Milestone Pharmaceuticals Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Amounts are U.S. dollars. Milestone is a clinical-stage cardiovascular biopharmaceutical company; it has no products approved for sale. Its lead candidate, etripamil, is a self-administered nasal spray being developed primarily for paroxysmal supraventricular tachycardia (PSVT), with atrial fibrillation with rapid ventricular rate (AFib-RVR) also under study.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $1.0 million | $0 |
| Research and development expense, net | $8.6 million | $10.7 million | $18.9 million | $19.4 million |
| General and administrative expense | $4.4 million | $3.9 million | $8.3 million | $7.6 million |
| Commercial expense | $3.4 million | $2.2 million | $5.7 million | $3.9 million |
| Operating loss | $16.4 million | $16.8 million | $31.9 million | $30.9 million |
| Net loss | $16.0 million | $16.6 million | $31.0 million | $30.7 million |
| Basic and diluted loss per share | $0.37 | $0.39 | $0.72 | $0.73 |
The $1.0 million first-half revenue was a milestone payment tied to Ji Xing’s initiation of a Phase 1 PSVT trial in its territory, not product sales. Gross or operating margins are not meaningful given the absence of product sales.
- Cash and short-term investments: $87.6 million at June 30, 2023, comprising $32.6 million cash and equivalents and $55.0 million short-term investments. Accumulated deficit was $297.3 million.
- Cash flows, first half: $24.5 million used in operations, compared with $28.0 million in 2022; $1.9 million provided by investing activities; and $47.5 million provided by financing. Cash increased by $25.0 million during the period.
- Debt: In March, the company issued $50.0 million principal of 6.0% senior secured convertible notes due 2029. The June 30 carrying amount was $48.1 million. Interest is payable quarterly in cash or, at the company’s option, in kind for the first three years. The notes are secured by substantially all company and subsidiary-guarantor assets and have an initial conversion price of approximately $5.23 per share.
- Liquidity outlook: Management expects existing cash, equivalents and investments to fund operations for at least 12 months from the filing. The company expects continuing operating losses for at least several years.
Changes versus the prior comparable period
- Q2 net loss narrowed by $0.6 million year over year, while first-half net loss increased by $0.3 million. First-half operating loss increased 3.5%.
- R&D expense declined as Phase 3 studies reached completion; this was partly offset by higher manufacturing, formulation and regulatory costs.
- Commercial expense rose 51% in Q2 and 48% for the first half, reflecting added personnel and professional costs in preparation for potential commercialization. G&A expense also increased.
- Interest income increased substantially with higher rates and investment balances. Interest expense began in 2023 following the convertible-note issuance.
- Financing increased liquidity but added secured debt and potential conversion dilution. The company also exchanged 1,059,000 common shares held by RTW affiliates for pre-funded warrants.
Outlook, developments and risks
- Management planned to submit the etripamil PSVT New Drug Application (NDA) to the FDA in October 2023. The company said it believed the available safety dataset was sufficient and had closed the NODE-303 and RAPID extension studies.
- In the Phase 3 RAPID trial, 64.3% of etripamil patients versus 31.2% of placebo patients converted from SVT within 30 minutes; median time to conversion was 17.2 versus 53.3 minutes. No serious adverse events related to etripamil were reported. These are trial results, not FDA approval or a guarantee of approval.
- The Phase 2 ReVeRA AFib-RVR study had enrolled 50 patients; top-line results were expected in Q4 2023.
- A contingent RTW royalty transaction could provide $75 million after FDA approval of etripamil, subject to conditions including approval by September 30, 2025. In return, RTW would receive tiered royalties on U.S. net sales. The proceeds are not included in current liquidity.
- Key risks include clinical and regulatory uncertainty, manufacturing and supply execution, commercialization costs and market acceptance, future financing needs, healthcare pricing and reimbursement changes, and macroeconomic pressures. Additional equity or debt financing may dilute shareholders or impose further obligations.
- The company reported no material legal proceedings. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material change in internal control over financial reporting.
Investor verification points
- Check the actual timing and outcome of the planned FDA NDA submission and any subsequent FDA review or decision.
- Verify ReVeRA results and whether the AFib-RVR program advances to later-stage trials.
- Track quarterly cash burn, commercial-preparation spending and whether the stated 12-month liquidity outlook remains supported.
- Review the note terms, interest paid or added to principal, security provisions, and potential dilution from conversion and equity awards.
- Confirm whether the conditions for the contingent $75 million royalty transaction are met and assess the effect of the royalty burden if etripamil is commercialized.