Trevi Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and 16 our audited consolidated financial statements and related notes for the year ended December 31, 2021 included in our Annual Report on Form 10-K , filed with the Securities and Exchange Commission , or SEC, on March 17 , 2022 . Some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, constitute forward - looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended , and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “ continue ,” “co uld ,” “ estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, particularly including those risks identified in Part II-Item 1A “Risk Factors” and our other filings with the SEC. Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. Overview We are a clinical-stage biopharmaceutical company focused on the development and commercialization of the investigational therapy Haduvio (nalbuphine ER) to treat serious neurologically mediated conditions. We are developing Haduvio for the treatment of chronic pruritus associated with prurigo nodularis and chronic cough in patients with idiopathic pulmonary fibrosis, or IPF. We are conducting a Phase 2b/3 clinical trial of Haduvio, which we refer to as the Phase 2b/3 PRISM trial, in adults with severe pruritus associated with prurigo nodularis. The Phase 2b/3 PRISM trial is a randomized, double-blind, placebo controlled, two-arm treatment study that is designed to evaluate the safety and anti-pruritic efficacy of Haduvio in patients in the United States and Europe. In accordance with the protocol for the Phase 2b/3 PRISM trial, we conducted a sample size re-estimation, or SSRE, analysis in July 2020, following such time as approximately 45% of the initial targeted number of subjects in the trial were evaluable for the primary endpoint. Based on the analysis, the independent Data Monitoring Committee, or DMC, recommended that the Phase 2b/3 PRISM trial should continue and that the trial size should increase from an initial enrollment target of 240 to 360 subjects, which maintains the statistical power for the primary endpoint. Based on the DMC’s recommendation, we increased the planned trial size to 360 subjects. We completed enrollment in the trial on January 31, 2022. We expect to report top-line data in the second quarter of 2022. If the Phase 2b/3 PRISM trial is successful, we expect that we will use the Phase 2b/3 PRISM trial and an additional Phase 3 clinical trial that we believe we will need to conduct to support the submission of a new drug application, or NDA, to the U.S. Food and Drug Administration, or FDA, a marketing authorization application, or MAA, to the European Medicines Agency, or EMA, and an MAA to the Medicines and Healthcare Products Regulatory Agency in the United Kingdom, or MHRA, for Haduvio for the treatment of pruritus associated with prurigo nodularis. We are also conducting a Phase 2 clinical trial of Haduvio for chronic cough in adults with IPF, which we refer to as the Phase 2 CANAL trial. The Phase 2 CANAL trial is a randomized, double-blind, placebo controlled, two-treatment, two-period, crossover study that is designed to evaluate the efficacy, safety, tolerability and dosing of Haduvio for chronic cough in adults with IPF. This trial was originally designed to enroll approximately 60 subjects with a goal to have 44 study completers. We are conducting the trial at multiple sites in the United Kingdom. In February 2022, we conducted an interim statistical analysis for this trial. The interim analysis (N=26) was statistically significant on the primary efficacy endpoint demonstrating a 52% placebo-adjusted reduction in the geometric mean percent change in daytime cough events (p<0.0001, conditional power 100%) for Haduvio. P-value is a conventional statistical method for measuring the statistical significance of clinical results. A p-value of less than 0.05 is generally considered to represent statistical significance, meaning that there is a less than five percent likelihood that the observed results occurred by chance. The interim analysis was conducted by an independent statistical team according to the pre-specified endpoint in the protocol. In March 2022, in light of the statistically significant efficacy results from the interim analysis, we concluded enrollment early for our Phase 2 CANAL trial. In total, we enrolled approximately 40 subjects in the study. We expect to report efficacy and safety data for the full set of subjects for this trial in the third quarter of 2022. 17 We are currently focusing our financial and operational resources on completing the Phase 2b/3 PRISM and the Phase 2 CANAL trials and preparing for the initiation of the next trial of Haduvio for the treatment of chronic cough in adults with IPF . After we receive top-line data from both of these trials , we will evaluate additional indications for which we may choose to pursue the development of Haduvio. Since commencing operations in 2011, we have devoted substantially all of our efforts and financial resources to the clinical development of Haduvio. We have not generated any revenue from product sales and, as a result, we have never been profitable and have incurred net losses in each year since commencement of our operations. As of March 31, 2022, we had an accumulated deficit of $188.2 million, primarily as a result of research and development and general and administrative expenses. We do not expect to generate product revenue unless and until we obtain marketing approval for and commercialize Haduvio for the treatment of pruritus associated with prurigo nodularis or chronic cough in adults with IPF and we can provide no assurance that we will ever generate significant revenue or profits. In May 2019, we issued and sold 5,500,000 shares of common stock in our IPO, and 1,500,000 shares of common stock in a concurrent private placement, in each case at an offering price of $10.00 per share, for combined 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. Upon the closing of the IPO, our preferred stock then outstanding converted into an aggregate of 10,381,234 shares of common stock. In June 2020, we entered into a sales agreement with SVB Leerink LLC, or SVB Leerink, which we refer to as the ATM Sales Agreement, under which we may issue and sell shares of 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. We are not obligated to make any sales of our common stock under the ATM Sales Agreement. We began making sales pursuant to the ATM Sales Agreement in July 2020, and as of March 31, 2022, we had issued and sold an aggregate of 3,583,394 shares of common stock for gross proceeds of $11.0 million, before deducting estimated commissions and allocated fees of $0.8 million. Under the terms of the October 2021 Private Placements, as described below, we agreed to not issue and sell additional shares under the ATM Sales Agreement on or prior to January 4, 2022. In August 2020, we entered into a loan and security agreement, or the SVB Loan Agreement, with Silicon Valley Bank, or SVB, pursuant to which SVB provided a term loan, or the SVB Term Loan, to us in the original principal amount of $14.0 million. On the first business day of each month commencing on March 1, 2022, we are required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest. All outstanding principal and accrued and unpaid interest under the SVB Term Loan and all other outstanding obligations with respect to the SVB Term Loan are due and payable in full on February 1, 2024. The SVB Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB Term Loan, subject to a prepayment premium. In July 2021 and April 2022, we entered into amendments to the SVB Loan Agreement with SVB, which we refer to as the Loan Amendments, that modified the conditions under which we will be required to cash collateralize the outstanding amounts owed to them under the SVB Loan Agreement. For further discussion of the SVB Term Loan and the Loan Amendments, see “—Liquidity and Capital Resources”. On October 5, 2021 and October 18, 2021, we issued and sold in two private placements, or the October 2021 Private Placements, in the aggregate (i) 4,225,053 shares of our common stock and accompanying warrants to purchase an aggregate of 8,450,106 shares of our common stock, and (ii) pre-funded warrants to purchase up to an aggregate of 4,926,069 shares of our common stock and accompanying warrants to purchase an aggregate of 9,852,138 shares of our common stock. Each share of our common stock and accompanying common stock warrants were sold together at a combined price of $1.62, and each pre-funded warrant and accompanying common stock warrants were sold together at a combined price of $1.619, for gross proceeds of approximately $14.8 million. Each pre-funded warrant had an exercise price of $0.001 per share, became exercisable immediately upon issuance and continued to be exercisable until exercised in full. As of February 10, 2022, all of the pre-funded warrants had been exercised. Of the accompanying common stock warrants, warrants to purchase an aggregate of 9,151,122 shares will expire in April 2025 and warrants to purchase an aggregate of 9,151,122 shares will expire in October 2028. The accompanying common stock warrants have an exercise price of $1.37 per share and became exercisable immediately upon issuance. As of May 12, 2022, warrants to purchase 3,299,270 shares of common stock that were to expire on April 5, 2025 have been exercised. On April 11, 2022, we issued and sold in a private placement, or the April 2022 Private Placement, (i) an aggregate of 4,580,526 shares of our common stock, and (ii) pre-funded warrants to purchase up to an aggregate of 24,379,673 shares of our common stock. Each share of our common stock was sold at a price of $1.90, and each pre-funded warrant was sold at a price of $1.899 per warrant share, for gross proceeds of approximately $55.0 million. Each pre-funded warrant has an exercise price of $0.001 per share, is exercisable immediately and will be exercisable until the pre-funded warrant is exercised in full. As of March 31, 2022, we had cash and cash equivalents of $29.1 million. In April 2022, we received approximately $55.0 million in gross proceeds from the April 2022 Private Placement and $4.5 million in proceeds from the exercise of common stock warrants that were issued in the October 2021 Private Placements. We believe that our existing cash and cash equivalents, including the proceeds from the April 2022 Private Placement and the proceeds from the exercise of common stock warrants that were issued in the October 2021 Private Placements, will enable us to fund our operating expenses and capital expenditure requirements for at least 18 12 months from the date of issuance of the Condensed Consolidated F inancial S tatements included in this Quarterly Report on Form 10-Q. We expect to incur substantial expenditures in the foreseeable future as we advance Haduvio through clinical development, the regulatory approval process and, if approved, commercial launch activities. Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing Phase 2b/3 PRISM trial in patients with pruritus associated with prurigo nodularis and the additional Phase 3 clinical trial we believe we will be required to conduct to support the submission of a NDA to the FDA for Haduvio for the treatment of pruritus associated with prurigo nodularis, our ongoing Phase 2 CANAL trial and the next trial we plan to conduct for Haduvio for the treatment of chronic cough in adults with IPF which we expect will be designed as a Phase 2b/3 trial, subject to discussions with the FDA. We also expect to incur substantial expenditures in the foreseeable future related to the development and validation of our commercial manufacturing process for Haduvio and other development activities. In addition, we may continue to incur additional expenses as a result of the COVID-19 pandemic and related clinical trial delays and interruptions. We will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of Haduvio, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of Haduvio for one or more indications or delay our efforts to expand our product pipeline. Impacts of the COVID-19 Pandemic The COVID-19 pandemic and government measures taken in response thereto have had a significant impact, both direct and indirect, on segments of the global economy and have interrupted our clinical trial activities, disrupted our business operations and have the potential to interrupt our supply chain. We have experienced restrictions and delays at our existing clinical sites for both our Phase 2b/3 PRISM and Phase 2 CANAL trials. The COVID-19 pandemic may also adversely affect our ability to recruit and retain principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, and may result in further disruptions to our clinical trials due to prioritization of hospital and medical resources toward the outbreak, restrictions on travel of patients and healthcare providers, potential unwillingness of patients to enroll in trials at this time or the inability of patients to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services. The response to the COVID-19 pandemic may also redirect resources of regulators in a way that could adversely impact our ability to progress towards regulatory approvals and we may face impediments to regulatory meetings and approvals relating to our clinical trials due to measures intended to limit in-person interactions. The COVID-19 pandemic may also affect employees of third-party contract research organizations located in affected geographies that we rely upon to carry out our clinical trials. The spread of COVID-19 or another infectious disease could also negatively affect the operations at our third-party suppliers, which could result in delays or disruptions in the supply of drug product used in our clinical trials. We have taken precautionary measures intended to help minimize the risk of the virus to our employees, including allowing employees to work remotely part of the week. Components of Operating Results Operating Expenses Research and Development Expenses All of our research and development expenses consist of expenses incurred in connection with the development of Haduvio. These expenses include personnel-related costs, including stock-based compensation, consulting costs, contract manufacturing costs and fees paid to clinical research organizations, or CROs, to conduct certain research and development activities on our behalf. We do not allocate all of our costs by each indication for which we are developing Haduvio, as a significant amount of our development activities broadly support all indications. In addition, several of our departments support our Haduvio drug candidate development program and we do not identify internal costs for each potential indication. We expect our research and development expenses to increase over the next few years as we pursue our development program, pursue regulatory approval of Haduvio in the U.S., Europe and other jurisdictions outside the U.S. and prepare for a possible commercial launch of Haduvio. Predicting the timing or the cost to conduct our Haduvio development program and prepare for a possible commercial launch of Haduvio is difficult and delays may occur because of many factors including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate or if we experience significant delays in enrollment in any of our clinical trials, whether as a result of the COVID-19 pandemic or otherwise, we could be required to expend significant additional financial resources and time on our development program. Furthermore, we are unable to predict when or if Haduvio will receive regulatory approval in the U.S. or elsewhere with any certainty. General and Administrative Expenses 19 General and administrative expenses consist principally of personnel-related costs, including stock-based compensation for personnel in executive, finance, commercial and other administrative functions ; professional fees for legal, consulting and accounting services ; as well as rent and other general operating expenses not otherwise classified as research and development expenses. We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, including stock-based compensation and expanded infrastructure. Other (Expense) Income, Net Change in Fair Value of Term Loan Derivative Liability In connection with the SVB Term Loan, prior to the Third Amendment (as defined below) to the SVB Loan Agreement, as discussed below, upon the occurrence of the Phase 3 Event, as described below, the interest rate on the SVB Term Loan would increase by 2.00%. This contingent interest rate increase represented a free-standing financial instrument. Accordingly, we accounted for the contingent interest rate increase as a derivative under Accounting Standards Codification or ASC, 815, Derivatives and Hedging and therefore, we recorded a term loan derivative liability for the contingent interest rate increase at its fair value. We adjust this liability to fair value at each reporting date it remains outstanding. We recognized changes in the fair value of this term loan derivative in our statements of operations as a component of other income (expense), net. Interest Income Interest income consists of interest earned from money market funds on our cash and cash equivalents. Interest Expense In August 2020, we entered into the SVB Loan Agreement under which we borrowed $14.0 million under the SVB Term Loan. In connection with the SVB Term Loan, we recognize interest expense 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. Prior to the Third Amendment to the SVB Loan Agreement, t he SVB Term Loan bore interest at a floating rate per annum equal to the greater of (A) the prime rate plus 1.00% and (B) 4.25%. If SVB received evidence satisfactory to it that we had (i) received positive data for the Phase 2b/3 PRISM trial sufficient to advance Haduvio into a second Phase 3 clinical trial for chronic pruritus associated with prurigo nodularis and (ii) raised sufficient financing to fund such Phase 3 clinical trial and our operations, which we refer to together as the Phase 3 Event, the interest rate under the SVB Term Loan would be adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25% . On April 6, 2022, we entered into the Third Amendment to the SVB Loan Agreement, or the Third Amendment. Under the Third Amendment, amounts outstanding under the SVB Loan Agreement will accrue interest at a floating per annum rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25%. The SVB Term Loan required interest-only payments until March 2022. Commencing on March 1, 2022, we are required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest. All outstanding principal and accrued and unpaid interest under the SVB Term Loan and all other outstanding obligations with respect to the SVB Term Loan are due and payable in full on February 1, 2024. Results of Operations Comparison of the Three Months Ended March 31, 2022 and 2021 The following table summarizes our results of operations for the periods indicated (in thousands): 20 Three Months Ended March 31, 2022 2021 Change Operating expenses: Research and development $ 4,645 $ 5,589 $ (944 ) General and administrative 2,380 2,500 (120 ) Total operating expenses 7,025 8,089 (1,064 ) Loss from operations (7,025 ) (8,089 ) 1,064 Other (expense) income: Change in fair value of term loan derivative liability (11 ) (6 ) (5 ) Interest income 4 3 1 Interest expense (302 ) (294 ) (8 ) Total other expense, net (309 ) (297 ) (12 ) Loss before income taxes (7,334 ) (8,386 ) 1,052 Income tax benefit 5 15 (10 ) Net loss $ (7,329 ) $ (8,371 ) $ 1,042 Operating Expenses Research and Development Expenses The following table summarizes our research and development expenses for the periods indicated (in thousands): Three Months Ended March 31, 2022 2021 Change Clinical development expenses $ 3,066 $ 3,811 $ (745 ) Personnel and related expenses 1,089 1,176 (87 ) Stock-based compensation expenses 260 173 87 Consulting expenses and professional fees 180 404 (224 ) Other research and development expenses 50 25 25 Total research and development expenses $ 4,645 $ 5,589 $ (944 ) Research and development expenses for the three months ended March 31, 2022 decreased to $4.6 million from $5.6 million for the corresponding period in 2021, primarily due to decreased clinical trial subject recruitment costs. Our consulting expenses and professional fees declined as well due to a reduction in our use of consulting services and the non-recurrence of professional recruiting fees related to hirings in the prior year period. For the periods presented, all of our research and development expenses related to our development activity for Haduvio. General and Administrative Expenses General and administrative expenses for the three months ended March 31, 2022 decreased to $2.4 million from $2.5 million for the corresponding period in 2021. The decrease was primarily due to lower legal fees as a result of the timing of certain intellectual property filings. Liquidity and Capital Resources Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. Prior to the completion of our initial public offering, or the IPO, and concurrent private placement in May 2019, we financed our operations primarily through private placements of our preferred stock and convertible notes as well as borrowings under our prior term loan. From inception to our IPO, we raised an aggregate of $102.2 million in gross proceeds from sales of our preferred stock and convertible notes and borrowed $15.0 million under our prior term loan. In May 2019, we issued and sold 5,500,000 shares of common stock in our IPO and 1,500,000 shares of common stock in a concurrent private placement, in each case at an offering price of $10.00 per share, for combined 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. In June 2020, we entered into the ATM Sales Agreement, under which we may issue and sell shares of 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. We are not obligated to make any sales of our common stock under the ATM Sales Agreement. We began making sales pursuant to the ATM Sales Agreement in July 2020 and as of March 31, 2022 we had issued and sold an aggregate of 3,583,394 shares of common stock for gross proceeds of $11.0 million, before deducting estimated commissions and allocated fees of $0.8 million. Under the terms of the October 2021 Private Placements, we agreed to not issue or sell additional shares under the ATM Sales 21 Agreement on or prior to January 4 , 2022. During the three months ended March 31, 2022 , the Company had no sales of shares of common stock under the ATM Sales Agreement. On June 18, 2021, we entered into the LPC Purchase Agreement with Lincoln Park for an equity line financing. The LPC Purchase Agreement provides that, subject to the terms and conditions set forth therein, we have the right, but not the obligation, to sell to Lincoln Park and Lincoln Park is obligated to purchase up to $15.0 million of shares of common stock at our sole discretion, over a 24-month period commencing on July 23, 2021. We filed a registration statement on Form S-1 covering the resale of shares of common stock that are issued to Lincoln Park under the LPC Purchase Agreement, which was declared effective on July 14, 2021. As part of the LPC Purchase Agreement, we issued 170,088 shares of our common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock under the LPC Purchase Agreement. Under the terms of the October 2021 Private Placements, we agreed to not issue or sell additional shares under the LPC Purchase Agreement on or prior to April 6, 2023. SVB Loan Agreement In August 2020, we entered into the SVB Loan Agreement with SVB, pursuant to which SVB provided the SVB Term Loan in the original principal amount of $14.0 million. The SVB Term Loan bears interest at a floating rate per annum equal to the greater of (A) the prime rate plus 1.00% and (B) 4.25%. If SVB received evidence satisfactory to it that we had (i) received positive data for the Phase 2b/3 PRISM trial, sufficient to advance Haduvio into a second Phase 3 clinical trial for prurigo nodularis and (ii) raised sufficient financing to fund such Phase 3 clinical trial and our operations, the interest rate under the SVB Term Loan would have been adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25%. Commencing on March 1, 2022 and on the first business day of each month thereafter, we are required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest. All outstanding principal and accrued and unpaid interest under the SVB Term Loan and all other outstanding obligations with respect to the SVB Term Loan are due and payable in full on February 1, 2024. The SVB Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB Term Loan, subject to a prepayment premium. Such prepayment premium would be 3.00% of the principal amount of the SVB Term Loan if prepaid prior to the first anniversary of the date on which we entered into the SVB Term Loan or the Effective Date, 2.00% of the principal amount of the SVB Term Loan if prepaid on or after the first anniversary of the Effective Date, but prior to the second anniversary of the Effective Date and 1.00% of the principal amount of the SVB Term Loan if prepaid on or after the second anniversary of the Effective Date but prior to February 1, 2024. Upon repayment in full of the SVB Term Loan, we will be required to pay a final payment fee equal to $1.2 million. The SVB Term Loan and related obligations under the SVB Loan Agreement are secured by substantially all of our properties, rights and assets, except for our intellectual property (which is subject to a negative pledge 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 us 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 our cash. On July 6, 2021, we and SVB entered into the First Amendment to the SVB Loan Agreement, or the First Amendment. The First Amendment modified the conditions under which we are required to cash collateralize outstanding amounts owed to SVB under the SVB Loan Agreement. Under the First Amendment, if we failed to receive positive data in our Phase 2b/3 PRISM trial or, prior to June 30, 2022, failed to raise sufficient net proceeds from the sale of equity securities to finance our planned second Phase 3 clinical trial of Haduvio for prurigo nodularis and our ongoing operations, each of which we refer to as a Milestone Condition, we would be required to deposit unrestricted and unencumbered cash equal to 100% of all outstanding amounts owed to SVB in a cash collateral account with SVB, which could be used by SVB to prepay the SVB Term Loan at any time. In addition, the First Amendment provided that if we failed to maintain at least $20.0 million in unrestricted and unencumbered cash in our accounts with SVB, or the Minimum Required Cash, at any time prior to the satisfaction of all the Milestone Conditions, we would also have been required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement. We would also have been required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement if we did not raise 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. We satisfied this equity funding condition through a combination of equity issuances under our ATM Sales Agreement and the proceeds from the October 2021 Private Placements. On April 6, 2022, we entered into the Third Amendment to the SVB Loan Agreement. The Third Amendment principally modified the conditions under which we are required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement. As a result of the Third Amendment, upon the closing of the April 2022 Private Placement, our obligations to achieve the Milestone Conditions and maintain the Minimum Required Cash terminated and the cash collateralization requirement under the SVB Loan Agreement will instead be triggered if we do not receive positive final data by December 31, 2022 from either our ongoing Phase 2b/3 PRISM trial of Haduvio for prurigo nodularis or our Phase 2 CANAL trial of Haduvio for the treatment of chronic cough in adults with IPF. In addition, the Third Amendment modified the interest rate on the principal amount outstanding under the SVB Loan Agreement, as discussed above under “–Interest Expense.” Private Placements 22 On October 5 , 2021 and October 18 , 2021, we issued and sold in two private placement s (i) an aggregate of 4,225,053 shares of our common stock and accompanying warrants to purchase an aggregate of 8 , 450 , 106 shares of our common stock, and (ii) pre-funded warrants to purchase up to an aggregate of 4,926,069 shares of our common stock and accompanying warrants to purchase an aggregate of 9,852,138 shares of our common stock. Each share of our common stock and accompanying common stock warrants were sold together at a combined price of $1.62, and each pre-funded warrant and accompanying common stock warrants were sold together at a combined price of $1.619, for gross proceeds of approximately $1 4 .8 million. Each pre-funded warrant ha d an exercise price of $0.001 per share, became exercisable immediately upon issuance and was exercisable until exercised in full. As of February 10, 2022, all of the pre-funded warrants had been exercised. Of the accompanying common stock warrants, warrants to purchase an aggregate of 9 , 151 , 122 shares will expire in April 2025 and warrants to purchase an aggregate of 9 , 151 , 122 shares will expire in October 2028 . The accompanying common stock warrants have an exercise price of $1.37 per share and became exercisable immediately upon issuance . As of May 12, 2022, common stock warrants to purchase 3,299,270 shares of common stock that were to expire on April 5, 2025 have been exercised. On April 11, 2022, we issued and sold in a private placement, or the April 2022 Private Placement, (i) an aggregate of 4,580,526 shares of our common stock, and (ii) pre-funded warrants to purchase up to an aggregate of 24,379,673 shares of our common stock. Each share of our common stock was sold at a price of $1.90, and each pre-funded warrant was sold at a price of $1.899 per warrant share, for gross proceeds of approximately $55.0 million. Each pre-funded warrant has an exercise price of $0.001 per share, is exercisable immediately and will be exercisable until the pre-funded warrant is exercised in full. Cash Flows As of March 31, 2022, we had cash and cash equivalents of $29.1 million. Our cash and cash equivalents are primarily held in money market accounts. The following table summarizes our cash flows for each of the periods presented below (in thousands): Three Months Ended March 31, 2022 2021 Change Net cash used in operating activities $ (7,092 ) $ (7,578 ) $ 486 Net cash (used in) provided by financing activities (625 ) 4,147 (4,772 ) Net decrease in cash and cash equivalents $ (7,717 ) $ (3,431 ) $ (4,286 ) Operating Activities During the three months ended March 31, 2022, operating activities used $7.1 million of net cash, resulting from our net loss of $7.3 million and net changes in our operating assets and liabilities of $0.7 million, offset by non-cash charges of $0.9 million. The non-cash charges consisted primarily of stock-based compensation expense of $0.7 million and $0.2 million of accretion/accrual of term loan discounts and debt issuance costs. Changes in our operating assets and liabilities consisted of a $1.1 million decrease in accounts payable, a $0.4 million decrease in prepaid expenses and other current assets and an immaterial increase in accrued expenses and other liabilities. The decrease in accounts payable was primarily due to the timing of vendor invoices. The decrease in prepaid expenses and other current assets was primarily due to a decrease in prepayments of our corporate insurance policies. The immaterial increase in accrued expenses and other liabilities was primarily due to increased accruals for research, development and clinical trial work performed by our CROs, partially offset by a decrease in accrued compensation and benefits. During the three months ended March 31, 2021, operating activities used $7.6 million of cash, resulting from our net loss of $8.4 million and net changes in our operating assets and liabilities of $0.1 million, partially offset by non-cash charges of $0.9 million. The non-cash charges consisted primarily of stock-based compensation expense of $0.7 million and $0.1 million of accretion/accrual of term loan discounts and debt issuance costs. Changes in our operating assets and liabilities consisted of a $1.2 million decrease in accounts payable, a $0.7 million decrease in prepaid expenses and other current assets and a $0.4 million increase in accrued expenses. The decrease in accounts payable was primarily due to the timing of vendor invoices. The decrease in prepaid expenses and other current assets was primarily due to a decrease in prepayments of our corporate insurance policies and our research, development and clinical trial work performed by our CROs and other vendors. The increase in accrued expenses was primarily due to increased accruals for research, development and clinical trial work performed by our CROs, partially offset by a decrease in accrued compensation and benefits. Investing Activities During the three months ended March 31, 2022 and 2021, no cash was provided by or used in investing activities. Financing Activities During the three months ended March 31, 2022, net cash used in financing activities was $0.6 million, primarily consisting of repayments of $0.6 million on the SVB Term Loan and by payments of offering costs of less than $0.1 million, slightly offset by proceeds received from the exercise of warrants. During the three months ended March 31, 2021, net cash provided by financing activities was $4.1 million, consisting of gross cash proceeds of $4.4 million from sales of our common stock under the ATM Sales Agreement, before deducting estimated commissions and allocated fees of $0.3 million. 23 Funding Requirements We expect to incur substantial expenditures in the foreseeable future as we advance Haduvio through clinical development, the regulatory approval process and, if approved, commercial launch activities. Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing Phase 2b/3 PRISM trial, the additional Phase 3 clinical trial we believe we will need to conduct to support the submission of an NDA to the FDA and MAAs to the EMA and MHRA for Haduvio for the treatment of pruritus associated with prurigo nodularis if the PRISM trial is successful, our ongoing Phase 2 CANAL trial and our next clinical trial that we expect will be designed as a Phase 2b/3 trial, subject to discussions with the FDA, if the CANAL trial is successful, as well as any additional clinical trials required to support the submission of an NDA to the FDA and MAAs to the EMA and MHRA for Haduvio for the treatment of chronic cough in adults with IPF. Generally, regulatory authorities require two adequate and well-controlled studies for approval. We also expect to incur substantial expenditures in the foreseeable future related to the costs of commercialization activities, including manufacturing capabilities, for Haduvio and other development activities. In addition, we have incurred and may continue to incur additional expenses as a result of the COVID-19 pandemic and resulting clinical trial delays and interruptions. Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. We will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of Haduvio, if ever, we expect to finance our operations through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms or at all. Our future funding requirements, both short-term and long-term, will depend on many factors, including: • the scope, progress, timing, costs and results of clinical trials of Haduvio, including our ongoing Phase 2b/3 PRISM trial and our ongoing Phase 2 CANAL trial, as well as any future product candidates; • the number and characteristics of indications for which we seek to develop Haduvio or any future product candidates and their respective development requirements; • the outcome, timing and costs of clinical and nonclinical trials and of seeking regulatory approvals, including the costs of supportive clinical studies such as our planned human abuse liability, or HAL, study and a potential Thorough QT, or TQT, study; • the costs associated with the manufacture of necessary quantities of Haduvio or any future product candidate for clinical development in connection with regulatory submissions; • the costs of commercialization activities for Haduvio for the treatment of pruritus associated with prurigo nodularis or for the treatment of chronic cough in adults with IPF or for any other serious neurologically mediated conditions or for any future product candidates that receive marketing approval, if any, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities; • subject to receipt of marketing approvals, revenue, if any, received from commercial sales of Haduvio for the treatment of pruritus associated with prurigo nodularis or for the treatment of chronic cough in adults with IPF or for any other serious neurologically mediated conditions or from any future product candidates; • our ability to identify potential collaborators for Haduvio for the treatment of pruritus associated with prurigo nodularis or for the treatment of chronic cough in adults with IPF or for any future product candidates and the terms and timing of any collaboration agreement that we may establish for the development and any commercialization of such product candidates; • the extent to which we acquire or in-license rights to other potential product candidates or technologies and the terms and timing of any such acquisition or licensing arrangements; • our potential obligation to make milestone payments to Endo, which would become due upon the successful completion of the first Phase 3 clinical trial of a licensed product candidate and the marketing approval of a licensed product in the United States, as well as our potential obligations to pay Endo mid-single digit royalties on the net sales of the product; • our headcount growth and associated costs as we expand our research and development activities and establish a commercial infrastructure; • the costs of preparing, filing and prosecuting patent applications, maintaining, expanding and protecting our intellectual property rights and defending against intellectual property-related claims; • the effect of competing technologies and market developments; • our ability to establish and maintain healthcare coverage and adequate reimbursement for our products; • the costs of operating as a public company; • our ability to continue as a going concern; and 24 • the impact of the COVID-19 pandemic on the scope, progress, timing, costs and results of our ongoing and planned clinical trials of Haduvio. We believe that our existing cash and cash equivalents, including the proceeds from our April 2022 Private Placement, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2024. We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing and financing may not be available to us on acceptable terms, on a timely basis or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We do not have any committed external source of funds. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations, licensing arrangements or other sources to complete the clinical development and commercialization of Haduvio for the treatment of pruritus associated with prurigo nodularis or for the treatment of chronic cough in adults with IPF or any other indication. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any debt financing into which we enter would result in fixed payment obligations and may involve agreements that include grants of security interests on our assets and restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, granting liens over our assets, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business. For example, in connection with the SVB Term Loan, we granted a security interest on all of our assets, excluding our intellectual property, agreed to a negative pledge on our intellectual property, agreed to restrictive covenants including, subject to certain exceptions, covenants that prohibit us from transferring all or any part of our business or property, changing our business, liquidating or dissolving, merging with or acquiring another entity, entering into a transaction that will result in a change in control, incurring additional indebtedness, creating any lien on our property, paying dividends or redeeming stock, making payments on subordinated debt or entering into material transactions with affiliates and agreed to cash collateralize the SVB Term Loan in certain circumstances. Future debt securities or other financing arrangements could contain similar or more restrictive negative covenants. We are also bound by certain contractual terms and obligations that may limit or otherwise impact our ability to raise additional funding in the near-term including, but not limited to, provisions in the October 2021 Private Placements prohibiting us from obtaining additional financing through a variable rate transaction such as an equity line of credit. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates. Any debt financing or additional equity that we raise may contain terms that could adversely affect our common stockholders. If we are unable to raise sufficient capital as and when needed, we may be required to delay, reduce or abandon our product development programs or commercialization efforts. If we raise additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. Critical Accounting Policies and Use of Estimates Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in the Notes to our financial statements, we believe that the critical accounting policies described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021 are the most important to understanding and evaluating our reported financial results. During the three months ended March 31, 2022, there were no material changes to our critical accounting policies. Recently Adopted Accounting Pronouncements There have been no new pronouncements adopted during the three months ended March 31, 2022, which could be expected to materially impact the Company’s Condensed Consolidated Financial Statements. Recently Issued Accounting Pronouncements There have been no new pronouncements during the three months ended March 31, 2022 which could be expected to materially impact our Condensed Consolidated Financial Statements. 25 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not Applicable.