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f

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission File Number 001-36193

Trevena, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

26-1469215
(I.R.S. Employer Identification No.)

955 Chesterbrook Boulevard, Suite 110
Chesterbrook, PA
(Address of Principal Executive Offices)

19087
(Zip Code)

Registrant’s telephone number, including area code: (610354-8840

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

TRVN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.:

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $0.001 par value

Shares outstanding as of May 13, 2024: 18,340,953

TABLE OF CONTENTS

Page

Cautionary Note Regarding Forward-Looking Statements

ii

PART I- FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (Unaudited)

1

Consolidated Balance Sheets

1

Consolidated Statements of Operations and Comprehensive Loss

2

Consolidated Statements of Stockholders’ (Deficit) Equity

3

Consolidated Statements of Cash Flows

4

Notes to Unaudited Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

PART II- OTHER INFORMATION

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

SIGNATURES

32

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or this “Quarterly Report,” contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but also are contained elsewhere in this Quarterly Report, as well as in sections such as “Risk Factors,” including those that are incorporated by reference into this Quarterly Report from our most recent Annual Report on Form 10-K, or the “Annual Report.” In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:

our plans and expectations regarding our strategic alternative review process and the timing and success of such process regarding a potential transaction;
success in retaining, or changes required in, our officers, key employees or directors;
our sales of OLINVYK and our ability to successfully commercialize other product candidates for which we may obtain regulatory approval;
our sales, marketing and manufacturing capabilities and strategies;
any ongoing or planned clinical trials and nonclinical studies for our product candidates;
the extent of future clinical trials potentially required by the U.S. Food and Drug Administration for our product candidates;
our ability to fund future operating expenses and capital expenditures with our current cash resources or to secure additional funding in the future;
the timing and likelihood of obtaining and maintaining regulatory approvals for our product candidates;
our plan to develop and potentially commercialize our product candidates;
the clinical utility and potential market acceptance of our product candidates, particularly in light of existing and future competition;
the size of the markets for our product candidates;
the performance of third-parties upon which we depend, including contract manufacturing organizations, suppliers, contract research organizations, distributors and logistics providers;
our ability to identify or acquire additional product candidates with significant commercial potential that are consistent with our commercial objectives;
the extent to which health epidemics and other outbreaks of communicable diseases could disrupt our operations and/or materially and adversely affect our business and financial conditions;
our intellectual property position and our ability to obtain and maintain patent protection and defend our intellectual property rights against third parties; and

ii

our ability to satisfy and maintain all applicable Nasdaq continued listing requirements.

You should refer to the “Risk Factors” section of this Quarterly Report and our Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

iii

PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

TREVENA, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)

    

March 31, 2024

December 31, 2023

Assets

 

  

  

Current assets:

 

  

  

Cash and cash equivalents

$

23,552

$

32,975

Prepaid expenses and other current assets

2,426

 

2,230

Total current assets

 

25,978

 

35,205

Restricted cash

 

540

 

540

Property and equipment, net

 

1,107

 

1,195

Right-of-use lease assets

3,512

3,665

Total assets

$

31,137

$

40,605

Liabilities and stockholders’ deficit

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable, net

$

2,327

$

2,303

Accrued expenses and other current liabilities

 

3,839

 

4,239

Lease liabilities

1,041

1,012

Total current liabilities

 

7,207

 

7,554

Loan payable, net

 

31,317

 

30,809

Leases, net of current portion

 

4,153

 

4,424

Warrant liability

3,114

 

5,475

Total liabilities

 

45,791

 

48,262

Stockholders’ deficit:

 

  

 

  

Preferred stock—$0.001 par value; 5,000,000 shares authorized, none issued or outstanding at March 31, 2024 and December 31, 2023

 

 

Common stock—$0.001 par value; 200,000,000 shares authorized at March 31, 2024 and December 31, 2023; 18,321,010 and 17,289,104 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

18

 

17

Additional paid-in capital

 

581,067

 

580,387

Accumulated deficit

 

(595,739)

 

(588,061)

Total stockholders’ deficit

 

(14,654)

 

(7,657)

Total liabilities and stockholders’ deficit

$

31,137

$

40,605

See accompanying notes to consolidated financial statements.

1

TREVENA, INC.

Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)

Three Months Ended

 

March 31, 

    

2024

    

2023

 

Revenue:

  

  

Product revenue

$

20

$

6

Total revenue

 

20

 

6

Operating expenses:

 

 

Cost of goods sold

88

127

Selling, general and administrative

 

5,845

6,089

Research and development

 

3,965

3,909

Total operating expenses

 

9,898

 

10,125

Loss from operations

 

(9,878)

 

(10,119)

Other income (expense):

 

 

Change in fair value of warrant liability

 

2,361

2,466

Other income (expense), net

 

4

9

Interest income

 

353

289

Interest expense

(513)

(446)

Loss on foreign currency exchange

(5)

(18)

Total other income, net

 

2,200

 

2,300

Net loss

(7,678)

(7,819)

Unrealized gain on marketable securities

1

Comprehensive loss

$

(7,678)

$

(7,818)

Per share information:

 

 

  

Net loss per share of common stock, basic and diluted

$

(0.36)

$

(0.81)

Weighted average common shares outstanding, basic and diluted

 

21,303,390

 

9,594,072

See accompanying notes to consolidated financial statements.

2

TREVENA, INC.

Consolidated Statements of Stockholders’ (Deficit) Equity (Unaudited)
(in thousands, except share data)

Stockholders' (Deficit) Equity

Accumulated

Common Stock

Other

Number

$0.001

Additional

Comprehensive

Total

of

Par

Paid-in

Accumulated

Income

Stockholders'

    

Shares

    

Value

    

Capital

Deficit

    

(Loss)

   

(Deficit) Equity

Balance, January 1, 2024

 

17,289,104

$

17

$

580,387

$

(588,061)

$

$

(7,657)

Stock-based compensation expense

 

681

 

681

Exercise of pre-funded warrant

1,031,906

1

(1)

Net loss

 

(7,678)

 

(7,678)

Balance, March 31, 2024

 

18,321,010

$

18

$

581,067

$

(595,739)

$

$

(14,654)

Balance, January 1, 2023

 

7,744,692

$

8

$

563,362

$

(547,772)

$

1

$

15,599

Stock-based compensation expense

 

806

806

Unrealized loss on marketable securities

 

(1)

(1)

Exercise of pre-funded warrants and related reclassification of warrant liability

 

1,230,380

1

1,568

1,569

Net loss

 

(7,819)

(7,819)

Balance, March 31, 2023

 

8,975,072

$

9

$

565,736

$

(555,591)

$

$

10,154

See accompanying notes to consolidated financial statements.

3

TREVENA, INC.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Three Months Ended

March 31, 

    

2024

    

2023

Operating activities:

Net loss

$

(7,678)

$

(7,819)

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

 

 

Depreciation

 

88

82

Stock-based compensation

 

681

806

Noncash interest expense on loan

 

508

46

Change in fair value of warrant liability

(2,361)

(2,466)

Change in right-of-use asset

153

132

Changes in operating assets and liabilities:

 

Accounts receivable, prepaid expenses and other assets

 

(196)

(701)

Operating lease liabilities

(239)

(212)

Accounts payable, accrued expenses and other liabilities

 

(376)

(742)

Net cash used in operating activities

 

(9,420)

 

(10,874)

Financing activities:

 

  

 

  

Finance lease payments

 

(3)

(3)

Proceeds from exercise of pre-funded warrants

1

Net cash used in financing activities

 

(3)

 

(2)

Net decrease in cash, cash equivalents and restricted cash

 

(9,423)

 

(10,876)

Cash, cash equivalents and restricted cash—beginning of period

 

33,515

40,280

Cash, cash equivalents and restricted cash—end of period

$

24,092

$

29,404

Supplemental disclosure of cash flow information:

 

  

 

  

Reclassification of warrant liability upon exercise of pre-funded warrants

$

$

1,568

See accompanying notes to consolidated financial statements.

4

TREVENA, INC.

Notes to Unaudited Consolidated Financial Statements

March 31, 2024

1. Organization and Description of the Business

Trevena, Inc., or the Company, is a biopharmaceutical company focused on the development and commercialization of novel medicines for patients affected by central nervous system, or CNS, disorders. The Company operates in one segment and has its principal office in Chesterbrook, Pennsylvania.

Since commencing operations in 2007, the Company has devoted substantially all of its financial resources and efforts to commercialization and research and development, including nonclinical studies and clinical trials. The Company has never been profitable. In late 2017, the Company submitted a new drug application, or NDA, for OLINVYK® (OLINVYK) injection, or OLINVYK, to the United States Food and Drug Administration, or the FDA. In August 2020, the FDA approved the NDA for OLINVYK and the Company initiated commercial launch of OLINVYK in the first quarter of 2021. In April 2024, we announced that OLINVYK remains available for purchase by customers, but that we are reducing commercial support for the product to preserve capital as we conduct a process to explore a range of strategic alternatives for OLINVYK.

Since its inception, the Company has incurred losses and negative cash flows from operations. At March 31, 2024, the Company had an accumulated deficit of $595.7 million. The Company’s net loss was $7.7 million and $7.8 million for the three months ended March 31, 2024 and 2023 respectively. The Company follows the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements—Going Concern, or ASC 205-40, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. The Company expects that its existing balance of cash and cash equivalents as of March 31, 2024 is not sufficient to fund operations for one year after the date of this filing and therefore management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plans to mitigate this risk include raising additional capital through equity or debt financings, or through strategic transactions, including collaborations. Management’s plans may also include the deferral of certain operating expenses unless and until additional capital is received. However, there can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses. As a result, management concluded that such plans do not alleviate the substantial doubt. If the Company is unable to raise sufficient additional capital, consummate a strategic transaction or defer sufficient operating expenses, the Company may be compelled to reduce the scope of its operations and planned capital expenditures.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the ASC and Accounting Standards Updates, or ASUs, of the FASB. The Company’s functional currency is the U.S. dollar.

The consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s consolidated balance sheets as of March 31, 2024, its results of operations and its comprehensive loss for the three months ended March 31, 2024 and 2023, its consolidated statements of stockholders’ equity for the period from January 1, 2024 to March 31, 2024 and for the period January 1, 2023 to March 31, 2023, and its consolidated statements of cash flows for the three months ended March 31, 2024 and 2023. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2023. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies. The financial data and other information disclosed in these notes related to the three

5

months ended March 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

Principles of Consolidation

In connection with the royalty-based financing agreement disclosed in Note 5, the Company established three wholly owned subsidiaries, Trevena Royalty Corporation, Trevena SPV1 LLC and Trevena SPV2 LLC to facilitate the financing. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of March 31, 2024. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management used significant estimates in the following areas, among others: stock-based compensation expense, the determination of the fair value of stock-based awards, the fair value of common stock warrants, the accounting for research and development costs, accrued expenses, the recoverability of the Company’s net deferred tax assets and related valuation allowance, and the amortization of debt expenses. The financial data and other information disclosed in these notes are not necessarily indicative of the results to be expected for any future year or period. The Company bases its estimates on historical experience and also on assumptions that it believes are reasonable, however, actual results could significantly differ from those results.

Fair Value of Financial Instruments

The carrying amount of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts payable, and accrued expenses approximate their fair values, given their short-term nature. Additionally, the Company believes the carrying value of the loan payable approximates its fair value as the interest rate is reflective of the rate the Company could obtain on debt with similar terms and conditions. Certain of the Company’s common stock warrants are carried at fair value, as disclosed in Note 3.

The Company has evaluated the estimated fair value of financial instruments using available market information and management’s estimates. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. See Note 3 for additional information.

Product Revenue

Product revenue is recognized at the point in time when our performance obligations with our customers have been satisfied. At contract inception, we determine if the contract is within the scope of ASC Topic 606 and then evaluate the contract using the following five steps: (i) identify the contract with the customer; (ii) identify the performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue at the point in time when the Company satisfies a performance obligation.

OLINVYK is sold to wholesalers in the US (collectively, “customers”). These customers subsequently resell OLINVYK generally to hospitals, ambulatory surgical centers and other purchasers of OLINVYK. We recognize revenue from OLINVYK sales at the point customers obtain control of the product, which generally occurs upon delivery.

Revenue is recorded at the transaction price, which is the amount of consideration we expect to receive in exchange for transferring products to a customer. We determine the transaction price based on fixed consideration in our contractual agreements, which includes estimates of variable consideration which are more fully described below. The transaction price is allocated entirely to the performance obligation to provide pharmaceutical products. In determining the transaction price, a significant financing component does not exist since the timing from when we deliver product to when the customers pay for the product is less than one year and the customers do not pay for product in advance of the transfer of the product.

6

Variable Consideration

The Company includes an estimate of variable consideration in its transaction price at the time of sale when control of the product transfers to the customer. Variable consideration includes distributor chargebacks, prompt payment (cash) discounts, distribution service fees and product returns.

The Company assesses whether or not an estimate of its variable consideration is constrained and has determined that the constraint does not apply, since it is probable that a significant reversal in the amount of cumulative revenue will not occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. The Company’s estimates for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a change in the amount of total consideration it expects to receive.

Distributor Chargebacks

When a product that is subject to a contractual price agreement is sold to a third party, the difference between the price paid to the Company by the wholesaler and the price under the specific contract is charged back to the Company by the wholesaler. Utilizing this information, the Company estimates a chargeback percentage for each product and records an allowance for chargebacks as a reduction to revenue when the Company records sales of the products. We reduce the chargeback allowance when a chargeback request from a wholesaler is processed. Reserves for distributor chargebacks are included in accounts receivable, net on the consolidated balance sheet.

Prompt Payment (Cash) Discounts

The Company provides customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. The Company’s prompt payment discount reserves are based on actual net sales and contractual discount rates. Reserves for prompt payment discounts are included in accounts receivable, net on the consolidated balance sheet.

Distribution Service Fees

The Company pays distribution service fees to its customers based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. The Company reserves for these fees based on actual net sales, contractual fee rates negotiated with the customer and the mix of the products in the distribution channel that remain subject to fees. Reserves for distribution service fees are included in accounts receivable, net on the consolidated balance sheet.

Product Returns

Generally, the Company’s customers have the right to return any unopened product during the eighteen (18) month period beginning six (6) months prior to the labeled expiration date and ending twelve (12) months after the labeled expiration date.  The Company does not currently rely on industry data in its analysis of returns reserve. As the Company sold OLINVYK and established historical sales over a longer period of time (i.e., two to three years), the Company placed more reliance on historical purchasing, demand and return patterns of its customers when evaluating its reserves for product returns. OLINVYK has a forty-eight (48) month shelf life.

The Company recognizes the amount of expected returns as a refund liability, representing the obligation to return the customer’s consideration. Since the returns primarily consist of expired and short dated products that will not be resold, the Company does not record a return asset for the right to recover the goods returned by the customer at the time of the initial sale (when recognition of revenue is deferred due to the anticipated return). Accrued product return estimates are recorded in accrued expenses and other current liabilities on the consolidated balance sheet.

7

3. Fair Value of Financial Instruments

ASC 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the

Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The following table presents fair value of the Company’s cash, cash equivalents, restricted cash and warrant liability as of March 31, 2024 and December 31, 2023 (in thousands):

    

March 31, 

Quoted Prices in Active Markets

Significant Other Observable Inputs

Unobservable Inputs

Description:

2024

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets:

 

Cash

$

2,381

$

2,381

$

$

Money Market Funds

21,171

21,171

Restricted Cash

 

540

 

540

 

 

Total assets measured and recorded at fair value

$

24,092

$

24,092

$

$

Liabilities:

 

  

 

  

 

  

 

  

Warrant Liability

 

3,114

 

 

 

3,114

Total liabilities measured and recorded at fair value

$

3,114

$

$

$

3,114

8

December 31,

Quoted Prices in Active Markets

Significant Other Observable Inputs

Unobservable Inputs

Description:

    

2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets:

Cash

$

3,159

$

3,159

$

$

Money Market Funds

 

29,816

29,816

Restricted Cash

540

 

540

 

 

Total assets measured and recorded at fair value

$

33,515

$

33,515

$

$

Liabilities:

 

  

 

  

 

  

 

  

Warrant Liability

 

5,475

 

 

 

5,475

Total liabilities measured and recorded at fair value

$

5,475

$

$

$

5,475

(1)The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between Level 2 and Level 3 during the three months ended March 31, 2024.

December 2023 Equity Offering and Warrant Issuance

The common stock warrants issued in connection with the Company’s private placement and warrant exercise transactions in December 2023 (collectively, the “December 2023 Offering”) were classified as liabilities at the time of issuance due to certain cash settlement adjustment features that were not deemed to be indexed to the Company’s stock. The warrant liability is remeasured each reporting period with the change in fair value recorded to other income (expense) in the consolidated statement of operations and comprehensive loss until the warrants are exercised, expired, reclassified or otherwise settled. The fair value of the warrant liability was determined using Level 3 inputs and was estimated using a Black-Scholes Option Pricing Model.

The assumptions used to estimate the fair value were as follows:

 

    

March 31, 2024

    

December 31, 2023

 

Expected term of warrants (in years)

5.0

5.3

Risk-free interest rate

 

4.2

%  

3.8

%  

Expected volatility

 

114.72

%  

128.26

%  

Dividend yield

 

%  

%  

The following is a roll forward of the December 2023 Offering common stock warrant liability (in thousands):

    

Warrant Liability

Balance, December 31, 2023

$

5,475

Change in fair value

 

(2,361)

Balance, March 31, 2024

$

3,114

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Warrants

As of March 31, 2024, the Company had the following common stock warrants outstanding:

Classification

Warrants

Exercise Price

Expiration Date

December 2023 Offering Pre-Funded Warrants

Equity

1,748,000

$0.001

Until exercised

December 2023 Offering Warrants

Liability

8,648,666

0.70

4/19/2029

R-Bridge warrants

Equity

200,000

20.50

4/14/2025

Other warrants

Equity

4,114

90.38 - 265.48

9/19/2024 - 3/31/2027

10,600,780

4. Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories. Inventory includes the cost of API, raw materials and third-party contract manufacturing and packaging services. Indirect overhead costs associated with production and distribution are recorded as period costs in the period incurred. Costs of drug product to be consumed in any current or future clinical trials will continue to be recognized as research and development expense.

The Company periodically evaluates the carrying value of inventory on hand using the same lower of cost or net realizable value approach as that used to initially value the inventory. Valuation adjustments may be required for slow-moving or obsolete inventory or in any situations where market conditions have caused net realizable value to fall below the carrying cost of the inventory.

Inventory consists of the following (in thousands):

    

March 31, 2024

    

December 31, 2023

Finished goods

$

$

896

Inventory Valuation Adjustment

(896)

Total Inventories

$

-

$

-

The Company recorded an inventory valuation adjustment of $0.9 million during the year ended December 31, 2023. The valuation adjustment was recorded to account for slow moving or obsolete inventory due to uncertainty of commercial activities and future expected OLINVYK sales.

5. Loan Payable

In April 2022, the Company, through its wholly owned subsidiary, Trevena SPV2 LLC (“SPV2”), entered into a royalty-based loan agreement (the “Loan Agreement”) with R-Bridge, pursuant to which the Company may be eligible to receive up to $40.0 million in term loan borrowings (the “R-Bridge Financing”). Term loan borrowings will be advanced in three tranches. The first tranche of $15.0 million was advanced in April 2022. The second tranche of $10.0 million will become available upon achievement of either a commercial or financing milestone as set forth in the Loan Agreement. The third tranche of $15.0 million became available upon the first commercial sale of OLINVYK in China which occurred in August 2023 and the Company elected to receive such proceeds.

The following table summarizes the impact of the Loan Agreement on the Company’s consolidated balance sheet as follows (in thousands):

10

    

March 31, 

2024

Principal and accreted interest

$

32,691

Unamortized debt discount

 

(1,374)

Loans payable, net

$

31,317

The term loans bear interest at a rate per annum equal to 7.00% and will mature on the earlier of (i) the fifteen (15) year anniversary of the closing date in March 2022 and (ii) the date on which the license agreement with Nhwa expires. Repayment of any borrowings and related interest will be made quarterly beginning June 30, 2022. Repayment will be in the form of (i) a 4.0% royalty payment on the Company’s net sales of OLINVYK in the United States and (ii) proceeds from royalties from the Company’s license agreement with Nhwa. As a result of Nhwa obtaining Chinese approval of OLINVYK in May 2023, royalties from net sales of OLINVYK in the United States are capped at $10.0 million in accordance with the Loan Agreement. Upon a change in control or in the event the Company elects to repay any outstanding borrowings prior to their contractual maturity, SPV2 is required to pay a control premium equal to the greater of (i) principal and interest and (ii) $10.0 million or $20.0 million depending on the timing in which the triggering event occurs as further provided in the Loan Agreement.

In April 2022, the Company placed $2.0 million into an interest reserve account in connection with the Loan Agreement. Payments of interest under the Loan Agreement are made quarterly from the royalty on the Company’s net sales of OLINVYK in the United States and proceeds from royalties from the Company’s license agreement with Nhwa. On each interest payment date, if the royalty payments received do not equal the total interest due for the respective quarter, the interest payment due will be paid from the interest reserve account. The interest reserve account was classified as restricted cash on the Company’s balance sheet at December 31, 2022. During the second quarter of 2023, the Company agreed to transfer the remaining funds, approximately $1.0 million, to R-Bridge to prepay future interest payments. As of December 31, 2023, the prepaid interest had been reduced to $0.0 through interest expense incurred under the Loan Agreement.

Repayments of all borrowings, interest and other related payments, under the Loan Agreement are secured by substantially all of the assets associated with the license agreement with Nhwa, the Chinese intellectual property related to OLINVYK, and deposit accounts established to hold amounts received on account for repayment of the borrowings and related interest under the Loan Agreement. The Loan Agreement contains certain customary affirmative and negative covenants and contains customary defined events of default, upon which any outstanding principal and unpaid interest shall be due on demand. At March 31, 2024, there were no events of default pursuant to the Loan Agreement and the Company was in compliance with all covenants. Interest expense is imputed based on the estimated loan repayment period, which takes into consideration estimated future revenue in the United States and China. Changes in estimates are recognized prospectively and may have a material impact on liability balance. As of March 31, 2024, the effective interest rate was 5.8%.

In connection with the first tranche borrowings in April 2022, the Company issued a warrant to R-Bridge to purchase 200,000 shares of the Company’s common stock at an initial exercise price of $20.50 per share and will be exercisable for a period of three years. The Company concluded the warrant was a freestanding equity-classified instrument to which the proceeds from the first tranche was allocated across the debt and warrant on a relative fair value basis. In addition, the Company incurred lender fees and third-party costs of $0.5 million each and were netted against the proceeds allocated to the debt and warrant. Fees netted against debt proceeds represent a debt discount and are amortized into interest expense using the effective interest method. During the three months ended March 31, 2024, the Company recognized interest expense of $0.5 million, of which $0.1 million pertained to the amortization of the debt discount.

The accounting for the Loan Agreement requires the Company to make certain estimates and assumptions, particularly about future royalties under the license agreement with Nhwa and sales of OLINVYK in the United States and China. Such estimates and assumptions are utilized in determining the expected repayment term, amortization period of the debt discount, accretion of interest expense and classification between current and long-term portions of amounts outstanding. The Company amortizes the debt discount into interest expense over the expected term of the arrangement using the interest method based on projected cash flows. Similarly, the Company classifies as current debt for the Loan Agreement, amounts that are expected to be repaid during the succeeding twelve months after the reporting period end. However, the repayment of amounts due under the Loan Agreement is variable because the cash flows to be utilized for periodic payments is a function of amounts received by the Company with respect to the royalties and net product sales.

11

Accordingly, the estimates of the magnitude and timing of amounts to be available for debt service are subject to significant variability and thus, subject to significant uncertainty. Therefore, these estimates and assumptions are likely to change, which may result in future adjustments to the portion of the debt that is classified as a current liability, the amortization of debt discount and the accretion of interest expense. Other amounts that may become due and payable under the Loan Agreement, including amounts shared between the parties with respect to cash flows received in excess of pre-defined thresholds, are recognized as additional interest expense when they become probable and estimable. The amount of principal to be repaid in each of the five succeeding years is not fixed and determinable.

6. Stockholders’ (Deficit) Equity

Equity Offerings

Under its certificate of incorporation, the Company was authorized to issue up to 200,000,000 shares of common stock as of March 31, 2024. The Company also was authorized to issue up to 5,000,000 shares of preferred stock as of March 31, 2024. The Company is required, at all times, to reserve and keep available out of its authorized but unissued shares of common stock sufficient shares to effect the conversion of the shares of the preferred stock and all outstanding stock options and warrants.

December 2023 Equity Offering and Warrant issuance

On December 28, 2023, the Company and a single investor entered into a securities purchase agreement whereby the Company issued 2,779,906 pre-funded warrants with an initial exercise price of $0.001 per share for $0.70 per warrant, which are exercisable immediately and do not expire. In addition, the investor received 2,779,906 common stock warrants with an initial exercise price of $0.70 per share, which are exercisable for five years beginning on the date in which the Company obtains shareholder approval to issue the underlying shares of common stock associated with the warrants.

Concurrent with the securities purchase agreement above, the Company and the investor entered into an inducement agreement whereby the Company agreed to reduce the exercise price of 2,934,380 warrants held by the investor from prior equity offerings. The weighted average exercise price of the outstanding warrants was $3.35 per share and was reduced to $0.70 per share in exchange for the investor agreeing to immediately exercise the warrants. Of the warrants exercised, 1,234,380 are being held in abeyance for the benefit of the holder due to certain beneficial ownership limitations and these shares are not considered issued or outstanding in our consolidated balance sheet. In addition to reducing the exercise price, the Company issued 5,868,760 common stock warrants to the investor with an initial exercise price of $0.70 per share, which are exercisable for five years beginning on the date in which the Company obtained shareholder approval to issue the underlying shares of common stock associated with the warrants. The fair value of the warrants to purchase 5,868,760 shares of common stock and the change in fair value of the warrants resulting from the reduction in the exercise price totaling $4.2 million was accounted for as equity issuance costs in the consolidated statement of operations.

The Company received $3.5 million in total, after deducting underwriter fees and other third-party costs, as a result of the sale of pre-funded warrants and exercise of the warrants as part of the inducement.

The warrants issued did not meet the requirements to be indexed to equity and equity classified and, as such, are classified as liabilities at fair value with changes in fair value recorded within other income (expense), net on the consolidated statements of operations and comprehensive loss.

12

Equity Incentive Plan

The estimated grant date fair value of the Company’s share-based awards is amortized on a straight-line basis over the awards’ service periods. Share based compensation expense recognized was as follows (in thousands):

Three Months Ended March 31, 

    

2024

2023

    

Research and development

$

156

$

189

Selling, general and administrative

 

525

 

617

Total stock-based compensation

$

681

$

806

Stock Options

A summary of stock option activity and related information through March 31, 2024 follows:

Options Outstanding

    

    

    

Weighted 

Average 

Weighted 

Remaining 

Average 

Contractual 

Number of 

Exercise 

Term 

Shares

Price

(in years)

Balance, December 31, 2023

 

403,484

$

35.68

6.81

Granted

 

Exercised

 

Forfeited/Cancelled

 

(18,767)

37.31

Balance, March 31, 2024

 

384,717

$

35.61

6.66

Vested or expected to vest at March 31, 2024

 

384,717

$

35.61

6.66

Exercisable at March 31, 2024

 

257,015

$

47.92

5.62

The aggregate intrinsic value of options exercisable as of March 31, 2024 was zero, based on the difference between the Company’s closing stock price of $0.46 and the exercise price of each stock option.

The Company uses the Black Scholes option pricing model to estimate the fair value of stock options at the grant date. The Black Scholes model requires the Company to make certain estimates and assumptions, including estimating the fair value of the Company’s common stock, assumptions related to the expected price volatility of the Company’s common stock, the period during which the options will be outstanding, the rate of return on risk free investments and the expected dividend yield for the Company’s stock.

Restricted Stock Units

RSU-related expense is recognized on a straight-line basis over the vesting period. Upon vesting, these awards may be settled on a net-exercise basis to cover any required withholding tax with the remaining amount converted into an equivalent number of shares of common stock.

13

The following is a summary of changes in the status of non-vested RSUs during the three months ended March 31, 2024:

    

    

Weighted 

Average 

Number of 

Grant Date

Awards

Fair Value

Non-vested at December 31, 2023

 

1,602,588

$

2.05

Granted

 

Vested

 

Forfeited/Cancelled

 

(34,471)

1.70

Non-vested at March 31, 2024

 

1,568,117

$

2.06

For the three months ended March 31, 2024, the Company recorded $0.4 million in stock-based compensation expense related to RSUs, which is reflected in the consolidated statements of operations and comprehensive loss.

As of March 31, 2024, there was $2.5 million of total unrecognized compensation expense related to unvested RSUs that will be recognized over the weighted average remaining period of 2.17 years.

Shares Available for Future Grant

At March 31, 2024, the Company has the following shares available to be granted under its equity incentive plans:

    

    

Inducement 

2023 Plan

Plan

Available at December 31, 2023

 

253,463

 

12,000

Authorized

 

Granted

 

Shares withheld for taxes not issued

Forfeited/Cancelled

 

53,238

Available at March 31, 2024

 

306,701

 

12,000

Shares Reserved for Future Issuance

At March 31, 2024, the Company has reserved the following shares of common stock for issuance:

Stock options outstanding under 2013 Plan

    

273,967

Stock options outstanding under 2023 Plan

102,750

Restricted stock units outstanding under 2013 Plan

1,568,117

Stock options outstanding under Inducement Plan

 

8,000

Warrants outstanding

 

10,600,780

Total shares of common stock reserved for future issuance

 

12,553,614

7. Commitments and Contingencies

Leases

The Company leases office space in Chesterbrook, Pennsylvania and equipment. The Company’s principal office is located at 955 Chesterbrook Boulevard, Chesterbrook, Pennsylvania, where the Company currently leases approximately 8,231 square feet of developed office space on the first floor and 40,565 square feet of developed office space on the second floor. The lease term for this space extends through May 2028. On October 11, 2018, the Company entered into an agreement with The Vanguard Group, Inc. (“Vanguard”) whereby Vanguard agreed to sublease the 40,565 square feet of space on the second floor for an initial term of 37 months. On October 2, 2020, Vanguard notified the Company that they exercised the first option to extend the sublease term for three years through November 30, 2024. Vanguard has a second option to extend the sublease term for an additional three years through November 30, 2027. On

14

August 3, 2023, Vanguard exercised its second option to extend its sublease term. The Company and Vanguard agreed to further extend the sublease through May 2028. With the current extension to May 2028, Vanguard’s sublease is coterminous with the Company’s master lease term. The sublease provides for rent abatement for the first month of the term; thereafter, the rent payable to the Company by Vanguard under the sublease is (i) $0.50 less during months 2 through 13 of the sublease and (ii) $1.00 less in month 14 through 109 of the sublease, and (iii) in month 110 through 116 of the sublease, $16.50 less than the base rent payable by us under our master lease with Chesterbrook Partners, L.P. Vanguard also is responsible for paying to the Company all tenant energy costs, annual operating costs, and annual tax costs attributable to the subleased space during the term of the sublease. Rent expense and associated sublease income are recorded in the Company’s consolidated statements of operations and comprehensive loss as other income (expense).

Supplemental balance sheet information related to leases was as follows (in thousands):

    

March 31, 2024

    

December 31, 2023

Operating leases:

 

  

 

  

Operating lease right-of-use assets

 

$

3,512

 

$

3,665

Other current lease liabilities

1,031

1,002

Operating lease liabilities

4,148

4,417

Total operating lease liabilities

$

5,179

$

5,419

Finance leases:

Property and equipment, at cost

$

29

$

29

Accumulated depreciation

(16)

(13)

Property and equipment, net

13

16

Other current lease liabilities

10

10

Other long-term liabilities

5

7

Total finance lease liabilities

$

15

$

17

The components of lease expense were as follows (in thousands):

Three Months Ended

March 31, 

    

2024

    

2023

Operating lease costs:

Operating lease expense

$

385

$

398

Other income

(350)

(350)

Total operating lease costs

$

35

$

48

Finance lease costs:

Amortization of right-of-use assets

2

2

Interest on lease liabilities

Total finance lease costs

$

2

$

2

Supplemental cash flow information related to leases was as follows (in thousands):

Three Months Ended

March 31, 

    

2024

    

2023

Cash paid for amounts included in the measurement of lease liabilities

 

  

 

  

Operating cash flows from operating leases

$

(122)

$

(128)

Financing cash flows from finance leases

(3)

 

(3)

15

Our lease liabilities will mature, as follows (in thousands):

    

Operating Leases

 

Financing Leases

2024 (April 1 - December 31)

1,090

8

2025

1,474

8

2026

1,498

2027

1,523

2028

640

Total minimum lease payments

$

6,225

$

16

Less: imputed interest

(1,046)

(1)

Lease liability

$

5,179

$

15

Per the terms of our sublease, we expect the following inflows (in thousands):

    

Sublease

2024 (April 1 - December 31)

869

2025

1,178

2026

1,198

2027

1,166

2028

254

Total minimum lease payments

$

4,665

Weighted average lease term and discount rates are as follows:

Three Months Ended March 31, 

 

2024

 

2023

Weighted average remaining lease term (years)

Operating leases

4

5

Finance leases

1

2

Weighted average discount rate

Operating leases

9.2%

9.2%

Finance leases

6.5%

6.5%

8. Product Revenue

Performance Obligation

The Company’s performance obligation is the supply of finished pharmaceutical products to its customers. The Company’s customers consist of major wholesale distributors. The Company’s customer contracts generally consist of both a master agreement, which is signed by the Company and its customer, and a customer submitted purchase order, which is governed by the terms and conditions of the master agreement.

Revenue is recognized when the Company transfers control of its products to the customer, which occurs at a point-in-time, upon delivery.

The Company offers standard payment terms to its customers and has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing, since the period between when the Company transfers the product to the customer and when the customer pays for that product is one year or less. Taxes collected from customers relating to product revenue and remitted to governmental authorities are excluded from revenues. The consideration amounts due from customers as a result of product revenue are subject to variable consideration.

The Company offers standard product warranties which provide assurance that the product will function as expected and in accordance with specifications. Customers cannot purchase warranties separately and these warranties

16

do not give rise to a separate performance obligation. The Company permits the return of product under certain circumstances, mainly upon at or near product expiration, instances of shipping errors or where product is damaged in transit. The Company accrues for the customer’s right to return as part of its variable consideration.

Sales-Related Deductions

The following table presents a roll forward of the major categories of sales-related deductions included in trade receivable allowances for the three months ended March 31, 2024 (in thousands):

    

Sales Discounts

    

Chargebacks

    

Fee for Service

Balance, January 1, 2024

$

2

19

9

Provision related to sales recorded in the period

 

4

3

Credits / payments during the period

 

(2)

Adjustments related to prior period sales

 

Balance, March 31, 2024

$

2

$

21

$

12

As of March 31, 2024, the Company’s outstanding accounts receivable of $35,000 was offset by the trade receivable allowances presented above.

9. License and Royalty Revenue

License and Commercialization Agreement with Pharmbio Korea Inc.

In April 2018, the Company entered into an exclusive license agreement with Pharmbio Korea Inc., or Pharmbio, for the development and commercialization of OLINVYK for the management of moderate to severe acute pain in South Korea. Under the terms of the agreement, the Company received an upfront, non-refundable cash payment of $3.0 million (less applicable withholding taxes of $0.5 million) in June 2018, and will receive a cash commercial milestone of up to $0.5 million if OLINVYK is approved in South Korea and tiered royalties on product sales in South Korea ranging from high single digits to 20%, less applicable withholding taxes. As part of the agreement, the Company also granted Pharmbio an option to manufacture OLINVYK, on a non-exclusive basis, for the development and commercialization of the product in South Korea, subject to a separate arrangement to be entered into if Pharmbio exercises the option. The license agreement is terminable by Pharmbio for any reason upon 180 days written notice.

In accordance with the terms of the agreement, Pharmbio is solely responsible for all development and regulatory activities in South Korea. The parties have formed a Joint Development Committee with equal representation from the Company and Pharmbio to provide overall coordination and oversight of the development of OLINVYK in South Korea. The parties also agreed to form a Joint Manufacturing and Commercialization Committee at least six months prior to the anticipated date of regulatory approval of OLINVYK in South Korea to provide overall coordination and oversight of the manufacture and commercialization of OLINVYK in South Korea.

License Agreement with Jiangsu Nhwa Pharmaceutical Co. Ltd.

In April 2018, the Company also entered into an exclusive license agreement with Jiangsu Nhwa Pharmaceutical Co. Ltd., or Nhwa, for the development and commercialization of OLINVYK for the management of moderate to severe acute pain in China. Under the terms of this agreement, the Company received an upfront, non-refundable cash payment of $2.5 million (less applicable withholding taxes of $0.3 million) in July 2018. In August 2020, the Company received a milestone payment of $3.0 million (less applicable withholding taxes of $0.3 million), that became payable by Nhwa upon FDA approval of OLINVYK. In May 2023, the Company received a milestone payment of $3.0 million (less applicable withholding taxes $0.3 million), that became payable by Nhwa upon regulatory approval of OLINVYK in China. The Company is eligible to receive up to an additional $6.0 million of commercialization milestone payments based on product sales levels in China, and a ten percent royalty on all net product sales in China, less applicable withholding taxes. In the third quarter of 2023, Nhwa launched OLINVYK, recognized net product sales in China and reported royalties on those sales to the Company. This royalty is required to be used by the Company to repay its obligations under the Loan Agreement. As part of the license agreement with Nhwa, the Company also granted Nhwa an option to manufacture OLINVYK, on an exclusive basis in China, for the

17

development and commercialization of the product in China. In the second quarter of 2018, Nhwa elected to exercise this manufacturing option. The license agreement is terminable by Nhwa for any reason upon 180 days written notice.

In accordance with the terms of the agreement, Nhwa is solely responsible for all development and regulatory activities in China. The parties have formed a Joint Development Committee with equal representation from the Company and Nhwa to provide overall coordination and oversight of the development of OLINVYK in China. The parties also formed a Joint Manufacturing and Commercialization Committee to provide overall coordination and oversight of the manufacture and commercialization of OLINVYK in China.

For the three months ended March 31, 2024 and 2023, there was no license and royalty revenue.

10. Net Loss Per Common Share

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share and per share data):

Three Months Ended March 31, 

    

2024

    

2023

    

Basic and diluted net loss per common share calculation:

 

  

 

  

 

Net loss

$

(7,678)

$

(7,819)

Weighted average common shares outstanding

 

21,303,390

 

9,594,072

Net loss per share of common stock - basic and diluted

$

(0.36)

$

(0.81)

The pre-funded warrants to purchase common shares issued in connection with the December 2023 offering are included in the calculation of basic and diluted net loss per share as the exercise price of $0.001 per share is non-substantive and virtually assured. The pre-funded warrants are more fully described in Note 3. Further, the shares held in abeyance also described in Note 6, are included in the calculation of basic and diluted net loss per share.

The following outstanding securities at March 31, 2024 and 2023 have been excluded from the computation of diluted weighted shares outstanding, as they would have been anti-dilutive:

March 31, 

    

2024

    

2023

Options outstanding

 

384,717

334,060

RSUs outstanding

1,568,117

834,720

Warrants outstanding

 

8,852,780

3,145,394

Total

 

10,805,614

 

4,314,174

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2023, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on April 1, 2024. Unless the context otherwise requires, we use the terms “Trevena,” “Company,” “we,” “us” and “our” to refer to Trevena, Inc.

Overview

We are a biopharmaceutical company focused on developing and commercializing novel medicines for patients affected by central nervous system, or CNS, disorders. Our lead product, OLINVYK® (oliceridine) injection, or OLINVYK, was approved by the United States Food and Drug Administration (the “FDA”), in August 2020. In October 2020, we announced that OLINVYK had received scheduling from the U.S. Drug Enforcement Administration (the

18

“DEA”), and was classified as a Schedule II controlled substance. We initiated commercial launch of OLINVYK in the first quarter of 2021.

In April 2024, we announced that OLINVYK remains available for purchase by customers, but that we are reducing commercial support for the product to preserve capital as we conduct a process to explore a range of strategic alternatives for OLINVYK. Notwithstanding our reduction of commercial support for OLINVYK, which includes the elimination of our Chief Commercial Officer role, we continue to comply with all regulatory requirements, including post-marketing surveillance and reporting obligations. Potential strategic alternatives that may be explored or evaluated include, but are not limited to, a sale, license, divestiture or discontinuation of US commercial sales of OLINVYK. There can be no assurance regarding the schedule for completion of the strategic review process, that this strategic review process will result in the Company pursuing any transaction or that any transaction, if pursued, will be completed.

OLINVYK is an opioid agonist for use in adults for the management of acute pain severe enough to require an intravenous opioid analgesic and for whom alternative treatments are inadequate. We are also developing a pipeline of product candidates based on our proprietary product platform, including TRV045 for diabetic neuropathic pain, epilepsy, and seizure disorders; and TRV734 for moderate-to-severe acute and chronic pain and opioid use disorders.

Since our incorporation in late 2007, our operations have included organizing and staffing our company, business planning, raising capital, discovering and developing our product candidates, and establishing our intellectual property portfolio. We have financed our operations primarily through private placements and public offerings of our equity securities and debt borrowings. As of March 31, 2024, we had an accumulated deficit of $595.7 million. Our net loss was $7.7 million and $7.8 million for the three months ended March 31, 2024 and 2023, respectively. Our ability to become and remain profitable depends on our ability to generate revenue or sales. We do not expect to generate significant revenue or sales unless and until we or a collaborator successfully commercialize OLINVYK or obtain marketing approval for and successfully commercialize TRV045 or TRV734.

We expect to incur significant expenses and operating losses for the foreseeable future even as we reduce commercial support for OLINVYK and continue the development and clinical trials of our other product candidates. We will need to obtain substantial additional funding in connection with our continuing operations. We will seek to fund our operations through the sale of equity, debt financings or other sources, including potential strategic transactions, including collaborations. However, we may be unable to raise additional funds or enter into such other agreements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue our operations, development programs, and/or any future commercialization efforts.

Recent Developments

Results of Special Meeting of Stockholders

On April 19, 2024, the Company held a special meeting of stockholders (the “Adjourned Meeting”), which was originally held on March 21, 2024 and adjourned (the “Original Meeting” and together with the Adjourned Meeting, the “Special Meeting”). At the Special Meeting, we sought stokcholder approval to, among other things, authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our common stock underlying certain warrants issued by the Company in connection with the December 2023 Offering (the “Issuance Proposal”). At the Special Meeting, the Issuance Proposal was approved by a majority of the voting power of the outstanding shares of the Company’s common stock represented in person or by proxy and entitled to vote at the Special Meeting.

Compliance with Nasdaq Listing Requirements

As previously disclosed, on March 6, 2024, we received a letter from Nasdaq stating that, for the last 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share required for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) and that we were not eligible for a second 180-day extension period because the Company did not comply with the $5,000,000 minimum stockholders’ equity initial listing requirement for The Nasdaq Capital Market. As permitted under Nasdaq rules, we appealed Nasdaq’s determination and requested a hearing before a Nasdaq Hearings Panel (the “Panel”). The hearing took place on May 2, 2024 (the “Appeal Hearing”).

19

On April 5, 2024, we received an additional letter from Nasdaq notifying us that we no longer complied with the requirement under Nasdaq Listing Rule 5550(b)(1) to maintain a minimum of $2.5 million in stockholders’ equity for continued listing on the Nasdaq Capital Market (the “Equity Standard Requirement”). At the Appeal Hearing, we presented our plan to regain and maintain compliance with both the Minum Bid Price Requirement and the Equity Standard Requirement. All delisting actions were stayed pending a final decision by the Panel.

On May 13, 2024, we received a decision letter from the Panel granting us an extension until August 28, 2024, subject to certain conditions, to regain compliance with the Nasdaq continued listing requirements, including the Minimum Bid Price Requirement and Equity Standard Requirement. All delisting actions are stayed during the additional extension period granted by the Panel following the Appeal Hearing. While we are investigating a range of options available to us to regain compliance with the Minimum Bid Price Requirement and Equity Standard Requirement, there can be no assurance that we will be able to regain compliance with the Nasdaq continued listing requirements before dates required by Nasdaq or at all.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, as well as the reported revenues and expenses during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in the notes to our audited consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K. However, we believe that the following accounting policies are important to understanding and evaluating our reported financial results, and we have accordingly included them in this discussion.

Product Revenue

We account for product revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (ASC 606). We perform the following five steps to recognize revenue under ASC 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only recognize revenue when we believe that it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services that will be transferred to the customer.

We sell OLINVYK to wholesalers in the US (collectively, “customers”). These customers subsequently resell our products generally to hospitals, ambulatory surgical centers and other purchasers of OLINVYK. We recognize revenue from OLINVYK sales at the point customers obtain control of the product, which generally occurs upon delivery. The transaction price that is recognized as revenue for products includes an estimate of variable consideration which is more fully described below.

Variable Consideration

We include an estimate of variable consideration in our transaction price at the time of sale when control of the product transfers to the customer. Variable consideration includes distributor chargebacks, prompt payment (cash) discounts, distribution service fees and product returns.

We assess whether or not an estimate of our variable consideration is constrained based on the probability that a significant reversal in the amount of cumulative revenue may occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. Actual amounts of consideration ultimately received may vary from

20

our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect product sales and earnings in the period such variances become known.

Distributor Chargebacks

When a product is sold to a third party that is subject to a contractual price agreement, the difference between the price paid to us by the wholesaler and the price under the specific contract is charged back to us by the wholesaler. Utilizing this information, we estimate a chargeback percentage for each product and record an allowance for chargebacks as a reduction to revenue when we record our sale of the products. We reduce the chargeback allowance when a chargeback request from a wholesaler is processed. Reserves for chargebacks are included in accounts receivable, net on the consolidated balance sheet.

Product Returns

Generally, our customers have the right to return any unopened product during the eighteen (18) month period beginning six (6) months prior to the labeled expiration date and ending twelve (12) months after the labeled expiration date. We do not currently rely on industry data in our analysis of returns reserve. As we sold OLINVYK and established historical sales over a longer period of time (i.e., two to three years), we placed more reliance on historical purchasing, demand from hospitals and ambulatory surgical centers, return patterns of our customers and