What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 224 added, 123 removed, 349 unchanged (50% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Marketable securities

Prepaid expenses

1 unchanged sentence

Total current assets

Marketable securities - non-current

Other non-current assets

9 unchanged sentences

Operating lease liability

Other non-current liabilities

Total liabilities

3 unchanged sentences

$ 0.001 par value;

5,000,000 shares authorized at March 31, 2022 and December 31, 2021;

no shares issued or outstanding at March 31, 2022 and December 31, 2021.

5,000,000 shares authorized at June 30, 2022 and December 31, 2021;

no shares issued or outstanding at June 30, 2022 and December 31, 2021.

Common stock:

$ 0.001 par value;

200,000,000 shares authorized at March 31, 2022 and December 31, 2021;

and 30,805,804 and 28,505,804 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.

200,000,000 shares authorized at June 30, 2022 and December 31, 2021;

and 39,719,572 and 28,505,804 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

3 unchanged sentences

Trevi Therapeutics, Inc.

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Comprehensive Loss

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

Three Months Ended

Six Months Ended

Operating expenses:

5 unchanged sentences

Change in fair value of term loan derivative liability

Interest income

Other expense

Interest income, net

Interest expense

5 unchanged sentences

attributable to common stockholders, basic and diluted

Other comprehensive loss:

Net unrealized losses on available-for-sale marketable securities

Comprehensive loss

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

2 unchanged sentences

(Amounts in thousands, except share amounts)

Comprehensive

Stockholders’

Balance at December 31, 2021

Balance at March 31, 2022

Stock-based compensation

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 and warrants under private placements, less issuance costs

Issuance of common stock from warrant exercise

Unrealized losses on available-for-sale marketable securities

Balance at June 30, 2022

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 from Employee Stock Purchase Plan

Issuance of common stock to Lincoln Park Capital Fund (see Note 8)

Balance at June 30, 2021

Comprehensive

Stockholders’

Balance at December 31, 2021

1 unchanged sentence

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

Balance at March 31, 2021

Issuance of common stock from Employee Stock Purchase Plan

Issuance of common stock and warrants under private placements, less issuance costs

Issuance of common stock from warrant exercise

Unrealized losses on available-for-sale marketable securities

Balance at June 30, 2022

Balance at December 31, 2020

Stock-based compensation

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 8)

Balance at June 30, 2021

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

2 unchanged sentences

(Amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities:

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

Accretion of available-for-sale marketable securities, net

Change in fair value of term loan derivative liability

Accretion/accrual of term loan discounts and debt issuance costs

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

Stock-based compensation

4 unchanged sentences

Net cash used in operating activities

Investing activities:

Purchases of available-for-sale marketable securities

Net cash used in investing activities

Financing activities:

Repayments of term loan

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

Payments of financing costs of term loan

Proceeds from sale of common stock and warrants under private placement,

net of issuance costs

Proceeds from exercises of warrants

Proceeds from employee stock purchase plan

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

Payments of offering costs

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Net decrease in cash and cash equivalents

7 unchanged sentences

Trevi Therapeutics, Inc.

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

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

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

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

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

8 unchanged sentences

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three months ended March 31, 2022 and 2021 included herein have been prepared in accordance with accounting principles generally accepted in the U.S.

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2022 and 2021 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.

5 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, 2022 for potential recognition or disclosure in the Condensed Consolidated Financial Statements and concluded there were no subsequent events that required recognition or disclosure other than those provided in Note 11.

The Company has evaluated events occurring subsequent to June 30, 2022 for potential recognition or disclosure in the Condensed Consolidated Financial Statements and concluded there were no subsequent events that required recognition or disclosure other than those provided in Note 13.

Use of Estimates

6 unchanged sentences

Unaudited Interim Financial Information

The accompanying interim Condensed Consolidated Balance Sheet as of March 31, 2022 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, 2022 and 2021 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, 2022 and the results of its operations and its cash flows for the three months ended March 31, 2022 and 2021.

The results for the three months ended March 31, 2022 and 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or any other interim period or any future year or period.

The accompanying interim Condensed Consolidated Balance Sheet as of June 30, 2022 and the Condensed Consolidated Statements of Comprehensive Loss, the Condensed Consolidated Statements of Stockholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2022 and 2021 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, 2022 and the results of its operations and its cash flows for the three and six months ended June 30, 2022 and 2021.

The results for the three and six months ended June 30, 2022 and 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or any other interim period or any future year or period.

Cash Equivalents

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

Marketable Securities

The Company generally invests its excess cash in money market funds and investment grade short- to intermediate-term fixed income securities.

Such investments are included in cash and cash equivalents, short-term marketable securities or long-term marketable securities on the Condensed Consolidated Balance Sheet.

Marketable securities with an original maturity date greater than 90 days and less than one year at each balance sheet date are classified as short-term.

Marketable securities with a maturity date greater than one year at each balance sheet date are classified as long-term.

All of the Company’s marketable securities are considered available-for-sale and are reported at fair value with unrealized gains and losses included as a component of stockholders’ equity (deficit).

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income, net on the Condensed Consolidated Statements of Comprehensive Loss.

Realized gains and losses and declines in value judged to be other-than-temporary, if any, on marketable securities are included in interest income, net on the Condensed Consolidated Statements of Comprehensive Loss.

The cost of securities sold is determined using specific identification.

The Company evaluates whether declines in the fair values of its marketable securities below their amortized cost are other-than temporary on a quarterly basis.

This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as the Company’s ability and intent to hold the marketable security until a forecasted recovery occurs.

Additionally, the Company assesses whether it has plans to sell the marketable security or whether it is more likely than not that it will be required to sell any marketable securities before recovery of its amortized cost basis.

Factors considered include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, other publicly available information that may affect the value of the marketable security, duration and severity of the decline in value, and the Company’s strategy and intentions for holding the marketable security.

Fair Value Measurements

The Company’s financial instruments have consisted of cash and cash equivalents, other current assets, accounts payable, accrued expenses, term loans, term loan derivative liability and warrants to acquire the Company’s common stock.

The Company’s financial instruments have consisted of cash and cash equivalents, available-for-sale marketable securities, other current assets, accounts payable, accrued expenses, term loans, term loan derivative liability and warrants to acquire the Company’s common stock.

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

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

Available-for-sale marketable securities are reported at their fair values, based upon pricing of securities with the same or similar investment characteristics as provided by third-party pricing services, as described below.

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

7 unchanged sentences

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

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, and the basis for that measurement, by level within the fair value hierarchy:

March 31, 2022

Financial assets carried at fair value:

Money market funds (1)

Financial liabilities carried at fair value:

Term loan derivative liability

December 31, 2021

Financial assets carried at fair value:

Money market funds ( 1)

Financial liabilities carried at fair value:

Term loan derivative liability

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

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

March 31, 2022

December 31, 2021

Financial liabilities

Balance at beginning of period

Change in fair value of term loan derivative liability

Balance at end of period

Valuation Techniques - Level 2 Inputs

The Company estimates the fair values of its financial instruments categorized as level 2 in the fair value hierarchy, including U.S.

Treasury securities, U.S.

government agency obligations, corporate bonds, commercial paper and municipal bonds, by taking into consideration valuations obtained from third-party pricing services.

The pricing services use industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value.

These inputs include reported trades of and broker/dealer quotes on the same or similar securities, benchmark yields, issuer credit spreads, benchmark securities, and other observable inputs.

The Company obtains a single price for each financial instrument and does not adjust the prices obtained from the pricing service.

Property, Equipment and Leasehold Improvements

7 unchanged sentences

The transactions are recorded in U.S.

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

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

Deferred Offering Costs

2 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.

The deferred offering costs are included in Other non-current assets on the Condensed Consolidated Balance Sheets.

Research and Development (“R&D”) Expenses

16 unchanged sentences

After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity.

Liability classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded in the statements of operations as a gain or loss.

Liability classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates,

with all changes in fair value after the issuance date recorded in the statements of comprehensive loss as a gain or loss.

For equity classified warrants, no changes in fair value are recognized after the issuance date.

3 unchanged sentences

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

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

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

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

9 unchanged sentences

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

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

For performance-based vesting, the fair value is recognized when the performance conditions are probable.

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

5 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.

There are no material uncertainties regarding the tax positions that the Company has taken through March 31, 2022 and December 31, 2021.

There are no material uncertainties regarding the tax positions that the Company has taken through June 30, 2022 and December 31, 2021.

The Company does not have any interest or penalties accrued related to tax positions as it does not have any unrecognized tax benefits.

15 unchanged sentences

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.

There have been no new pronouncements adopted during the six months ended June 30, 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 issued during the three months ended March 31, 2022, which could be expected to materially impact the Company’s Condensed Consolidated Financial Statements.

There have been no new pronouncements issued during the six months ended June 30, 2022, which could be expected to materially impact the Company’s Condensed Consolidated Financial Statements.

Marketable Securities

The fair value and amortized cost of available-for-sale marketable securities by major security type as of June 30, 2022 are presented in the following table (in thousands):

June 30, 2022

Type of security

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

treasury securities

Corporate bonds

Commercial paper

Total marketable securities

As of June 30, 2022, the remaining contractual maturities of available-for-sale marketable securities were as follows (in thousands):

June 30, 2022

Amortized Cost

Due to mature:

Less than one year

One year through two years

During the three and six months ended June 30, 2022, there have been no realized gains or losses on available-for-sale marketable securities, no marketable securities had been in a continuous unrealized loss position for more than 12 months, and the Company did no t recognize any other-than-temporary impairment losses on these marketable securities.

Fair Value Measurements

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and the basis for that measurement, by level within the fair value hierarchy:

Fair Value Measurement Using:

Balance Sheet Classification

Type of Instrument

June 30, 2022

Financial assets:

Cash equivalents

Money market funds

Cash equivalents

Corporate bonds

Marketable securities

treasury securities

Marketable securities

Corporate bonds

Marketable securities

Commercial paper

Fair Value Measurement Using:

Balance Sheet Classification

Type of Instrument

December 31, 2021

Financial assets:

Cash equivalents

Money market funds

Financial liabilities:

Term loan derivative liability

Total liabilities

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

June 30, 2022

December 31, 2021

Financial liabilities

Balance at beginning of period

Change in fair value of term loan derivative liability

Net settlements (see Note 7)

Balance at end of period

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 (collectively, the “Office Space Lease”).

1 unchanged sentence

The Office Space Lease requires monthly payments ranging from approximately $ 10 to $ 12 through February 1, 2023 and provides for two designated months of free rent.

The Company also entered into an immaterial office equipment lease during the three months ended June 30, 2022 that has a term of 36 months.

The incremental borrowing rate used on the Office Space Lease was 13.0 %.

1 unchanged sentence

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, 2022.

The Office Space Lease is an operating lease and the remaining term as of March 31, 2022 is approximately 1.0 year .

The Company had no significant new leases during the six months ended June 30, 2022.

The Office Space Lease is an operating lease and the remaining term as of June 30, 2022 is approximately 0.8 years .

The Company has no financing leases.

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

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

Total operating lease liabilities

Future minimum lease payments from March 31, 2022 until the expiration of the operating leases are as follows:

Future minimum lease payments from June 30, 2022 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 $ 39 and $ 30 for the three months ended March 31, 2022 and 2021, respectively.

Lease payments made in the three months ended March 31, 2022 and 2021 were $ 35 and $ 34 , 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 $ 23 and $ 30 for the three months ended June 30, 2022 and 2021, respectively, and $ 61 and $ 61 for the six months ended June 30, 2022 and 2021, respectively.

Lease payments made in the three months ended June 30, 2022 and 2021 were $ 24 and $ 35 , respectively, and $ 59 and $ 69 for the six months ended June 30, 2022 and 2021, respectively, with such amounts reflected in the Condensed Consolidated Statements of Cash Flows in operating activities.

Accrued Expenses

Accrued expenses consisted of the following:

March 31, 2022

June 30, 2022

December 31, 2021

17 unchanged sentences

Under the Loan Amendment, if the Company failed to receive positive data in its Phase 2b/3 PRISM trial or to raise by June 30, 2022 sufficient 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 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 Loan Amendment provided that if the Company failed 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 “Minimum Required Cash”), the Company would be required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement .

The Company would also have been required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement if it 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.

The Company satisfied this equity funding condition through a combination of equity issuances under the Company’s ATM Sales Agreement and two private placements, which took place in October 2021 (see Note 8 ).

On April 11, 2022, the Company and SVB entered into a Third Amendment to the SVB Loan Agreement.

Refer to Note 11 for additional information.

On April 6, 2022, the Company and SVB entered into a Third Amendment (the “Third Amendment”) to the SVB Loan Agreement .

The Third Amendment principally modified the conditions under which the Company would be required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement .

Under the terms of the Third Amendment, if the Company raised $ 45.0 million in net proceeds from the sale of equity securities (the “2022 Equity Event”), the Company’s obligations to achieve the Milestone Conditions and maintain the Minimum Required Cash would terminate and the sole remaining trigger for cash collateralization would be if the Company did not receive positive final data by December 31, 2022 from either its Phase 2b/3 PRISM trial of Haduvio for prurigo nodularis or its 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 Loan Agreement.

As a result of the Third Amendment, amounts outstanding under the Loan Agreement accrue interest at a floating per annum rate equal to (i) prior to the occurrence of the 2022 Equity Event, the greater of (A) the prime rate plus 1.00 % and (B) 4.25 %, and (ii) upon and after the occurrence of the 2022 Equity Event, the greater of (A) the prime rate plus 3.00 % and (B) 6.25 %.

The closing of the April 2022 Private Placement, as discussed in Note 8 below, constituted the 2022 Equity Event and thereby terminated the Company’s obligations to achieve the Milestone Conditions and maintain the Minimum Required Cash.

On August 3, 2022, SVB confirmed that the reported data from the Phase 2b/3 PRISM trial satisfied the requirement for positive final data and that the cash collateralization requirements of the SVB Loan Agreement were no longer in effect.

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

3 unchanged sentences

In connection with the Loan Amendment, the Company paid $ 68 in financing costs to a third party, which were recorded as deferred charges and will be amortized over the remaining life of the SVB Term Loan using the effective interest method.

Amortization of these deferred financing charges totaled $ 17 and $ 6 for the three months ended March 31, 2022 and 2021, respectively and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

The unamortized deferred charges totaled $ 59 and $ 76 at March 31, 2022 and December 31, 2021, respectively, and are included as a direct reduction of the carrying value of the term loan payable on the Company’s Condensed Consolidated Balance Sheets.

In connection with the Third Amendment, the Company paid $ 21 in financing costs to a third party, which were recorded as deferred charges and will be amortized over the remaining life of the SVB Term Loan using the effective interest method.

Amortization of these deferred financing charges totaled $ 20 and $ 5 for the three months ended June 30, 2022 and 2021, respectively, and $ 37 and $ 11 for the six months ended June 30, 2022 and 2021, respectively, and is included in interest expense in the Company’s Condensed Consolidated Statements of Comprehensive Loss.

The unamortized deferred charges totaled $ 60 and $ 76 at June 30, 2022 and December 31, 2021, respectively, and are included as a direct reduction of the carrying value of the term loan payable on the Company’s Condensed Consolidated Balance Sheets.

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

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

Accretion of these loan discounts totaled $ 2 and $ 3 for the three months ended March 31, 2022 and 2021, respectively, and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

At March 31, 2022 and December 31, 2021, the loan discount-financing costs balance was $ 10 and $ 12 , respectively.

Accretion of these loan discounts totaled $ 2 and $ 2 for the three months ended June 30, 2022 and 2021, respectively, and $ 5 and $ 5 for the six months ended June 30, 2022 and 2021, respectively, and is included in interest expense in the Company’s Condensed Consolidated Statements of Comprehensive Loss.

At June 30, 2022 and December 31, 2021, the loan discount-financing costs balance was $ 7 and $ 12 , 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.

Accrual of this final payment fee totaled $ 117 and $ 118 for the three months ended March 31, 2022 and 2021, respectively, and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

At March 31, 2022 and December 31, 2021, $ 774 and $ 657 was accrued for the final payment fee, respectively.

U pon SVB receiving evidence satisfactory to it that the Company has (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 the Company’s operations, the interest rate on the SVB Term Loan will increase by 2.00 % (the “Contingent Interest Rate Increase”) as described above.

The Contingent Interest Rate Increase represents a free-standing financial instrument.

Accrual of this final payment fee totaled $ 104 and $ 119 for the three months ended June 30, 2022 and 2021, respectively, and $ 220 and $ 237 for the six months ended June 30, 2022 and 2021, respectively, and is included in interest expense in the Company’s Condensed Consolidated Statements of Comprehensive Loss.

At June 30, 2022 and December 31, 2021, $ 877 and $ 657 was accrued for the final payment fee, respectively.

Prior to the Third Amendment, the SVB Loan Agreement provided that upon SVB receiving evidence satisfactory to it that the Company 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 the Company’s operations, the interest rate on the SVB Term Loan would increase by 2.00 % (the “Contingent Interest Rate Increase”) as described above.

Contingent Interest Rate Increase represent ed a free-standing financial instrument.

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

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

The total fair value of this liability was determined to be $ 125 and $ 114 at March 31, 2022 and December 31, 2021, respectively.

The change in fair value of the term loan derivative liability as of March 31, 2022 as compared to the fair value at December 31, 2021 was $ 11 .

The term loan derivative liability is presented as a current liability on the Company’s Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.

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 and $ 18 in the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022 and December 31, 2021, the balance of the term loan discount – interest was $ 66 and $ 84 , 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, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, the Company had outstanding borrowings of $ 13.4 million and $ 14.0 million, respectively, 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, 2022 and December 31, 2021 was comprised as shown below.

March 31, 2022

The Company adjust ed this liability to fair value at each reporting date it remain ed outstanding, with such adjustments recorded as non-cash charges in other expense , net in the Company’s Condensed Consolidated Statements of Comprehensive Loss .

The term loan derivative liability was presented as a current liability on the Company’s Condensed Consolidated Balance Sheet s as of December 31, 2021 .

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 Comprehensive Loss through the SVB Term Loan’s maturity date using the effective interest method .

Such amortization was $ 16 and $ 19 for the three months ended June 30, 2022 and 2021 , respectively, and $ 35 and $ 37 for the six months ended June 30, 2022 and 2021 , respectively .

At June 30, 2022 and December 31, 2021 , the balance of the term loan discount – interest was $ 49 and $ 84 , respectively , and is included as a reduction in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheet s .

Upon entering into the Third Amendment, the Contingent Interest Rate Increase became effective and the Company recorded an increase to the total fair value of the term loan derivative liability of $ 136 for the three months ended June 30, 2022 .

The term loan derivative liability was then settled and reclassed to both current and non-current interest payable, which are presented as accrued liabilities and other non-current liabilities on the Company’s Condensed Consolidated Balance Sheet as of June 30, 2022 .

Fair values of the term loan derivative liability were 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 June 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, the Company had outstanding borrowings of $ 11.7 million and $ 14.0 million, respectively, 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, 2022 and December 31, 2021 was comprised as shown below.

June 30, 2022

December 31, 2021

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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, 2022 and 2021, respectively.

For the three months ended March 31, 2022 and 2021, the interest rate applicable to borrowings under the SVB Term Loan was 4.25%.

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 and six months ended June 30, 2022 and 2021, respectively.

For the three and six months ended June 30, 2022, the weighted average interest rate applicable to borrowings under the SVB Term Loan was 4.92 % and 4.59 %, respectively.

For the three and six months ended June 30, 2021, the weighted average interest rate applicable to borrowings under the SVB Term Loan was 4.25 %.

Three Months Ended

Six Months Ended

Interest payments

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Stockholders’ Equity

As of March 31, 2022 and December 31, 2021, the Company had reserved shares of common stock for future issuance as shown in the table below:

As of June 30, 2022 and December 31, 2021, the Company had reserved shares of common stock for future issuance as shown in the table below:

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

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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.

No sales were made during the three months ended March 31, 2022.

As of March 31, 2022, the Company 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.

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 $ 0.3 million and $ 0.6 million, respectively.

No sales were made during the three and six months ended June 30, 2022.

As of June 30, 2022, the Company 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.

In May 2022, the Company amended the ATM Sales Agreement with SVB Leerink LLC to increase the maximum aggregate offering price of common stock that it may issue and sell from time to time under the ATM Sales Agreement by $ 50.0 million, from $ 12.0 million to up to $ 62.0 million.

Equity Purchase Agreement

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On October 5, 2021, the Company issued and sold to an initial investor in a private placement priced at-the-market under Nasdaq rules, (i) 2,373,201 shares of the Company’s common stock and accompanying warrants to purchase an aggregate of 4,746,402 shares of the Company’s common stock, and (ii) pre-funded warrants to purchase up to an aggregate of 4,926,069 shares of the Company’s common stock and accompanying warrants to purchase an aggregate of 9,852,138 shares of the Company’s common stock.

Each share of the Company’s 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 $ 11.8 million.

Each pre-funded warrant had an exercise price of $ 0.001 per share, became exercisable immediately upon issuance and was exercisable until exercised in full.

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The accompanying common stock warrants have an exercise price of $ 1.37 per share and became exercisable immediately upon issuance.

On October 18, 2021, the Company issued and sold to New Enterprise Associates 16, L.P., an existing stockholder of the Company (“NEA”) and related party, in a private placement, 1,851,852 shares of the Company’s common stock and accompanying warrants to purchase an aggregate of 3,703,704 shares of the Company’s common stock.

warrants to purchase an aggregate of 3,703,704 shares of the Company’s common stock.

Each share of the Company’s common stock and accompanying common stock warrants were sold together at a combined price of $ 1.62 for gross proceeds of approximately $ 3.0 million.

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Total net proceeds from the two October private placements were $ 13.7 million, after deducting issuance costs of $ 1.1 million .

Warrant activity, including activity related to the pre-funded warrants, for the three months ended March 31, 2022 is shown in the table below:

On April 6, 2022, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain purchasers, pursuant to which the Company agreed to issue and sell to the purchasers, in a private placement priced at-the-market under Nasdaq rules, (i) 4,580,526 shares of the Company’s common stock at a purchase price of $ 1.90 per share, and (ii) pre-funded warrants to purchase up to an aggregate of 24,379,673 shares of common stock at a purchase price of $ 1.899 per warrant (the “April 2022 Private Placement”).

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.

The April 2022 Private Placement, which closed on April 11, 2022, resulted in gross proceeds to the Company of approximately $ 55.0 million.

NEA, an existing stockholder of the Company and a related party, as well as an affiliate of NEA, participated in the offering.

Warrant activity, including activity related to the pre-funded warrants, for the six months ended June 30, 2022 is shown in the table below:

Pre-funded Warrant

Common Stock Warrant

Total Number of

Outstanding as of December 31, 2021

Outstanding as of March 31, 2022

As of March 31, 2022, all of the pre-funded warrants had been exercised to purchase shares of the Company’s common stock at the exercise price of $ 0.001 per share.

Outstanding as of June 30, 2022

As of June 30, 2022, all of the pre-funded warrants from the October 2021 private placements had been exercised at the exercise price of $ 0.001 per share.

The pre-funded and common stock warrants are classified as equity in accordance with ASC 815 given that the pre-funded and common stock warrants are indexed to the Company’s own shares of common stock and meet the requirements to be classified in permanent equity.

On April 11, 2022, the Company issued common stock and pre-funded warrants to purchase common stock in a private placement.

Refer to Note 11 for additional information.

On April 11, 2022, common stock warrants to purchase approximately 3.3 million shares of common stock were exercised, which provided $4.5 million in cash proceeds to the Company.

Such warrants had been issued in the October 2021 private placements and were set to expire on April 5, 2025.

In July 2022, the remaining common stock warrants from the October 2021 private placements that were set to expire on April 5, 2025 were exercised to purchase 3.0 million shares of common stock, which provided approximately $ 4.1 million in cash proceeds to the Company.

Stock-Based Awards

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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 Stock Incentive Plan (the “2012 Plan”) was 5,206,441 as of March 31, 2022, of which 1,141,850 shares remained available for grant under the 2019 Plan.

The total number of shares of common stock that may be issued under the 2019 Plan and the 2012 Stock Incentive Plan (the “2012 Plan”) was 5,206,441 as of June 30, 2022, of which 1,062,074 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:

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

As of March 31, 2022 and December 31, 2021, respectively, options to purchase 3,401,502 shares and 2,263,752 shares of common stock were granted and outstanding, net of cancellations, under the 2019 Plan.

As of March 31, 2022 and December 31, 2021, respectively, options to purchase 663,089 and 665,720 shares of common stock, were granted and outstanding, net of cancellations, under the 2012 Plan.

As of June 30, 2022 and December 31, 2021, respectively, options to purchase 3,481,278 shares and 2,263,752 shares of common stock were granted and outstanding, net of cancellations, under the 2019 Plan.

As of June 30, 2022 and December 31, 2021, respectively, options to purchase 663,089 and 665,720 shares of common stock, were granted and outstanding, net of cancellations, under the 2012 Plan.

In February 2021, the compensation committee of the Company’s board of directors approved the grant of stock options to purchase 450,875 shares of common stock with performance-based vesting (“PSOs”) to employees of the Company.

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

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the three months ended March 31, 2022 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, 2022 is as follows:

Outstanding as of December 31, 2021

Outstanding as of March 31, 2022

Options exercisable as of March 31, 2022

Options unvested as of March 31, 2022

Outstanding as of June 30, 2022

Options exercisable as of June 30, 2022

Options unvested as of June 30, 2022

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 was 803,976 as of March 31, 2022, of which 755,689 shares remain available for issuance.

The total number of shares of common stock that may be issued under the 2019 ESPP was 803,976 as of June 30, 2022, of which 721,717 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.

Effective January 1, 2022 and January 1, 2021, respectively, the aggregate number of shares of the Company’s common stock that may be issued under the 2019 ESPP increased, pursuant to the terms of the 2019 ESPP, by an additional 285,058 shares and 185,467 shares, in each case equal to 1 % of the Company’s then-outstanding common stock .

The following table summarizes the classifications of stock-based compensation expenses for the 2012 Plan, the 2019 Plan and the 2019 ESPP recognized in the Condensed Consolidated Statements of Operations:

Three Months Ended

Six Months Ended

General and administrative expense

Research and development expense

During the three months ended March 31, 2022 and 2021, the Company maintained a full valuation allowance on deferred tax assets.

The amounts recorded for income taxes during the three months ended March 31, 2022 and 2021 were to align the Company’s estimates for its state research and development credits in each given year.

As of June 30, 2022 and December 31, 2021, the Company maintained a full valuation allowance on deferred tax assets.

The income tax benefit recorded during the three and six months ended June 30, 2022 and 2021 were to align the Company’s estimates for its state research and development credits in each given year.

Net Loss per Share

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Three Months Ended

Six Months Ended

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

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Basic shares outstanding includes the weighted average effect of the Company’s pre-funded warrants from the date of issuance, the exercise of which requires little or no consideration for the delivery of shares of common stock.

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

As of June 30, 2022, the Company had pre-funded warrants to purchase 24,379,673 share of common stock outstanding, which were issued in the April 2022 Private Placement.

Such pre-funded warrants are included in the weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted in both the three and six months ended June 30 2022.

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

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

The following potential common shares, presented based on shares outstanding as of March 31, 2022 and 2021, respectively, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Shares as of March 31,

The following potential common shares, presented based on shares outstanding as of June 30, 2022 and 2021, respectively, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Shares as of June 30,

Stock Options

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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.

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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Subsequent Events

On April 6, 2022, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain purchasers, pursuant to which the Company agreed to issue and sell to the purchasers, in a private placement priced at-the-market under Nasdaq rules, (i) 4,580,526 shares of the Company’s common stock, par value $ 0.001 per share, at a purchase price of $ 1.90 per share, and (ii) pre-funded warrants to purchase up to an aggregate of 24,379,673 shares of common stock at a purchase price of $ 1.899 per warrant (the “April 2022 Private Placement”).

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.

The April 2022 Private Placement, which closed on April 11, 2022, resulted in gross proceeds to the Company of approximately $ 55.0 million.

New Enterprise Associates 16, L.P., an existing stockholder of the Company and a related party (“NEA”), as well as an affiliate of NEA, participated in the offering.

Registration Rights Agreement

On April 6, 2022, in connection with the April 2022 Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the purchasers, pursuant to which the Company agreed to register for resale the shares issued in the private placement, as well as the shares of common stock issuable upon exercise of the pre-funded warrants.

Under the Registration Rights Agreement, the Company agreed to file a registration statement covering the resale by the purchasers of the shares and pre-funded warrant shares within 30 days following the date the Registration Rights Agreement was entered into.

The registration statement was filed on May 2, 2022 and was declared effective on May 11, 2022.

Loan Amendment

On April 6, 2022, the Company and SVB entered into a Third Amendment (the “Third Amendment”) to the Loan and Security Agreement, dated as of August 13, 2020, by and between the Company and SVB, as amended to date (the “Loan Agreement”).

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

As a result of the Third Amendment, when the Company raised $ 45.0 million in net proceeds from the sale of equity securities (the “2022 Equity Event”), the Company’s obligations to achieve the Milestone Conditions and maintain the Minimum Required Cash terminated.

The closing of the April 2022 Private Placement constituted the 2022 Equity Event.

Upon the Company’s achievement of the 2022 Equity Event, the cash collateralization requirement under the Loan Agreement will instead be triggered if the Company does not receive positive final data by December 31, 2022 from either its ongoing Phase 2b/3 PRISM trial of Haduvio for prurigo nodularis or its Phase 2 CANAL trial of Haduvio for the treatment of chronic cough in adults with IPF.

In addition, the Third Amendment modifies the interest rate on the principal amount outstanding under the Loan Agreement.

Warrant Exercises

On April 11, 2022, common stock warrants to purchase approximately 3.3 million shares of common stock were exercised, which provided $ 4.5 million in cash proceeds to the Company.

Such warrants had been issued in the October 2021 private placements and were set to expire on April 5, 2025.

See Note 8 above for further discussion of the October 2021 private placements.

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