of June 30, 2021, of which 503,789 shares remain 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.

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Three Months Ended

Six Months Ended

Research and development expense

General and administrative expense

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

During the three and six months ended June 30, 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

Weighted average common shares used in net loss per share

attributable to common stockholders, basic and diluted

Six Months Ended

Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted

Basic and diluted net loss per common share outstanding

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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 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.

The common shares underlying stock options, based on stock options outstanding as of June 30, 2021 and 2020, were excluded from the calculations 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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(“Endo”)) for an exclusive worldwide sublicensable license under certain patent rights and know-how controlled by Penwest to develop and commercialize products incorporating nalbuphine hydrochloride in any formulation, including an extended-release formulation such as Haduvio, in all fields and for any use.

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 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.

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

The Company may also become obligated to make milestone payments to Endo of $ 0.3 million, 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 $ 0.8 million, which would become due upon the marketing approval of a licensed product in the U.S.

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.

Endo also has the right to terminate in the event the Company undergoes specified bankruptcy, insolvency or liquidation events.

The Company has the right to terminate the agreement at its convenience at 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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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.

The Company may become obligated to make milestone payments to Rutgers in the aggregate of up to $331 based on the achievement of certain clinical, regulatory and sales milestones.

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 may become obligated to make milestone payments to Rutgers in the aggregate of up to $ 0.3 million based on the achievement of certain clinical, regulatory and sales milestones.

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.

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The royalty is subject to reduction in certain circumstances.

In June 2021, the Company entered into an amendment with Rutgers to extend the deadline to commence a clinical trial on nalbuphine ER for LID to December 31, 2022.

The Company paid a minimal fee related to this amendment, which was recorded as R&D expense during the second quarter of 2021.

Restructuring Agreement with MentiNova, LLC

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 $1.2 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.

Upon entering into the license agreement, the Company paid MentiNova an aggregate upfront payment of $ 0.1 million, which was recorded as R&D expense in 2018, subject to specified closing adjustments.

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.

Commitments and Contingencies

A significant portion of the Company’s development activities are outsourced to third parties under agreements, including with clinical research organizations, and contract manufacturers in connection with the production of clinical trial materials.

A significant portion of the Company’s development activities are outsourced to third parties under agreements, including with CROs and contract manufacturers in connection with the production of clinical trial materials.

These arrangements may require the Company to pay termination costs to the third parties for reimbursement of costs and expenses incurred in the event of the orderly termination of contractual services.

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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