Trevi Therapeutics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Trevi is a clinical-stage biopharmaceutical company developing extended-release nalbuphine (nalbuphine ER) for pruritus, chronic cough associated with idiopathic pulmonary fibrosis, and levodopa-induced dyskinesia. It had no product revenue and has not been profitable.
Financial performance and position
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $3.338 | $2.363 |
| General and administrative expense | $1.474 | $0.779 |
| Total operating expenses / operating loss | $4.812 | $3.142 |
| Net loss | $4.802 | $4.051 |
| Adjusted net loss attributable to common stockholders | $6.152 | $5.136 |
| Basic and diluted net loss per common share | $13.85 | $11.82 |
| Net cash used in operating activities | $4.096 | $3.954 |
| Cash and cash equivalents at period end | $12.946 | $15.959 at March 31, 2018 |
Operating and net margins are not meaningful because the company had no revenue. Clinical development expenses, the main driver of R&D costs, rose $0.9 million, primarily with commencement of the Phase 2b/3 PRISM trial. G&A increased with higher personnel, stock compensation, consulting and professional fees.
At March 31, 2019, total assets were $17.185 million, current assets $14.764 million and current liabilities $3.665 million. Cash increased $5.744 million during the quarter, principally due to $9.963 million net proceeds from the January Series C preferred-stock tranche; operating activities used $4.096 million. There were no term-loan borrowings outstanding. The company reported a $0.512 million obligation for the loan success fee, which was paid after quarter-end.
Changes, financing and subsequent events
- Compared with Q1 2018, operating expenses increased $1.670 million and net loss increased $0.751 million. Other income/expense improved by $0.940 million, primarily because the prior-year period included an $0.844 million fair-value loss on the Series C tranche liability; that liability was settled when the final tranche closed in January 2019.
- In May 2019, Trevi completed an IPO and concurrent private placement, selling 7.0 million shares at $10 per share for combined net proceeds of approximately $62.6 million. Outstanding preferred stock converted into common stock at the IPO closing. The IPO also triggered payment of $0.675 million to former term-loan lenders under the success-fee agreement.
- The company effected a 1-for-9.5 reverse stock split on April 22, 2019; share and per-share amounts in the financial statements are retrospectively adjusted.
- Management expected cash, including IPO and placement proceeds, to fund operating and capital requirements through the end of 2020. The financial-statement note separately states that funds were expected to cover at least 12 months from issuance. These estimates depend on assumptions and may not prove accurate.
Outlook, risks and notable items
- Trevi expects substantial ongoing losses and higher spending as it advances PRISM, plans an additional Phase 3 trial needed to support an NDA for prurigo nodularis, conducts other indication trials, develops manufacturing capability and bears new public-company costs. The filing provides no revenue or profitability guidance.
- Key development risks include PRISM enrollment and completion, uncertain clinical efficacy and safety, subjective itch assessments and placebo response, and the possibility that regulators may require further studies. Trevi disclosed that its earlier Phase 2 prurigo nodularis trial missed its primary endpoint and that the FDA questioned the reliability of its findings.
- The company depends on nalbuphine ER as its sole product candidate and relies on third parties for trials and manufacturing, including a single supplier for active ingredient without guaranteed supply quantities or pricing. Potential financing needs beyond the stated runway could lead to dilution, debt obligations or reduced development activity.
- Potential opioid-related safety, misuse, labeling, REMS or controlled-substance restrictions could affect development or commercialization. The filing also describes competition, regulatory, intellectual-property, reimbursement and commercialization risks.
- Trevi reported an accumulated deficit of $115.5 million and recurring losses. Its 2018 auditor report had included a going-concern explanatory paragraph; management cautioned that future funding needs remain dependent on clinical spending and financing availability.
- Preferred stock carried cumulative 6% dividends and redemption rights beginning on or after July 14, 2020 before its conversion at the IPO. Accrued preferred dividends were $17.7 million at March 31, 2019.
Important facts for investors to verify
- PRISM enrollment, timing, endpoint results and the status and cost of the additional Phase 3 trial.
- Actual post-IPO cash balance, quarterly cash burn and whether the end-of-2020 runway estimate remains supportable.
- Post-IPO share count, potential dilution from equity awards and registration rights, and the effect of preferred-stock conversion.
- Clinical, safety, regulatory and supply developments, including the planned abuse-liability and cardiac-risk studies and the single-source drug-substance exposure.
- Any future changes in financing plans, regulatory requirements, preferred-stock obligations or commercialization strategy.