Trevi Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Trevi is a clinical-stage biopharmaceutical company developing Haduvio (nalbuphine ER), with no approved products and no product revenue.
Financial performance and position
Amounts are in millions of dollars except per-share data. Operating margins are not meaningful because the company reported no revenue.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Research and development expense | $4.718 | $4.828 | $16.805 | $15.768 |
| General and administrative expense | $2.229 | $2.416 | $7.398 | $7.528 |
| Total operating expenses | $6.947 | $7.244 | $24.203 | $23.296 |
| Net loss | $7.255 | $7.378 | $25.420 | $23.235 |
| Basic and diluted loss per share | $0.34 | $0.41 | $1.25 | $1.30 |
- Cash and liquidity: Cash and cash equivalents were $29.318 million at September 30, down from $45.001 million at December 31, 2020. Current assets were $30.707 million and current liabilities $9.913 million.
- Cash flow: Operating activities used $22.717 million in the first nine months, versus $20.076 million a year earlier. Financing activities provided $7.034 million, principally from ATM stock sales; cash decreased by $15.683 million.
- Debt: SVB term-loan principal was $14.0 million; carrying value was $14.328 million, including accrued final payment fee and unamortized discounts. Principal repayment installments begin March 2022, with remaining obligations due February 1, 2024. The loan is secured by substantially all assets other than intellectual property, which is subject to a negative pledge.
Changes versus prior comparable periods
- Q3 operating expenses fell $0.297 million and net loss improved $0.123 million year over year. Lower clinical supply purchases reduced R&D expense; lower market research and stock compensation reduced G&A.
- Nine-month operating expenses rose $0.907 million and net loss widened $2.185 million. Higher personnel, stock-based compensation and professional costs outweighed lower clinical development expenses. Higher loan interest, the Lincoln Park commitment-share expense and lower interest income also weighed on results.
- Cash used in operations increased $2.641 million year over year, while financing cash flow fell $9.049 million, largely because the prior-year period included the $14 million SVB loan funding.
Outlook, risks and unusual items
- Clinical outlook: PRISM, a Phase 2b/3 trial for prurigo nodularis pruritus, targeted 360 participants after a sample-size reassessment; approximately 90% were enrolled. Top-line data were expected in the first half of 2022, subject to pandemic-related uncertainty. CANAL, a Phase 2 chronic-cough trial in IPF, also had top-line data expected in the first half of 2022. COVID-19 disrupted enrollment and site operations in both trials. A further Phase 3 trial is expected to be needed for a prurigo nodularis marketing application if PRISM succeeds.
- Liquidity and going concern: Management concluded substantial doubt existed about Trevi’s ability to continue as a going concern without additional capital. October 2021 private placements generated approximately $14.8 million gross proceeds. Management estimated available cash, including those proceeds, could fund operations into Q4 2022, but that estimate excludes potential SVB cash-collateral requirements and relies on assumptions; the filing says additional funding is necessary.
- SVB conditions: Failure to obtain positive PRISM data or raise sufficient equity by June 30, 2022 to fund a second Phase 3 trial and operations can trigger a cash deposit equal to 100% of outstanding principal. Falling below $20 million of unrestricted cash held with SVB before milestone satisfaction can require collateralization of all amounts owed. The separate requirement to raise at least $15 million in net equity proceeds by October 31, 2021 was met through ATM sales and the October placements.
- October financing and dilution: The private placements issued common shares and pre-funded and common-stock warrants. Common warrants have a $1.37 exercise price; pre-funded warrants have a $0.001 exercise price. The warrants cover a substantial number of potential shares and may dilute existing holders. Trevi agreed to suspend ATM sales through January 4, 2022 and Lincoln Park sales through April 6, 2023.
- Key business risks: Haduvio is Trevi’s sole product candidate; clinical efficacy and safety are unproven. Risks include trial enrollment and results, regulatory approval, opioid-related safety and possible misuse controls, dependence on third parties, and reliance on a single nalbuphine drug-substance supplier, Mallinckrodt, which was in bankruptcy proceedings. The filing also identifies potential future financing needs and share dilution.
- Other disclosures: No material legal proceedings were reported. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during Q3.
Most important facts for investors to verify
- PRISM and CANAL enrollment, execution, and whether expected first-half 2022 data timing was achieved.
- Actual cash burn and runway after the October financing, including whether further capital was raised and whether the going-concern assessment changed.
- Compliance with SVB’s cash minimum and milestone requirements, and any resulting cash-collateral or repayment obligations.
- Fully diluted share count and potential dilution, resale activity, and control implications from the October warrants and pre-funded warrants.
- Continuity and qualification of nalbuphine supply, including developments affecting Mallinckrodt or alternative suppliers.