Trevena
TREVENA INC (Form: 10-Q, Received: 05/09/2014 14:16:57)

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2014

 

Or

 

o           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 000-19119

 

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.)

 

 

 

1018 West 8th Avenue, Suite A
King of Prussia, PA

(Address of Principal Executive Offices)

 

19406
(Zip Code)

 

Registrant’s telephone number, including area code: (610) 354-8840

 

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

 

Title of each class

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

NASDAQ Global Select Market

 

Securities registered pursuant to Section 12(g) of the Act: None

 

(Title of Class)

 

 

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  x   No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes  x   No  o

 

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

 

Large accelerated filer  o

 

Accelerated filer  o

 

 

 

Non-accelerated filer  o

 

Smaller reporting company  x

(Do not check if a smaller reporting company)

 

 

 

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

 

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 5, 2014: 26,357,423

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

 

Page

PART I- FINANCIAL INFORMATION

Item 1.

Financial Statements

2

 

Balance Sheets as of December 31, 2013 and March 31, 2014 (unaudited)

2

 

Statements of Operations and Comprehensive Loss (unaudited) for the three months ended March 31, 2013 and 2014 and period from November 9, 2007 (date of inception) to March 31, 2014

3

 

Statements of Redeemable Convertible Preferred Stock and Stockholder’s (Deficit) Equity (unaudited) for the period from January 1, 2014 to March 31, 2014

4

 

Statements of Cash Flow (unaudited) for the three months ended March 31, 2013 and 2014 and period from November 9, 2007 (date of inception) to March 31, 2014

5

 

Notes to Unaudited Financial Statements

6

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

PART II- OTHER INFORMATION

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 4.

Mine Safety Disclosures

23

Item 5.

Other Information

23

Item 6.

Exhibits

23

 

 

 

SIGNATURES

25

 

i



Table of Contents

 

PART I

 

ITEM 1.  FINANCIAL STATEMENTS

 

TREVENA, INC.

 

(A Development Stage Company)

 

Balance Sheets (Unaudited)

 

 

 

December 31, 2013

 

March 31, 2014

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

37,965,198

 

$

91,344,666

 

Prepaid expenses and other current assets

 

1,957,765

 

3,395,364

 

Offering costs

 

1,999,279

 

 

Total current assets

 

41,922,242

 

94,740,030

 

Property and equipment, net

 

343,059

 

257,864

 

Restricted cash

 

112,000

 

112,000

 

Other assets

 

15,625

 

45,300

 

Total assets

 

$

42,392,926

 

$

95,155,194

 

Liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

545,053

 

$

3,084,016

 

Accrued expenses and other current liabilities

 

2,158,792

 

1,775,505

 

Deferred rent

 

33,114

 

34,707

 

Total current liabilities

 

2,736,959

 

4,894,228

 

Deferred rent, net of current portion

 

313,919

 

307,374

 

Warrant liability

 

350,519

 

106,341

 

Total liabilities

 

3,401,397

 

5,307,943

 

Commitments and contingencies (Note 6)

 

 

 

 

 

Redeemable convertible preferred stock:

 

 

 

 

 

Series A convertible preferred stock, $0.001 par value; 25,074,999 and 0 shares authorized, 25,074,999 and 0 shares issued and outstanding at December 31, 2013 and March 31, 2014 respectively, (liquidation preference of $25,074,999 at December 31, 2013)

 

25,024,373

 

 

Series B convertible preferred stock, $0.001 par value; 35,500,000 and 0 shares authorized, 30,800,000 and 0 shares issued and outstanding at December 31, 2013 and March 31, 2014, respectively (liquidation preference of $30,800,000 at December 31, 2013)

 

30,778,700

 

 

Series B-1 convertible preferred stock, $0.001 par value; 6,000,000 and 0 shares authorized, 4,750,000 and 0 shares issued and outstanding at December 31, 2013 and 2014, respectively (liquidation preference of $4,200,000 at December 31, 2013)

 

4,823,079

 

 

Series C convertible preferred stock, $0.001 par value; 37,000,000 and 0 shares authorized, 36,764,704 and 0 shares issued and outstanding at December 31, 2013 and March 31, 2014, respectively (liquidation preference of $59,999,997 at December 31, 2013)

 

59,935,986

 

 

Total redeemable convertible preferred stock

 

120,562,138

 

 

Stockholders’ (deficit) equity:

 

 

 

 

 

Common stock, $0.001 par value; 132,000,000 shares authorized, 957,756 and 26,232,941 shares issued and outstanding at December 31, 2013 and March 31, 2014, respectively

 

958

 

26,233

 

Additional paid-in capital

 

697,283

 

181,463,282

 

Deficit accumulated during the development stage

 

(82,268,850

)

(91,642,264

)

Total stockholders’ (deficit) equity

 

(81,570,609

)

89,847,251

 

Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity

 

$

42,392,926

 

$

95,155,194

 

 

See accompanying notes to financial statements.

 

2



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Statements of Operations and Comprehensive Loss (Unaudited)

 

 

 

Three Months Ended March 31,

 

Period From
November 9, 2007
(date of inception) to

 

 

 

2013

 

2014

 

March 31, 2014

 

Revenue:

 

 

 

 

 

 

 

Grant revenue

 

$

41,201

 

$

 

$

9,016,734

 

Collaboration revenue

 

 

 

450,000

 

Total revenue

 

41,201

 

 

9,466,734

 

Operating expenses:

 

 

 

 

 

 

 

General and administrative

 

761,437

 

2,020,865

 

20,748,841

 

Research and development

 

2,115,066

 

7,633,509

 

80,408,153

 

Total operating expenses

 

2,876,503

 

9,654,374

 

101,156,994

 

Loss from operations

 

(2,835,302

)

(9,654,374

)

(91,690,260

)

Other income (expense):

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

10,255

 

98,922

 

395,861

 

Miscellaneous income

 

 

176,015

 

300,052

 

Interest income

 

 

6,023

 

76,553

 

Interest expense

 

(58,241

)

 

(675,768

)

Total other income (expense)

 

(47,986

)

280,960

 

96,698

 

Net loss and comprehensive loss

 

(2,883,288

)

(9,373,414

)

(91,593,562

)

Accretion of redeemable convertible preferred stock

 

(79,161

)

(28,521

)

(850,530

)

Net loss attributable to common stockholders

 

$

(2,962,449

)

$

(9,401,935

)

$

(92,444,092

)

Per share information:

 

 

 

 

 

 

 

Net loss per share of common stock, basic and diluted

 

$

(4.30

)

$

(0.59

)

 

 

Weighted average shares outstanding, basic and diluted

 

689,266

 

16,023,497

 

 

 

 

See accompanying notes to financial statements.

 

3



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity (Unaudited)

 

For the period from January 1, 2014 to March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ (Deficit) Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit

 

 

 

 

 

Redeemable Convertible Preferred Stock

 

Common Stock

 

 

 

Accumulated

 

Total

 

 

 

Series A

 

Series B

 

Series B-1

 

Series C

 

 

 

 

 

$0.001

 

Additional

 

During the

 

Stockholders’

 

 

 

Number of

 

 

 

Number of

 

 

 

Number of

 

 

 

Number of

 

 

 

 

 

Number of

 

Par

 

Paid-in

 

Development

 

(Deficit)

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Total

 

Shares

 

Value

 

Capital

 

Stage

 

Equity

 

Balance, January 1, 2014

 

25,074,999

 

$

25,024,373

 

30,800,000

 

$

30,778,700

 

4,750,000

 

$

4,823,079

 

36,764,704

 

$

59,935,986

 

$

120,562,138

 

957,756

 

$

958

 

$

697,283

 

$

(82,268,850

)

$

(81,570,609

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

527,302

 

 

527,302

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

26,450

 

26

 

3,413

 

 

3,439

 

Accretion of Series A, Series B/B-1 and Series C convertible preferred stock to its redemption value

 

 

1,688

 

 

709

 

 

23,990

 

 

2,134

 

28,521

 

 

 

(28,521

)

 

(28,521

)

Conversion of Series A convertible preferred stock to common stock upon initial public offering

 

(25,074,999

)

(25,026,061

)

 

 

 

 

 

 

(25,026,061

)

4,044,354

 

4,044

 

25,022,017

 

 

25,026,061

 

Conversion of Series B convertible preferred stock to common stock upon initial public offering

 

 

 

(30,800,000

)

(30,779,409

)

 

 

 

 

(30,779,409

)

4,967,741

 

4,968

 

30,774,441

 

 

30,779,409

 

Conversion of Series B-1 convertible preferred stock to common stock upon initial public offering

 

 

 

 

 

(4,750,000

)

(4,847,069

)

 

 

(4,847,069

)

766,129

 

766

 

4,846,303

 

 

4,847,069

 

Conversion of Series C convertible preferred stock to common stock upon initial public offering

 

 

 

 

 

 

 

(36,764,704

)

(59,938,120

)

(59,938,120

)

5,929,789

 

5,930

 

59,932,190

 

 

59,938,120

 

Net conversion of preferred stock warrants to common stock upon initial public offering

 

 

 

 

 

 

 

 

 

 

20,273

 

20

 

(20

)

 

 

Reclassification of convertible preferred stock warrant liability

 

 

 

 

 

 

 

 

 

 

 

 

145,256

 

 

145,256

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

 

 

 

9,520,449

 

9,521

 

59,543,618

 

 

59,553,139

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,373,414

)

(9,373,414

)

Balance, March 31, 2014

 

 

$

 

 

$

 

 

$

 

 

$

 

$

 

26,232,941

 

$

26,233

 

$

181,463,282

 

$

(91,642,264

)

$

89,847,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

4


 


Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Statements of Cash Flows

 

 

 

Three Months Ended March 31,

 

Period From
November 9, 2007
(date of inception) to

 

 

 

2013

 

2014

 

March 31, 2014

 

Operating activities:

 

 

 

 

 

 

 

Net loss

 

$

(2,883,288

)

$

(9,373,414

)

$

(91,593,562

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

193,474

 

105,824

 

4,071,974

 

Stock-based compensation

 

39,724

 

527,302

 

1,892,552

 

Issuance of restricted stock for consulting services

 

 

 

7,380

 

Issuance of common stock for a license agreement

 

 

 

1,250

 

Noncash interest expense on loans

 

13,530

 

 

190,438

 

Loss on disposal of assets

 

 

 

5,062

 

Revaluation of preferred stock warrant liability

 

(10,255

)

(98,922

)

(395,861

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Prepaid expenses, offering costs and other assets

 

(4,931

)

532,005

 

(3,508,732

)

Restricted cash

 

 

 

(112,000

)

Accounts payable and accrued expenses

 

17,695

 

2,150,724

 

5,181,064

 

Net cash used in operating activities

 

(2,634,051

)

(6,156,481

)

(84,260,435

)

Investing activities:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(6,417

)

(20,629

)

(4,323,662

)

Net cash used in investing activities

 

(6,417

)

(20,629

)

(4,323,662

)

Financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of redeemable convertible preferred stock and warrants, net

 

 

 

119,735,880

 

Proceeds from the sale of restricted common stock

 

 

 

11,836

 

Proceeds from exercise of common stock options

 

1,303

 

3,439

 

90,457

 

Proceeds from exercise of preferred stock warrants

 

 

 

550,000

 

Proceeds from loans payable

 

 

 

7,615,278

 

Proceeds from issuance of common stock, net

 

 

59,553,139

 

59,553,139

 

Repurchase of restricted stock

 

 

 

(1,312

)

Repayment of loans payable

 

(530,000

)

 

(7,615,278

)

Capital lease payments

 

 

 

(11,237

)

Net cash provided by financing activities

 

(528,697

)

59,556,578

 

179,928,763

 

Net increase (decrease) in cash and cash equivalents

 

(3,169,165

)

53,379,468

 

91,344,666

 

Cash and cash equivalents—beginning of period

 

6,738,659

 

37,965,198

 

 

Cash and cash equivalents—end of period

 

$

3,569,494

 

$

91,344,666

 

$

91,344,666

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Fair value of preferred stock warrants issued

 

$

 

$

 

$

1,449,135

 

 

See accompanying notes to financial statements.

 

5



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements

 

March 31, 2014

 

1. Organization and Description of the Business

 

Trevena, Inc. (the Company) is a development stage biopharmaceutical company that was incorporated in Delaware as Parallax Therapeutics, Inc. on November 9, 2007. The Company began operations in December 2007, and its name was changed to Trevena, Inc. on January 3, 2008. The Company is a drug discovery company focused on discovering and developing pharmaceutical products targeting G protein coupled receptors. The Company operates in one segment and has its principal office in King of Prussia, Pennsylvania. The Company’s revenue has been derived from research grants and a research collaboration with a pharmaceutical company.

 

Reverse Stock Split

 

During 2013, the Company’s Board of Directors and stockholders approved a one-for-6.2 reverse stock split of the Company’s Common Stock which became effective on October 30, 2013. All share and per share amounts in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split

 

Initial Public Offering

 

On February 5, 2014, 9,250,000 shares of common stock were sold on the Company’s behalf at an initial public offering price of $7.00 per share, for aggregate gross proceeds of $64.8 million. On March 6, 2014, in connection with the partial exercise by the underwriters of the Company’s initial public offering of the over-allotment option granted to them in connection with the initial public offering, 270,449 additional shares of common stock were sold on the Company’s behalf at the initial public offering price of $7.00 per share, for aggregate gross proceeds of approximately $1.9 million. In addition, as part of the initial public offering, all of the Company’s outstanding convertible preferred stock was converted, and a portion of its warrants were net exercised, into an aggregate of 15,728,286 shares of common stock.

 

The Company paid to the underwriters underwriting discounts and commissions of approximately $4.6 million in connection with the initial public offering. In addition, the Company incurred expenses of approximately $2.5 million in connection with the initial public offering. Thus, the net offering proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, were approximately $59.6 million.

 

Following the completion of the initial public offering, there is a warrant exercisable to purchase 20,161 shares of our common stock at an exercise price of $6.20 per share, which expires in December 2021. There is also a warrant exercisable to purchase 2,419 shares of our common stock at an exercise price of $0.06 per share, which expires in June 2018.

 

Liquidity

 

The Company has incurred recurring operating losses since inception. As of March 31, 2014, the Company had an accumulated deficit of $91,642,264 and will require substantial additional capital to fund its research and development. The net proceeds from the Company’s initial public offering, together with its preexisting cash and cash equivalents, will enable it to fund its operating expenses and capital expenditure requirements through the end of 2015, without giving effect to a potential option payment and, if the option is exercised, potential milestone payments the Company may receive under its option and license agreements with Forest Laboratories Holdings Limited. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, development of its product candidates and its preclinical programs, and the expansion of its administrative organization. As the Company continues to incur losses, a transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and the achievement of a level of revenue adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. Management intends to fund future operations through the sale of equity, debt financings or other sources, including potential additional collaborations. There can be no assurances, however, that additional funding will be available on terms acceptable to the Company, or at all.

 

6



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements (Continued)

 

March 31, 2014

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (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 Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). The Company considers the U.S. dollar to be its functional currency.

 

Unaudited Interim Financial Information

 

The accompanying condensed Balance Sheet as of March 31, 2014, and Statements of Operations and Comprehensive Loss and Statements of Cash Flows for the three months ended March 31, 2013 and 2014 and the period from November 9, 2007 (date of inception) to March 31, 2014 and the Statement of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity from January 1, 2014 to March 31, 2014 are unaudited. The interim unaudited financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2014 and the results of its operations, its comprehensive loss and its cash flows for the three months ended March 31, 2013 and 2014 and the period from November 9, 2007 (date of inception) to March 31, 2014. The financial data and other information disclosed in these notes related to the three months ended March 31, 2013 and 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014, any other interim periods or any future year or period.

 

Significant Accounting Policies

 

The Company’s significant accounting policies are described in Note 2 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies.

 

Use of Estimates

 

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these financial statements, 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 liability-classified preferred and common stock warrants, the accounting for research and development costs, accrued expenses and the recoverability of the Company’s net deferred tax assets and related valuation allowance.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents subject the Company to concentrations of credit risk. However, the Company has invested in U.S. government securities with one month maturity terms and money market mutual funds that invest substantially all of their assets in U.S. government securities. Cash equivalents are valued at cost, which approximates their fair market value.

 

Fair Value Measurements

 

ASC Topic 820, Fair Value Measurement (ASC 820), 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

 

7



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements (Continued)

 

March 31, 2014

 

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 Topic 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.

 

Items measured at fair value on a recurring basis include money market mutual funds, restricted cash and warrants to purchase redeemable convertible preferred stock and common stock. During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs. The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis:

 

 

 

Quoted Prices in
Active Markets
for Identical
Items
(Level 1)

 

Significant Other
Observable Inputs
(Level 2)

 

Significant
Unobservable
Inputs (Level 3)

 

Total

 

December 31, 2013

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Money market mutual funds

 

$

35,551,000

 

$

 

$

 

$

35,551,000

 

Restricted cash

 

112,000

 

 

 

112,000

 

Total assets

 

$

35,663,000

 

$

 

$

 

$

35,663,000

 

Liabilities

 

 

 

 

 

 

 

 

 

Warrants to purchase redeemable preferred stock

 

$

 

$

 

$

350,519

 

$

350,519

 

Total liabilities

 

$

 

$

 

$

350,519

 

$

350,519

 

March 31, 2014

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Money market mutual funds

 

$

10,275,000

 

$

 

$

 

$

10,275,000

 

U.S. Treasury Bills (one month maturity)

 

79,998,000

 

 

 

79,998,000

 

Restricted cash

 

112,000

 

 

 

112,000

 

Total assets

 

$

90,385,000

 

$

 

$

 

$

90,385,000

 

Liabilities

 

 

 

 

 

 

 

 

 

Warrants to purchase common stock

 

$

 

$

 

$

106,341

 

$

106,341

 

Total liabilities

 

$

 

$

 

$

106,341

 

$

106,341

 

 

The U.S. Treasury Bills and money market mutual funds noted above are included in cash and cash equivalents in the accompanying balance sheets. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the three months ended March 31, 2013 or 2014.

 

8



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements (Continued)

 

March 31, 2014

 

The following table sets forth a summary of changes in the fair value of the Company’s warrant liability, which represents a recurring measurement that is classified within Level 3 of the fair value hierarchy, wherein fair value is estimated using significant unobservable inputs:

 

 

 

Warrant
Liability

 

Balance as of December 31, 2013

 

$

350,519

 

Amounts acquired or issued

 

 

Changes in estimated fair value

 

(98,922

)

Amounts reclassified to additional paid-in capital

 

(145,256

)

Balance as of March 31, 2014

 

$

106,341

 

 

In connection with the issuance of the Company’s Series B-1 preferred shares, shareholders received warrants to purchase shares of the Company’s Series B-1 Preferred Stock. Additionally, in connection with a banking facility, the Company issued a warrant to purchase 125,000 shares of Series B preferred stock. As of December 31, 2013, the fair value of the warrants outstanding of $350,519 was recognized as a liability in the Company’s balance sheet in accordance with the guidance for accounting for certain financial instruments with characteristics of both liabilities and equity as the warrants entitle the holder to purchase preferred stock that is considered contingently redeemable. Upon the Company’s initial public offering, 1,100,000 of the outstanding Series B-1 warrants were net exercised into 20,273 shares of common stock and the remaining fair value of $145,256 associated with these particular warrants was reclassified to additional paid-in capital.  The warrant to purchase 125,000 shares of Series B preferred stock was converted into a warrant to purchase up to 20,161 shares of the Company’s common stock and remains outstanding with a fair value recorded as a liability of $106,341 at March 31, 2014 as it contains a cash settlement feature upon certain strategic transactions.

 

The fair value of the warrants on the date of issuance and the fair value of the warrants classified as liabilities on each re-measurement date is estimated using the Black-Scholes option pricing model. For this liability, the Company develops its own assumptions that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company’s various classes of preferred stock, stock price volatility, the contractual term of the warrants, risk free interest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement. The following assumptions were used at December 31, 2013 and March 31, 2014:

 

 

 

December 31, 2013

 

March 31, 2014

 

 

 

Series B-1
preferred stock
warrant liability

 

Series B
preferred stock
warrant liability

 

Common stock
warrant liability

 

Estimated remaining term

 

0.25 years

 

8.4 years

 

8.2 years

 

Dividend yield

 

0.00

%

0.00

%

0.00

%

Risk-free interest rate

 

0.38

%

2.75

%

2.42

%

Fair value of underlying instrument

 

$

7.00

 

$

7.00

 

$

7.86

 

Volatility

 

71

%

70

%

74

%

 

The warrant liability is recorded on its own line item on the Company’s Balance Sheet and is marked-to-market at each reporting period with the change in fair value recorded on its own line in the Statement of Operations and Comprehensive Loss.

 

Recent Accounting Pronouncements

 

The Company does not anticipate the adoption of recently issued accounting standards to have a significant impact on its financial position, results of operations or cash flows.

 

3. Net Loss Per Common Share

 

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated:

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2014

 

Basic and diluted net loss per common share calculation:

 

 

 

 

 

Net loss and comprehensive loss

 

$

(2,883,288

)

$

(9,373,414

)

Accretion of redeemable convertible preferred stock

 

(79,161

)

(28,521

)

Net loss attributable to common stockholders

 

$

(2,962,449

)

$

(9,401,935

)

Weighted average common shares outstanding

 

689,266

 

16,023,497

 

Net loss per share of common stock—basic and diluted

 

$

(4.30

)

$

(0.59

)

 

9



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements (Continued)

 

March 31, 2014

 

The following outstanding securities at March, 31, 2013 and 2014 have been excluded from the computation of diluted weighted shares outstanding, as they would have been anti-dilutive:

 

 

 

March 31,

 

 

 

2013

 

2014

 

Redeemable convertible preferred stock

 

9,689,515

 

 

Options outstanding

 

1,427,591

 

3,441,284

 

Warrants

 

288,709

 

22,580

 

Total

 

11,405,815

 

3,463,864

 

 

4. Stockholders’ (Deficit) Equity

 

On February 5, 2014, 9,250,000 shares of common stock were sold on the Company’s behalf at an initial public offering price of $7.00 per share, for aggregate gross proceeds of $64.8 million. On March 6, 2014, in connection with the partial exercise by the underwriters of the Company’s initial public offering of the over-allotment option granted to them in connection with the initial public offering, 270,449 additional shares of common stock were sold on the Company’s behalf at the initial public offering price of $7.00 per share, for aggregate gross proceeds of approximately $1.9 million.

 

As of December 31, 2013, the Company had the following redeemable convertible preferred stock outstanding which converted into common shares on a one-for-6.2 basis upon consummation of the Company’s initial public offering:

 

 

 

Preferred
Shares
Outstanding

 

Conversion
into Common
Shares upon
Initial Public
Offering

 

Series A

 

25,074,999

 

4,044,354

 

Series B

 

30,800,000

 

4,967,741

 

Series B-1

 

4,750,000

 

766,129

 

Series C

 

36,764,704

 

5,929,789

 

Total

 

97,389,703

 

15,708,013

 

 

In connection with the issuance of the Company’s Series B-1 preferred shares, shareholders received warrants to purchase shares of the Company’s Series B-1 Preferred Stock. Additionally, in connection with a banking facility, the Company issued a warrant to purchase 125,000 shares of Series B preferred stock. As of December 31, 2013, the fair value of the warrants outstanding of $350,519 was recognized as a liability in the Company’s balance sheet. Upon the Company’s initial public offering, 1,100,000 of the outstanding Series B-1 warrants were net exercised into 20,273 shares of common stock and the remaining fair value of $145,256 associated with these particular warrants was reclassified to additional paid-in capital.  The warrant to purchase 125,000 shares of Series B preferred stock was converted into a warrant to purchase up to 20,161 shares of the Company’s common stock and remains outstanding with a fair value recorded as a liability of $106,341 at March 31, 2014 as it contains a cash settlement feature upon certain strategic transactions.

 

The Company was authorized to issue 132,000,000 shares of common stock as of December 31, 2013 and March 31, 2014. 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 stock options and warrants.

 

5. 2008 and 2013 Equity Incentive Plans

 

In January 2008, the Company adopted the 2008 Equity Incentive Plan (the 2008 Plan), amended on February 29, 2008, January 7, 2010, July 8, 2010, December 10, 2010, June 23, 2011 and June 17, 2013 that authorizes the Company to grant up to 3,310,990 shares of common stock to eligible employees, directors and consultants to the Company, in the form of restricted stock and stock options. The amount, terms of grants and exercisability provisions are determined by the board

 

10



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements (Continued)

 

March 31, 2014

 

of directors. The term of the options may be up to 10 years, and options are exercisable in cash or as otherwise determined by the board of directors. Vesting generally occurs over a period of not greater than four years.

 

In 2013 the Company adopted the 2013 Equity Incentive Plan (the 2013 plan) that authorizes the Company to grant up to 4,100,000 shares of common stock. The 2013 plan became effective upon the initial public offering in January 2014. As of the time the 2013 plan became effective, no further grants may be made under the 2008 plan. The 2013 plan provides for the grant of incentive stock options, or ISOs, nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and other forms of equity compensation (collectively, stock awards), all of which may be granted to employees, including officers, non-employee directors and consultants of the Company. Additionally, the 2013 plan provides for the grant of performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants.

 

The estimated grant-date fair value of the Company’s share-based awards is amortized ratably over the awards’ service periods. Share-based compensation expense recognized was as follows:

 

 

 

Three months ended
March 31,

 

Period from
November 9, 2007
(date of inception) to

 

 

 

2013

 

2014

 

March 31, 2014

 

Research and development

 

$

27,151

 

$

324,188

 

$

1,219,183

 

General and administrative

 

12,573

 

203,114

 

673,369

 

Total stock-based compensation

 

$

39,724

 

$

527,302

 

$

1,892,552

 

 

 

 

 

 

Options Outstanding

 

 

 

Shares Available
for Grant

 

Number of
Shares

 

Weighted-Average
Exercise Price

 

Weighted Average
Remaining
Contractual
Term (in years)

 

Balance, December 31, 2013

 

83,465

 

2,795,746

 

$

2.52

 

8.45

 

Authorized

 

4,100,000

 

 

 

 

 

 

Granted

 

(671,988

)

671,988

 

7.35

 

 

 

Exercised

 

 

(26,450

)

0.13

 

 

 

Forfeitures

 

 

 

 

 

 

Balance, March 31, 2014

 

3,511,477

 

3,441,284

 

$

3.50

 

8.58

 

Vested or expected to vest at March 31, 2014

 

 

 

3,394,254

 

$

3.45

 

8.56

 

Exercisable at March 31, 2014

 

 

 

1,136,928

 

$

1.08

 

7.09

 

 

The intrinsic value of the options exercisable as of March 31, 2014 was $7.7 million, based on the Company’s closing stock price of $7.86 per share and a weighted average exercise price of $1.08 per share. The intrinsic value of the unvested options as of March 31, 2014 was $7.3 million, based on the Company’s closing stock price of $7.86 per share and a weighted average exercise price of $4.69 per share.

 

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 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.

 

The per-share weighted-average grant date fair value of the options granted to employees and directors during the three months ended March 31, 2014 was estimated at $4.91 per share on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

 

 

Three Months
Ended March
31, 2014

 

Risk-free interest rate

 

1.89

%

Expected term of options (in years)

 

6.06

 

Expected volatility

 

75.59

%

Dividend yield

 

0.00

%

 

11



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements (Continued)

 

March 31, 2014

 

There were no share-based awards granted to employees during the three months ended March 31, 2013.

 

The weighted-average valuation assumptions were determined as follows:

 

·                   Risk-free interest rate: The Company based the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

 

·                   Expected term of options: The Company estimated the expected life of its employee stock options using the “simplified” method, as prescribed in Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to its lack of sufficient historical data.

 

·                   Expected stock price volatility: The Company estimated the expected volatility based on actual historical volatility of the stock price of similar companies with publicly-traded equity securities. The Company calculated the historical volatility of the selected companies by using daily closing prices over a period of the expected term of the associated award. The companies were selected based on their enterprise value, risk profiles, position within the industry and with historical share price information sufficient to meet the expected term of the associated award. A decrease in the selected volatility would have decreased the fair value of the underlying instrument.

 

·                   Expected annual dividend yield: The Company estimated the expected dividend yield based on consideration of its historical dividend experience and future dividend expectations. The Company has not historically declared or paid dividends to stockholders. Moreover, it does not intend to pay dividends in the future, but instead expects to retain any earnings to invest in the continued growth of the business. Accordingly, the Company assumed an expected dividend yield of 0.0%.

 

·                   Estimated forfeiture rate: The Company’s estimated annual forfeiture rate on 2013 and 2014 stock option grants was 5% and 7%, respectively, based on the historical forfeiture experience.

 

The fair value of the Company’s common stock, prior to the Company’s initial public offering, was determined by its board of directors with assistance of its management. The board of directors and management considered numerous objective and subjective factors in the assessment of fair value, including the price for the Company’s preferred stock that was sold to investors and the rights, preferences and privileges of the preferred stock and common stock, the Company’s financial condition and results of operations during the relevant periods and the status of strategic initiatives. These estimates involve a significant level of judgment.

 

As of March 31, 2014, there was $6.7 million of total unrecognized compensation expense, related to unvested options granted under the Plan, which will be recognized over the weighted average remaining period of 2.16 years.

 

Shares Reserved for Future Issuance

 

At March 31, 2014, the Company has reserved the following shares of common stock for issuance:

 

Common stock options outstanding

 

3,441,284

 

Common stock options and restricted stock available for future grant

 

3,511,477

 

Common stock warrants outstanding

 

22,580

 

 

 

6,975,341

 

 

6. Commitments and Contingencies

 

Licenses

 

On May 3, 2013, the Company entered into an option agreement and a license agreement with Forest, under which the Company granted to Forest an exclusive option to license its product candidate, TRV027. If Forest exercises this option, the license agreement between the Company and Forest will become effective and Forest will have an exclusive worldwide license to develop and commercialize TRV027 and specified related compounds. Under the option agreement, the Company will conduct, at its expense, a Phase 2b trial of TRV027 in acute heart failure. Forest may exercise its option during the pendency of the Phase 2b clinical trial or during a specified time period after the Company delivers the data from the Phase 2b clinical trial to Forest. During the option period, the Company is not permitted to negotiate for or enter into any agreement with a third party for the development and commercialization of TRV027 and its related compounds. Under

 

12



Table of Contents

 

TREVENA, INC.

 

(A Development Stage Company)

 

Notes to Financial Statements (Continued)

 

March 31, 2014

 

specified circumstances linked to adverse changes in the market or with respect to TRV027, Forest has the right to renegotiate the terms of the license agreement. If Forest exercises such right, its option will expire and the Company will be obligated to negotiate in good faith with Forest for a period of time the terms of any new arrangement. If the Company and Forest are unable to agree on the terms of any new arrangement during such period of time, then the option agreement will terminate and for a specified period of time thereafter the Company may not offer a license to any third party on terms better than those last proposed by either the Company or Forest during the negotiations.

 

If Forest does not exercise the option during the specified period, its option will expire and the license agreement will not become effective. In that event, the Company would be free to enter into a collaboration arrangement with another party for the development and commercialization of TRV027 or to pursue development and commercialization on its own.

 

If Forest exercises the option, Forest will have the sole and exclusive right under the license agreement, at its sole cost and expense, to develop and commercialize TRV027 and specified related compounds throughout the world. At the Company’s request, Forest will consider in good faith whether to grant the Company the right to co-promote the licensed products in the United States under terms to be agreed upon by the parties.

 

The Company received no consideration upon the grant of the option to Forest. If Forest exercises the option, the Company could potentially receive up to $430 million in the aggregate, including an upfront option exercise fee of $65 million and milestone payments depending upon the achievement of future development and commercial milestones. The Company could also receive tiered royalties between 10% and 20% on net sales of licensed products worldwide, with the royalty rates on net sales of licensed products in the United States being somewhat higher than the royalty rates on net sales of licensed products outside the United States.

 

If Forest exercises the option and the license agreement becomes effective, both Forest and the Company would have the right to terminate the license agreement in the event of an uncured material breach or insolvency of the other party. In addition, Forest would be permitted to terminate the license agreement without cause at any time upon prior written notice or immediately for product safety reasons. Following a termination of the license agreement, all licenses granted to Forest would terminate, and Forest would grant the Company an exclusive royalty bearing license under specified patents and know-how to develop and commercialize reverted licensed products. If not terminated, the license agreement would remain in effect until the expiration of the last royalty term for the last licensed product.

 

If Forest elects to exercise its option, the term of the royalty on sales of TRV027 for a given country would extend until the latest to occur of (i) 10 years from first commercial sale of TRV027 in that country, (ii) the expiration of the last to expire patent claiming TRV027 that is sufficient to block the entrance of a generic version of the product, or (iii) the expiration of any period of exclusivity granted by applicable law or any regulatory authority in such country that confers exclusive marketing rights on the product.

 

Forest has the right to grant sublicenses under the license agreement to affiliates and third parties. Any sublicensing does not act to relieve Forest of any of its obligations under the license agreement, including Forest’s obligation to make milestone payments to the Company with respect to TRV027 or pay royalties to the Company on sales of TRV027 by such sublicensee. Forest participated in the Series C Preferred Stock financing and purchased $30 million of Series C Preferred Stock. Because the Series C Preferred Stock was acquired at the same time as the option agreement, management considered whether the Preferred Stock was issued at fair value and if not, whether the consideration received for the Preferred Stock should be allocated in the financial statements in a manner differently than the price stated in the agreement. The Series C Preferred Stock acquired by Forest was acquired at the same time and at the same price per share as all of the other investors in the Series C Preferred Stock financing and therefore the preferred stock sold to Forest was deemed to be issued at fair value and no value was allocated to the option agreement. The Series C Preferred Stock held by Forest was converted into common shares on a one-for 6.2 basis upon consummation of the Company’s initial public offering.

 

Legal Proceedings

 

The Company is not involved in any legal proceeding that it expects to have a material effect on its business, financial condition, results of operations and cash flows.

 

13



Table of Contents

 

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

 

The following discussion and analysis of our financial condition and result of operations should be read in conjunction with our 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. 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 prospectus, 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. You should refer to the “Risk Factors” section of our most recent Annual Report on Form 10-K as filed with the SEC and which are incorporated herein by reference, 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. Furthermore, such forward-looking statements speak only as of the date of this report. 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.

 

Overview

 

Trevena, Inc. is a clinical stage biopharmaceutical company that discovers, develops and intends to commercialize therapeutics that use a novel approach to target G protein coupled receptors, or GPCRs. Using our proprietary product platform, we have identified and advanced three differentiated product candidates into the clinic. We have completed a Phase 2a clinical trial and we have initiated a Phase 2b clinical trial of TRV027 for acute heart failure, or AHF. Forest Laboratories Holdings Limited, or Forest, has the exclusive option to license TRV027 from us. We have also completed a Phase 1b clinical trial of TRV130 and we have initiated an additional Phase 1 trial and Phase 2 trial of TRV130 to evaluate its potential to treat moderate to severe acute pain intravenously. We have retained all worldwide development and commercialization rights to TRV130. We plan to develop and commercialize both TRV027 and TRV130 initially in the acute care hospital markets. We are currently running a Phase 1 trial for our third product candidate, TRV734, which we are developing as an orally administered compound for the treatment of moderate to severe acute and chronic pain.

 

We were incorporated and commenced operations in the fourth quarter of 2007. Our operations to date have included organizing and staffing our company, business planning, raising capital and developing TRV027, TRV130, TRV734 and performing research to identify additional product candidates. We have financed our operations primarily through private placements of our preferred stock and debt borrowings. As of March 31, 2014, we had a deficit accumulated during the development stage of $91.6 million. Our net loss was $2.9 million and $9.4 million for the three months ended March 31, 2013 and 2014, respectively. Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we or a collaborator obtain marketing approval for and commercialize TRV027, TRV130, TRV734 or one of our other product candidates.

 

On February 5, 2014, we sold 9,250,000 shares of common stock in our initial public offering at an initial public offering price of $7.00 per share, for aggregate gross proceeds of $64.8 million. On March 6, 2014, in connection with the partial exercise by the underwriters of our initial public offering of the over-allotment option granted to them in connection with the initial public offering, we sold 270,449 additional shares of common stock at the initial public offering price of $7.00 per share, for aggregate gross proceeds of approximately $1.9 million. In addition, as part of the initial public offering, all of our outstanding convertible preferred stock was converted, and a portion of our warrants were net exercised, into an aggregate of 15,728,287 shares of common stock.

 

We paid underwriting discounts and commissions of approximately $4.6 million in connection with the initial public offering. In addition, we incurred expenses of approximately $2.5 million in connection with the offering. Thus, our offering proceeds, after deducting underwriting discounts and commissions and offering expenses, were approximately $59.6 million.

 

We have received net proceeds of $179.3 million through March 31, 2014 from the issuance of our common stock, preferred stock and related warrants and $9.5 million pursuant to grant and collaboration agreements.

 

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From inception through March 31, 2014, we had incurred approximately $80.4 million of total research and development expenses and approximately $20.7 million of total general and administrative expenses.

 

We expect to incur significant expenses and operating losses for the foreseeable future as we continue the development and clinical trials of, and seek regulatory approval for, our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses. Furthermore, as a result of our initial public offering in January 2014, we expect to incur additional costs associated with operating as a public company. We expect that these costs will include significant legal, accounting, investor relations and other expenses that we did not incur as a private company. We will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. We will seek to fund our operations through the sale of equity, debt financings or other sources, including potential additional 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 the development and/or commercialization of one or more of our product candidates.

 

Our Option and License Agreements with Forest

 

In May 2013, we entered into an option agreement and a license agreement with Forest, under which we granted to Forest an exclusive option to license TRV027, which may be exercised at any time before we deliver our Phase 2b clinical trial results to Forest and during a specified period of time thereafter. If Forest exercises its option, the license agreement between us and Forest will become effective, and Forest will have an exclusive worldwide license to develop and commercialize TRV027 and specified related compounds. Forest will be responsible for subsequent development, regulatory approval and commercialization of TRV027 at Forest’s expense.

 

Under the option agreement, we will conduct, at our expense, a Phase 2b trial of TRV027 in AHF. The Phase 2b trial will be conducted pursuant to a mutually agreed upon development plan and under the oversight of a joint development committee, which has an equal number of representatives from us and from Forest, with operational authority during the option period retained by us, subject to Forest’s right to assume control in certain circumstances if we fail to conduct the development activities adequately.

 

We expect to deliver the data from the Phase 2b trial to Forest in the second half of 2015. During the option period, we are not permitted to negotiate for or enter into any agreement with a third party for the development and commercialization of TRV027 and its related compounds. Under specified circumstances linked to adverse changes in the market or with respect to TRV027, Forest has the right to renegotiate the terms of the license agreement. If Forest exercises such right, its option will expire and we will be obligated to negotiate in good faith with Forest for a period of time the terms of any new arrangement. If we and Forest are unable to agree on the terms of any new arrangement during such period of time, then the option agreement will terminate and for a specified period of time thereafter we may not offer a license to any third party on terms better than those last proposed by either us or Forest during our negotiations.

 

If Forest does not exercise the option during the specified period, its option will expire and the license agreement will not become effective. In that event, we would be free to enter into any type of collaboration arrangement with another party for the development and commercialization of TRV027 or to pursue development and commercialization ourselves.

 

If Forest exercises the option, Forest will have the sole and exclusive right under the license agreement, at its sole cost and expense, to develop and commercialize TRV027 and specified related compounds throughout the world. At our request, Forest will consider in good faith whether to grant us the right to co-promote the licensed products in the United States under terms to be agreed upon by the parties but it has no obligation to provide any co- promote rights to us. Under the license agreement, we may not, and may not license others to, develop or commercialize certain products that compete with the licensed products.

 

We received no consideration from Forest for the grant of the option to license TRV027. If Forest exercises the option, we could potentially receive up to $430 million in the aggregate, including an upfront option exercise fee of $65 million and milestone payments depending upon the achievement of future development and commercial milestones. We could also receive tiered royalties between 10% and 20% on net sales of licensed products worldwide, subject to certain deductions and offsets, with the royalty rates on net sales of licensed products in the United States being somewhat higher than the royalty rates on net sales of licensed products outside the United States.

 

If Forest exercises the option and the license agreement becomes effective, both we and Forest would have the right to terminate the license agreement in the event of an uncured material breach or insolvency of the other party. In addition, Forest would be permitted to terminate the license agreement without cause at any time upon prior written notice or

 

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immediately for product safety reasons. Following a termination of the license agreement, all licenses granted to Forest would terminate, and Forest would grant us an exclusive royalty-bearing license under specified patents and know-how to develop and commercialize the licensed products that it returns to us. If not terminated, Forest’s license agreement would remain in effect until the expiration of the last royalty term for the last licensed product.

 

If Forest elects to exercise its option, the term of the royalty on sales of TRV027 for a given country would extend until the latest to occur of (i) 10 years from first commercial sale of TRV027 in that country, (ii) the expiration of the last to expire patent claiming TRV027 that is sufficient to block the entrance of a generic version of the product, or (iii) the expiration of any period of exclusivity granted by applicable law or any regulatory authority in such country that confers exclusive marketing rights on the product.

 

Forest has the right to grant sublicenses under the license agreement to affiliates and third parties. Any sublicensing does not act to relieve Forest of any of its obligations under the license agreement, including Forest’s obligation to make milestone payments to us with respect to TRV027 or pay royalties to us on sales of TRV027 by such sublicensee.

 

Components of Operating Results

 

Revenue

 

To date, we have derived revenue principally from research grants as well as from one research collaboration arrangement. We have not generated any revenue from commercial product sales. In the future, if any of our product candidates currently under development is approved for commercial sale, we may generate revenue from product sales, or alternatively, we may choose to select a collaborator to commercialize our product candidates in all or selected markets.

 

We expect grant and collaboration revenue to decrease because we have completed our grant programs and our research collaboration. We do not currently anticipate any revenue from new grant programs or research collaborations. We will not generate any commercial revenue until one of our product candidates receives regulatory approval, if ever.

 

General and Administrative Expenses

 

General and administrative expenses consist principally of salaries and related costs for executive and other personnel, including stock-based compensation and travel expenses. Other general and administrative expenses include facility- related costs, communication expenses and professional fees for legal, patent prosecution and maintenance, consulting and accounting services.

 

We anticipate that our general and administrative expenses will increase in the future with continued research, development and potential commercialization of our product candidates and expanded compliance obligations of operating as a public company. These increases will likely include greater costs for insurance, costs related to the hiring of additional personnel, payments to outside consultants and investor relations providers, and costs for lawyers and accountants, among other expenses. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

 

Research and Development Expenses

 

Our research and development expenses consist primarily of costs incurred for the development of our product candidates. These costs include external costs and internal research and development costs.

 

External costs include:

 

·                   expenses incurred under agreements with contract research organizations and investigative sites that conduct our clinical trials, preclinical studies and regulatory activities; and

 

·                   the costs of acquiring, developing and manufacturing clinical trial materials.

 

Internal costs include:

 

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·                   personnel-related expenses, including salaries, benefits and stock-based compensation expense of our research and development personnel;

 

·                   laboratory supplies;

 

·                   allocated facilities, depreciation and other expenses, which include rent and utilities;

 

·                   travel and training for research and development employees;

 

·                   product liability insurance; and

 

·                   laboratory service costs.

 

We track external costs by discovery program and subsequently by product candidate once a product candidate has been selected for development. TRV130 and TRV734 were both selected from the μ-opioid receptor discovery program and so we did not separately allocate costs between TRV734 and TRV130 until the start of 2011 when we selected TRV130 as a product candidate. We have incurred a total of $80.4 million in research and development expenses from inception through March 31, 2014, with $34.5 million being spent on external costs for TRV027, TRV130 and TRV734 and the remainder being spent on internal costs, predominantly personnel related costs, and external costs related to the development of our ABLE product platform, grant funded activities and our early stage programs, including the δ-opioid receptor program.

 

Research and development costs are expensed as incurred. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors.

 

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As we advance our product candidates, we expect the amount of research and development spending allocated to external spending relative to internal spending will continue to grow for the foreseeable future, while our internal spending should grow at a slower and more controlled pace.

 

It is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates, or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rate and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

 

Change in Fair Value of Warrant Liability

 

In connection with the issuance of the Company’s Series B-1 preferred shares, shareholders received warrants to purchase shares of the Company’s Series B-1 Preferred Stock. Additionally, in connection with a banking facility, the Company issued a warrant to purchase 125,000 shares of Series B preferred stock. As these are financial instruments that may have required a transfer of assets because of the redemption features of the underlying preferred stock, the warrants were recorded as liabilities. We re-measured the fair value of these liabilities at each balance sheet date and recorded the changes in the fair value of the warrant liability in our statement of operations and comprehensive loss as a change in fair value of warrant liability.

 

Upon the Company’s initial public offering, 1,100,000 of the outstanding Series B-1 warrants were net exercised into 20,273 shares of common stock and the remaining fair value of $145,256 associated with these particular warrants was reclassified to additional paid-in capital.  The warrant to purchase 125,000 shares of Series B preferred stock was converted into a warrant to purchase up to 20,161 shares of the Company’s common stock and remains outstanding with a fair value recorded as a liability of $106,341 at March 31, 2014 as it contains a cash settlement feature upon certain strategic transactions.

 

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Other Income / Expense

 

Other income consists principally of interest income earned on cash and cash equivalent balances and miscellaneous income attributable to the sale of research and development tax credits.

 

Interest expense consists of cash paid and noncash interest expense related to our prior bank facility, which we repaid in November 2011, our prior equipment loan facility with the Commonwealth of Pennsylvania, which we repaid in December 2012, and our loan facility with Comerica Bank, which we repaid in May 2013.

 

Recent Accounting Pronouncements

 

The Company does not anticipate the adoption of recently issued accounting standards to have a significant impact on its financial position, results of operations or cash flows.

 

JOBS Act

 

The JOBS Act contains provisions that, among other things, reduce reporting requirements for an “emerging growth company.” As an emerging growth company, we have elected to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

 

Results of Operations

 

Comparison of the Three Months Ended March 31, 2013 and 2014

 

 

 

Three Months Ended
March 31,

 

 

 

 

 

2013

 

2014

 

Change

 

Revenue:

 

 

 

 

 

 

 

Grant revenue

 

$

41,201

 

$

 

$

(41,201

)

Total revenue

 

41,201

 

 

(41,201

)

Operating expenses:

 

 

 

 

 

 

 

General and administrative

 

761,437

 

2,020,865

 

1,259,428

 

Research and development

 

2,115,066

 

7,633,509

 

5,518,443

 

Total operating expenses

 

2,876,503

 

9,654,374

 

6,777,871

 

Loss from operations

 

(2,835,302

)

(9,654,374

)

(6,819,072

)

Other income (expense):

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

10,255

 

98,922

 

88,667

 

Miscellaneous income

 

 

176,015

 

176,015

 

Interest income

 

 

6,023

 

6,023

 

Interest expense

 

(58,241

)

 

58,241

 

Total other income (expense)

 

(47,986

)

280,960

 

328,946

 

Net loss and comprehensive loss

 

(2,883,288

)

(9,373,414

)

(6,490,126

)

Accretion of redeemable convertible preferred stock

 

(79,161

)

(28,521

)

50,640

 

Net loss attributable to common stockholders

 

$

(2,962,449

)

$

(9,401,935

)

$

(6,439,486

)

 

Revenue

 

Grant revenue decreased $41,201 for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013 due to the discontinuation of funding in June 2013 for a research grant from the National Institutes of Health.

 

General and administrative expense

 

General and administrative expenses increased by $1.3 million, or 165%, for the three months ended March 31, 2014 compared to the same period in 2013 primarily as a result of increased headcount and salary costs, increased compensation expense associated with stock options granted and increased insurance, professional fees and other operating costs as a result of becoming a public company.

 

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Research and development expense

 

Research and development expenses increased by $5.5 million, or 261%, from $2.1 million for the three months ended March 31, 2013 to $7.6 million for the three months ended March 31, 2014. The increase was primarily driven by an increase of $2.5 million in clinical research expenses for TRV027 associated with its advancement into a Phase 2b study and an increase of $1.9 million of clinical research expenses for TRV130 associated with its continued development.

 

The following table summarizes our research and development expenses for the three months ended March 31, 2013 and 2014:

 

 

 

Three Months Ended
March 31,

 

 

 

2013

 

2014

 

 

 

 

 

 

 

TRV027 (external costs)

 

$

41,460

 

$

2,582,958

 

TRV130 (external costs)

 

88,457

 

1,971,881

 

TRV734 (external costs)

 

295,674

 

568,675

 

Stock-based compensation

 

27,151

 

324,188

 

Other personnel related costs

 

1,143,138

 

1,433,796

 

Other research and development

 

519,186

 

752,011

 

 

 

$

2,115,066

 

$

7,633,509

 

 

Change in fair value of warrant liability

 

We recognized gains of $10,255 and $98,922 for the three months ended March 31, 2013 and 2014, respectively, for the change in fair value on revaluation of our warrant liability associated with our warrants outstanding.

 

Miscellaneous income

 

Miscellaneous income of $176,015 was recorded during the three months ended March 31, 2014 due to the sale of research and development tax credits awarded by the Commonwealth of Pennsylvania.

 

Interest income

 

Interest income of $6,023 was recorded during the three months ended March 31, 2014 due to income associated with the investment of funds in U.S. government securities with one month maturity terms.

 

Interest expense

 

Interest expense decreased from $58,241 in the three months ended March 31, 2013 due primarily to the full repayment of a loan facility in May 2013.

 

Liquidity and Capital Resources

 

Since our inception, we have incurred net losses and negative cash flows from our operations. We incurred net losses of $2.9 million and $9.4 million for the three months ended March 31, 2013 and 2014, respectively. Net cash used in operating activities was $2.6 million and $6.2 million during the three months ended March 31, 2013 and 2014, respectively. At March 31, 2014, we had an accumulated deficit of $91.6 million, working capital of $89.8 million and cash and cash equivalents of $91.3 million. Historically, we have financed our operations principally through private placements of preferred stock. In January 2014, we completed our initial public offering. Through March 31, 2014, we have received net proceeds of $179.3 million from the issuance of preferred and common stock.

 

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Cash Flows

 

The following table summarizes our cash flows for the three months ended March 31, 2013 and 2014:

 

 

 

Three Months Ended
March 31,

 

 

 

2013

 

2014

 

Net cash (used in) provided by:

 

 

 

 

 

Operating activities

 

$

(2,634,051

)

$

(6,156,481

)

Investing activities

 

(6,417

)

(20,629

)

Financing activities

 

(528,697

)

59,556,578

 

Net increase (decrease) in cash and cash equivalents

 

$

(3,169,165

)

$

53,379,468

 

 

Net cash (used in) provided by operating activities

 

Net cash used in operating activities was $6.2 million for the three months ended March 31, 2014 and consisted primarily of a net loss of $9.4 million partially offset by noncash adjustments of $534,205 and changes in operating assets and liabilities of $2.7 million. The noncash adjustments were primarily attributable to depreciation and amortization related to leasehold improvements and capital equipment and increased expense associated with stock options granted offset by a gain recognized on the revaluation of the preferred stock warrant liability. The significant factors that contributed to the change in operating assets and liabilities included increases in accounts payable and accrued expenses of $2.2 million and a decrease in prepaid expenses and other assets of $532,005. The decrease in prepaid expenses and other assets was primarily due to prepaid initial public offering costs incurred in 2013 partially offset by costs that were prepaid in the first quarter of 2014 in association with the startup of the Phase 2b trial for TRV027. The increase in accounts payable and accrued expenses was primarily due to the timing of our payment of costs related to ongoing development of our product candidates.

 

Net cash used in operating activities was $2.6 million for the three months ended March 31, 2013 and consisted primarily of a net loss of $2.9 million, partially offset by noncash adjustments of $246,728 primarily attributable to depreciation and amortization expenses on leasehold improvements and laboratory equipment.

 

Net cash used in investing activities

 

Net cash used in investing activities for the three months ended March 31, 2014 and 2013 was $20,629 and $6,417, respectively and consisted primarily of expenditures related to leasehold improvements and the purchase of capital equipment.

 

Net cash provided by financing activities

 

Net cash provided by financing activities was $59.6 million for the three months ended March 31, 2014, which was primarily due to $59.6 million in net proceeds from the issuance of common stock in our IPO.

 

Net cash used in financing activities was $528,697 for the three months ended March 31, 2013, resulting primarily from the repayment of a loan facility.

 

Operating and Capital Expenditure Requirements

 

We have not achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future. We expect our cash expenditures to increase in the near term as we fund our Phase 2 clinical trials of TRV027 and TRV130, our Phase 3 clinical trials of TRV130, our Phase 1 and 2 clinical trials of TRV734, as well as our clinical trials of our other preclinical product candidates and continuing preclinical activities.

 

We believe that our existing capital resources, together with the net proceeds from our initial public offering, will be sufficient to fund our operations through the end of 2015. However, we anticipate that we will need to raise substantial additional financing in the future to fund our operations. In order to meet these additional cash requirements, we may seek to sell additional equity or convertible securities that may result in dilution to our stockholders. If we raise additional funds through the issuance of convertible securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. Our future capital requirements will depend on many factors, including:

 

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·                   the progress and results of the Phase 2 clinical program for TRV130;

 

·                   whether Forest exercises its option to license TRV027;

 

·                   the progress and results of the Phase 1 clinical program for TRV734;

 

·                   our ability to enter into collaborative agreements for the development and commercialization of our product candidates, for example TRV734;

 

·                   the number and development requirements of any other product candidates that we pursue;

 

·                   the scope, progress, results and costs of researching and developing our product candidates or any future product candidates, both in the United States and in territories outside the United States;

 

·                   the costs, timing and outcome of regulatory review of our product candidates or any future product candidates, both in the United States and in territories outside the United States;

 

·                   the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

 

·                   any product liability or other lawsuits related to our products;

 

·                   the expenses needed to attract and retain skilled personnel;

 

·                   the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; and

 

·                   the costs involved in preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending our intellectual property-related claims, both in the United States and in territories outside the United States.

 

Please see “Risk Factors” section of our most recent Annual Report on Form 10-K as filed with the SEC and which are incorporated herein by reference, for additional risks associated with our substantial capital requirements.

 

License Agreements and Other Commitments

 

In addition to our option agreement and license agreement with Forest, in the course of normal business operations, we have agreements with contract service providers to assist in the performance of our research and development and manufacturing activities. We can elect to discontinue the work under these agreements at any time. We could also enter into additional collaborative research, contract research, manufacturing and supplier agreements in the future, which may require upfront payments and even long- term commitments of cash.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

This 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 of America, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

 

                Please see the “Critical Accounting Policies and Significant Judgments and Estimates” section of our most recent Annual Report on Form 10-K as filed with the SEC and which are incorporated herein by reference, for full detail. We have not made any significant changes to their critical accounting policies during the current quarter.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, as defined by applicable SEC regulations.

 

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations.

 

We had cash and cash equivalents of $91.3 million at March 31, 2014, consisting primarily of funds in cash, short-term government securities and money market accounts. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10.0% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014, the end of the period covered by this Quarterly Report on Form 10-Q.

 

Based on our evaluation, we believe that our disclosure controls and procedures as of the date of our Quarterly Report on Form 10-Q have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

Neither we nor our independent registered public accounting firm has performed an evaluation of our internal control over financial reporting during any period in accordance with the provisions of the Sarbanes-Oxley Act. As a result it is possible that, had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, material weaknesses and significant control deficiencies may have been identified. However, for as long as we remain an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of the exemption permitting us not to comply with the requirement that our independent registered public accounting firm provide an attestation on the effectiveness of our internal control over financial reporting.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Management’s Report on Internal Control Over Financial Reporting and Attestation Report of the Registered Public Accounting Firm

 

This Quarterly Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.

 

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PART II

 

ITEM 1.  LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes in our risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

(a)  Sales of Unregistered Securities

 

During the three months ended March 31, 2014, we sold no shares of unregistered securities.

 

(b) Use of Proceeds from Sales of Registered Securities

 

Our initial public offering of common stock was effected through a Registration Statement on Form S-1 (File No. 333-191643) that was declared effective by the Securities and Exchange Commission on January 30, 2014. On February 5, 2014, 9,250,000 shares of common stock were sold on our behalf at an initial public offering price of $7.00 per share, for aggregate gross proceeds of $64.8 million. On March 6, 2014, in connection with the partial exercise by the underwriters of our initial public offering of the over-allotment option granted to them in connection with the initial public offering, 270,449 additional shares of common stock were sold on our behalf at the initial public offering price of $7.00 per share, for aggregate gross proceeds of approximately $1.9 million.

 

We paid to the underwriters underwriting discounts and commissions of approximately $4.6 million in connection with the offering. In addition, we incurred expenses of approximately $2.5 million in connection with the offering. Thus, the net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were approximately $59.6 million. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.

 

There has been no material change in the expected use of the net proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b).

 

ITEM 4.  MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5.  OTHER INFORMATION

 

None.

 

ITEM 6.  EXHIBITS

 

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q. Where so indicated by footnote, exhibits that were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated.

 

Exhibit
Number

 

Description

10.1+

 

Employment Agreement, dated March 31, 2014, by and between the Company and Robert Prachar (incorporated by reference to Exhibit 10.1 to the Company ‘s Form 8-K filed with the SEC on April 3, 2014).

 

 

 

31.1

 

Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.

 

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Exhibit
Number

 

Description

31.2

 

Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.

 

 

 

32.1

 

Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 


+                                          Indicates management contract or compensatory plan.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 9, 2014

 

 

TREVENA, INC.

 

 

 

 

By:

/s/ ROBERTO CUCA

 

 

Roberto Cuca

 

 

Senior Vice President and Chief Financial Officer

 

 

(Principal Financial and Accounting Officer)

 



Table of Contents

 

EXHIBIT INDEX

 

Exhibit
Number

 

Description

10.1+

 

Employment Agreement, dated March 31, 2014, by and between the Company and Robert Prachar (incorporated by reference to Exhibit 10.1 to the Company ‘s Form 8-K filed with the SEC on April 3, 2014).

 

 

 

31.1

 

Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.

 

 

 

31.2

 

Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.

 

 

 

32.1

 

Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 


+                                          Indicates management contract or compensatory plan.

 

26


Exhibit 31.1

 

Certification of Principal Executive Officer of Trevena, Inc.

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Maxine Gowen, certify that:

 

1.                                       I have reviewed this Quarterly Report on Form 10-Q of Trevena, Inc.;

 

2.                                       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.                                       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a.                                       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.                                       Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

c.                                        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.                                       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.                                       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.                                       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 9, 2014

 

 

/s/ MAXINE GOWEN

 

Maxine Gowen

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 


Exhibit 31.2

 

Certification of Principal Financial Officer of Trevena, Inc.

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Roberto Cuca, certify that:

 

1.                                       I have reviewed this Quarterly Report on Form 10-Q of Trevena, Inc.;

 

2.                                       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.                                       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a.                                       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.                                       Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

c.                                        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.                                       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.                                       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.                                       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 9, 2014

 

 

/s/ ROBERTO CUCA

 

Roberto Cuca

 

Senior Vice President and Chief Financial Officer (Principal

 

Financial Officer)

 


Exhibit 32.1

 

Certification Of

Principal Executive Officer

Pursuant To 18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 Of The Sarbanes-Oxley Act Of 2002

 

In connection with the Quarterly Report of Trevena, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Maxine Gowen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1)                                      The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2)                                      The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.

 

Date: May 9, 2014

/s/ MAXINE GOWEN

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 

This certification accompanies the Report and shall not be deemed “filed” by the Company with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

 


Exhibit 32.2

 

Certification Of

Principal Financial Officer

Pursuant To 18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 Of The Sarbanes-Oxley Act Of 2002

 

In connection with the Quarterly Report of Trevena, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roberto Cuca, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1)                                      The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2)                                      The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.

 

Dated: May 9, 2014

/s/ ROBERTO CUCA

 

Chief Financial Officer and Treasurer

 

(Principal Financial Officer)

 

This certification accompanies the Report and shall not be deemed “filed” by the Company with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.