Trevi Therapeutics, Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019; balance-sheet comparisons are to December 31, 2018. Amounts below are in U.S. dollars, generally millions unless stated otherwise.
Business context and reporting period
Trevi is a clinical-stage biopharmaceutical company developing oral extended-release nalbuphine (nalbuphine ER) for serious neurologically mediated conditions. Its programs include pruritus associated with prurigo nodularis, chronic cough in idiopathic pulmonary fibrosis (IPF), and levodopa-induced dyskinesia in Parkinson’s disease. The company has no approved products and has not generated product revenue.
Trevi completed its IPO and a concurrent private placement on May 9, 2019, issuing 7.0 million common shares at $10 per share for combined net proceeds of approximately $62.1 million. Previously outstanding preferred stock converted into common stock. A one-for-9.5 reverse stock split was effected in April 2019; share and per-share figures were retrospectively adjusted.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $5.53 | $3.44 | $8.87 | $5.80 |
| General and administrative expense | $1.89 | $0.94 | $3.36 | $1.72 |
| Total operating expenses / operating loss | $7.42 | $4.38 | $12.23 | $7.52 |
| Net loss | $7.35 | $4.86 | $12.15 | $8.91 |
| Net loss per common share | $0.63 | $13.62 | $2.32 | $25.45 |
| Operating cash used | Not presented quarterly | Not presented quarterly | $9.16 | $9.56 |
Operating expenses increased year over year, primarily with higher clinical-development activity. Q2 R&D expense rose $2.09 million, largely due to the PRISM trial and the start of the IPF cough Phase 2 trial. G&A increased with expanded staffing, public-company costs, and professional fees. Net loss increased, although the prior-year comparison included noncash fair-value expense on preferred-stock financing and term-loan interest. Loss per share comparisons are also affected by the IPO conversion and share-count changes. Profit margins are not meaningful because the company has no revenue.
At June 30, cash and cash equivalents were $71.39 million, versus $7.20 million at year-end 2018; current assets were $74.61 million and current liabilities $7.11 million. Stockholders’ equity was $67.70 million. There were no term-loan borrowings outstanding; the remaining $675,000 success fee was paid when the IPO triggered the payment obligation. Operating lease liabilities totaled $399,000.
For the first half, financing activities provided $73.35 million, principally from the IPO, private placement, and January Series C financing, partly offset by IPO costs and the success-fee payment. Investing activities used $9,000. The company reported $9.16 million of operating cash use.
Material changes versus the prior comparable period
- Q2 operating expenses rose approximately 69% year over year; first-half operating expenses rose approximately 63%. R&D was the largest increase as clinical programs advanced.
- Cash rose substantially following the May IPO and private placement. The financing also converted all outstanding redeemable convertible preferred stock into common stock and eliminated the preferred-stock financing liability.
- The company began recognizing operating lease right-of-use assets and liabilities under the new lease standard in 2019; adoption did not materially affect operating results.
- Common shares outstanding were 17,834,570 at June 30, 2019. The company had 17,834,570 shares outstanding as of August 12, 2019.
Outlook, management commentary, risks and contingencies
- Management stated that June 30 cash was expected to fund operating expenses and capital needs through the end of 2020. The financial-statement note separately says cash was expected to cover needs for at least 12 months from the August 12 issuance date. Both estimates depend on assumptions, and the company expects to need substantial additional funding.
- Near-term spending priorities include the ongoing Phase 2b/3 PRISM trial in prurigo nodularis, an additional Phase 3 trial required to support a planned NDA, the IPF cough Phase 2 trial, a chronic-liver-disease pruritus Phase 1b trial, and a planned Parkinson’s LID Phase 2 trial. Management also cited manufacturing development, possible further chronic-liver-disease work, and public-company costs.
- The prior Phase 2 prurigo nodularis trial failed to meet its primary endpoint. The filing highlights patient discontinuations, enrollment challenges, subjective patient-reported itch measures, and placebo response as important uncertainties. The PRISM protocol includes a sample-size re-estimation when 50% of patients are evaluable.
- Trevi expects ongoing losses and has an accumulated deficit of $100.3 million. It has no committed external funding; additional equity, debt, collaboration, or licensing financing may be required and may be unavailable or dilutive.
- Other key risks include clinical efficacy and safety uncertainty, regulatory approval and trial-design requirements, potential opioid-related warnings or controlled-substance classification, reliance on third-party clinical and manufacturing providers, and reliance on a single nalbuphine hydrochloride supplier.
- Potential contractual payments include Endo milestones of $250,000 upon successful completion of the first Phase 3 trial and $750,000 upon U.S. approval; Rutgers milestones of up to $331,000; and MentiNova milestones of up to $1.188 million. The filing reports no material legal proceedings.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level as of June 30, 2019, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- PRISM enrollment, the sample-size re-estimation outcome, trial timing, and whether results can support the planned regulatory filings.
- Actual cash burn against management’s stated runway, the cost and timing of the additional Phase 3 trial, and the timing and terms of any future financing.
- Progress and results in the IPF cough, chronic-liver-disease pruritus, and planned Parkinson’s LID programs, including required safety and abuse-potential studies.
- Manufacturing supply continuity, particularly the single-source drug-substance supplier, and any changes to clinical or regulatory timelines.
- Potential dilution and trading overhang: the filing identifies lock-up expiration on November 3, 2019, registration rights for certain holders, and approximately 72.7% insider and affiliate ownership as of August 12, 2019.