What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-11 · 128 added, 121 removed, 452 unchanged (36% of the section changed)

3 unchanged sentences

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

September 30,

Current assets:

4 unchanged sentences

Total current assets

Marketable securities - non-current

Other non-current assets

15 unchanged sentences

$ 0.001 par value;

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.

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

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

Common stock:

$ 0.001 par value;

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.

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

and 58,322,517 and 28,505,804 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

3 unchanged sentences

Loss from operations

Other (expense) income:

Other income (expense):

Change in fair value of term loan derivative liability

2 unchanged sentences

Interest expense

Total other expense, net

Total other income (expense), net

Loss before income taxes

Income tax benefit

Income tax benefit (expense)

Basic and diluted net loss per common share outstanding

10 unchanged sentences

Stockholders’

Balance at March 31, 2022

Balance at June 30, 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 exercise of stock options

Issuance of common stock and warrants under public offering, less issuance costs

Issuance of common stock from warrant exercise

Unrealized losses on available-for-sale marketable securities

Balance at September 30, 2022

Balance at June 30, 2021

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

Balance at September 30, 2021

Comprehensive

2 unchanged sentences

Stock-based compensation

Issuance of common stock from exercise of stock options

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 and warrants under public offering and private placement, 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 September 30, 2022

Balance at December 31, 2020

3 unchanged sentences

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

Balance at June 30, 2021

Balance at September 30, 2021

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

2 unchanged sentences

(Amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

11 unchanged sentences

Investing activities:

Proceeds from maturities of available-for-sale marketable securities

Purchases of available-for-sale marketable securities

Purchases of property, equipment and leasehold improvements

Net cash used in investing activities

2 unchanged sentences

Payments of financing costs of term loan

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

net of issuance costs

Proceeds from sale of common stock and warrants under public offering and private placement, net of issuance costs

Proceeds from exercises of warrants

Proceeds from exercises of stock options

Proceeds from employee stock purchase plan

2 unchanged sentences

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

6 unchanged sentences

Trevi Therapeutics, Inc.

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

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

2 unchanged sentences

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

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

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

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

3 unchanged sentences

Basis of Presentation

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.

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three and nine months ended September 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 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.

The Company has evaluated events occurring subsequent to September 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

4 unchanged sentences

Actual results could differ from those estimates.

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

Unaudited Interim Financial Information

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.

The accompanying interim Condensed Consolidated Balance Sheet as of September 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 nine months ended September 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 September 30, 2022 and the results of its operations and its cash flows for the three and nine months ended September 30, 2022 and 2021.

The results for the three and nine months ended September 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

5 unchanged sentences

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).

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.

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.

43 unchanged sentences

All of the Company’s R&D expenses consist of expenses incurred in connection with the development of Haduvio.

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

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

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

10 unchanged sentences

Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or the underlying shares by paying cash or other assets, or must or may require settlement by issuing variable number of shares.

If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.

If the warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.

If the warrants do not require liability classification under ASC 815, in order to conclude equity classification, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP.

19 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 recognized when the performance conditions are probable.

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

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 June 30, 2022 and December 31, 2021.

There are no material uncertainties regarding the tax positions that the Company has taken through September 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.

In the event the Company determines that accrual of interest or penalties are necessary in the future, the amount will be presented as a component of interest expense.

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

3 unchanged sentences

Operating lease right-of-use assets and operating lease liabilities are determined and recognized on the commencement date of the lease based on the present value of lease payments over the term of the lease.

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

Basic and Diluted Net Income (Loss) per Common Share

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

Basic and Diluted Net Loss per Common Share

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

6 unchanged sentences

Recently Adopted Accounting Pronouncements

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.

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

There have been no new pronouncements issued during the nine months ended September 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

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

September 30, 2022

Type of security

7 unchanged sentences

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.

As of September 30, 2022, all remaining contractual maturities of the Company’s available-for-sale marketable securities were due to mature in less than one year.

During the three and nine months ended September 30, 2022, there have been no realized gains or losses on available-for-sale marketable securities.

During the three and nine months ended September 30, 2022, 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 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:

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

Fair Value Measurement Using:

1 unchanged sentence

Type of Instrument

June 30, 2022

September 30, 2022

Financial assets:

1 unchanged sentence

Money market funds

Cash equivalents

Corporate bonds

Marketable securities

15 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

11 unchanged sentences

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

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 had no significant new leases during the nine months ended September 30, 2022.

The Office Space Lease is an operating lease and the remaining term as of September 30, 2022 is less than one year .

The Company has no financing leases.

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

June 30, 2022

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

September 30, 2022

December 31, 2021

3 unchanged sentences

Total operating lease liabilities

Future minimum lease payments from June 30, 2022 until the expiration of the operating leases are as follows:

Future minimum lease payments from September 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 $ 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.

Lease expense under operating leases, including leases of office equipment, was $ 31 and $ 29 for the three months ended September 30, 2022 and 2021, respectively, and $ 92 and $ 90 for the nine months ended September 30, 2022 and 2021, respectively.

Lease payments made in the three months ended September 30, 2022 and 2021 were $ 36 and $ 35 , respectively, and $ 95 and $ 104 for

the nine months ended September 30, 2022 and 2021 , respectively , with such amounts reflected in the Condensed Consolidated Statement s of Cash Flows in operating activities.

Accrued Expenses

Accrued expenses consisted of the following:

June 30, 2022

September 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

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.

2 unchanged sentences

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.

In addition, the Third Amendment modifie d 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 %.

7 unchanged sentences

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.

Amortization of these deferred financing charges totaled $ 17 and $ 11 for the three months ended September 30, 2022 and 2021, respectively, and $ 54 and $ 22 for the nine months ended September 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 $ 43 and $ 76 at September 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 $ 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.

Accretion of these loan discounts totaled $ 2 and $ 3 for the three months ended September 30, 2022 and 2021, respectively, and $ 7 and $ 8 for the nine months ended September 30, 2022 and 2021, respectively, and is included in interest expense in the Company’s Condensed Consolidated Statements of Comprehensive Loss.

At September 30, 2022 and December 31, 2021, the loan discount-financing costs balance was $ 5 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 $ 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.

Accrual of this final payment fee totaled $ 89 and $ 118 for the three months ended September 30, 2022 and 2021, respectively, and $ 309 and $ 355 for the nine months ended September 30, 2022 and 2021, respectively, and is included in interest expense in the Company’s Condensed Consolidated Statements of Comprehensive Loss.

At September 30, 2022 and December 31, 2021, $ 966 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.

The Contingent Interest Rate Increase represented 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 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 .

The Company adjusted this liability to fair value at each reporting date it remained 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 Sheets 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 .

Such amortization was $ 14 and $ 19 for the three months ended September 30, 2022 and 2021 , respectively, and $ 49 and $ 56 for the nine months ended September 30, 2022 and 2021, respectively.

At September 30, 2022 and December 31, 2021, the balance of the term loan discount – interest was $ 35 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

As of September 30, 2022 and December 31, 2021, the Company had outstanding borrowings of $ 9.9 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 September 30, 2022 and December 31, 2021 was comprised as shown below.

September 30, 2022

December 31, 2021

6 unchanged sentences

Term loan payable, non-current

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

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 nine months ended September 30, 2022 and 2021, respectively.

For the three and nine months ended September 30, 2022, the weighted average interest rate applicable to borrowings under the SVB Term Loan was 6.97 % and 5.27 %, respectively.

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Interest payments

2 unchanged sentences

Stockholders’ Equity

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:

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

September 30,

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

6 unchanged sentences

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

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

The Company is not obligated to make any sales of its common stock

under the ATM Sales Agreement.

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

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.

During the three and nine months ended September 30, 2021 , the Company issued and sold an aggregate of 162,026 and 2,895,518 shares of common stock, respectively, for gross proceeds of $ 0.3 million and $ 7.7 million, respectively, before deducting estimated commissions and allocated fees of less than $ 0.1 million and $ 0.6 million, respectively.

No sales were made during the three and nine months ended September 30, 2022.

As of September 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.

13 unchanged sentences

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.

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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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:

Public Offering

On September 27, 2022, the Company issued and sold 14,252,670 shares of the Company’s common stock and, in lieu of common stock to certain investors, pre-funded warrants to purchase 14,247,330 shares of common stock in a public offering (the “September 2022 Offering”), at a public offering price of $ 1.93 per share of common stock and $ 1.929 per pre-funded warrant pursuant to an underwriting agreement (the “Underwriting Agreement”) with SVB Securities LLC, Stifel, Nicolaus & Company, Incorporated and Oppenheimer & Co.

Inc., as representatives of the several underwriters (the “Underwriters”).

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.

Under the terms of the Underwriting Agreement, the Company agreed not to issue and sell additional shares until after November 21, 2022 except in certain circumstances, including the issuance and sale of additional shares pursuant to the Underwriting Agreement.

Under the terms of the Underwriting Agreement, the Company granted the Underwriters an option (the “Option”), exercisable for 30 days, to purchase up to an additional 4,275,000 shares of common stock (the “Additional Shares”), at the public offering price of $ 1.93 per share.

The Underwriters partially exercised the Option to purchase 1,600,428 Additional Shares, which shares were issued and sold on October 25, 2022.

The September 2022 Offering , including the initial closing on September 27, 2022 and the Option closing on October 25, 2022, resulted in aggregate gross proceeds to the Company of approximately $ 58.1 million.

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

Pre-funded Warrant

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Outstanding as of December 31, 2021

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.

Outstanding as of September 30, 2022

As of March 31, 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.

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 June 30, 2022, of which 1,062,074 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 5,155,433 as of September 30, 2022, of which 1,013,526 shares remained available for grant under the 2019 Plan.

Awards may be made under the 2019 Plan for up to such number of shares of the Company’s common stock as is equal to the sum of:

i) 1,578,947 shares;

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

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

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

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

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.

As of September 30, 2022 and December 31, 2021, respectively, options to purchase 3,534,413 shares and 2,263,752 shares of common stock were granted and outstanding, net of

cancellations, under the 2019 Plan.

As of September 30, 2022 and December 31, 2021 , respectively, options to purchase 607,494 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 six months ended June 30, 2022 is as follows:

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the nine months ended September 30, 2022 is as follows:

Outstanding as of December 31, 2021

Outstanding as of June 30, 2022

Options exercisable as of June 30, 2022

Options unvested as of June 30, 2022

Outstanding as of September 30, 2022

Options exercisable as of September 30, 2022

Options unvested as of September 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 June 30, 2022, of which 721,717 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 September 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.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

General and administrative expense

Research and development expense

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.

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

The income tax benefit (expense) recorded during the three and nine months ended September 30, 2022 and 2021 was to align the Company’s estimates for its state research and development tax credits in each given year.

Net Loss per Share

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

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.

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.

As of September 30, 2022, the Company had pre-funded warrants to purchase 38,627,003 shares of common stock outstanding, which were issued in the April 2022 Private Placement and the September 2022 Offering, which warrants are included in the weighted average common shares used in calculating the net loss per share attributable to common stockholders, basic and diluted in both the three and nine months ended September 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 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,

The following potential common shares, presented based on shares outstanding as of September 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 September 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.

Upon termination of the agreement, the Company must transfer to Endo all regulatory filings and approvals relating to the development, manufacture or commercialization of the licensed products and all trademarks, other than the Company’s corporate trademarks, then being used in connection with the licensed products.

If the agreement is terminated under certain specified circumstances, the Company will be deemed to have granted Endo a perpetual, royalty-free (except for pass-through payments to third parties), worldwide, exclusive, sublicensable license under any improvements the Company made to the licensed know-how and any related patent rights the Company has to manufacture and commercialize the licensed products.

If the agreement is terminated under certain specified circumstances, the Company will be deemed to have granted Endo a perpetual, royalty-free (except for pass-through payments to third

parties), worldwide, exclusive, sublicensable license under any improvements the Company made to the licensed know-how and any related patent rights the Company has to manufacture and commercialize the licensed products.

Commitments and Contingencies

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The Company also has commitments under lease and licensing agreements (Note 5 and Note 11).

Subsequent Events

Warrant Exercises

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

Subsequent Event

On October 25, 2022, the Company sold 1,600,428 shares of common stock at $ 1.93 per share to the Underwriters upon the exercise of the Option pursuant to the Underwriting Agreement for gross proceeds of approximately $ 3.1 million (Note 8).

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