Milestone Pharmaceuticals Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 11, 2023. Amounts are in U.S. dollars unless stated otherwise.
Business context
Milestone is a clinical-stage biopharmaceutical company developing etripamil, a self-administered rapid-onset nasal spray for cardiovascular conditions. Its lead indication is paroxysmal supraventricular tachycardia (PSVT); it is also studying etripamil for atrial fibrillation with rapid ventricular rate (AFib-RVR). The company had no approved products or product-sales revenue.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior balance |
|---|---|---|
| Revenue | $1.0 million | $0 |
| Research and development expense, net | $10.3 million | $8.8 million |
| General and administrative expense | $3.9 million | $3.6 million |
| Commercial expense | $2.4 million | $1.6 million |
| Operating loss | $15.5 million | $14.0 million |
| Net loss | $15.0 million; $0.35 per share | $14.0 million; $0.33 per share |
| Net cash used in operating activities | $13.9 million | $13.9 million |
| Cash and cash equivalents | $74.0 million | $7.6 million at Dec. 31, 2022 |
| Short-term investments | $27.0 million | $56.9 million at Dec. 31, 2022 |
| Total assets | $111.1 million | $74.5 million at Dec. 31, 2022 |
| Total liabilities | $57.1 million | $8.1 million at Dec. 31, 2022 |
The $1.0 million revenue was a milestone payment under the Ji Xing license agreement, triggered by initiation of a Phase 1 PSVT trial in its territory; it was not product-sales revenue. Operating expenses rose 17.5% year over year, led by R&D (+17%) and commercial spending (+44%) as development and potential-launch preparation continued. Interest income increased to $0.6 million from $0.04 million. Product margins are not meaningful because the company had no product sales.
Investing activities provided $30.0 million net, mainly from redeeming $45.0 million of short-term investments and purchasing $15.0 million. Financing activities provided $50.3 million, principally from the new notes. Cash and cash equivalents increased by $66.3 million during the quarter. Management stated that cash, cash equivalents and short-term investments of approximately $101.0 million, together with its operating plan, were expected to fund operations for at least 12 months from the filing; the company expects continuing losses and negative operating cash flow.
Financing and material changes
- On March 29, 2023, Milestone issued $50.0 million principal amount of 6.0% senior secured convertible notes due March 31, 2029. Interest is payable quarterly in cash or, at the company’s option, in kind during the first three years. The notes are secured by substantially all company and subsidiary-guarantor assets; initial conversion price is approximately $5.23 per share. The March 31 carrying amount was $47.3 million after $2.7 million of unamortized issuance costs.
- Under a separate royalty purchase agreement, RTW agreed, subject to conditions including FDA approval by September 30, 2025, to pay $75.0 million for tiered U.S. etripamil royalties: 7% on annual sales up to $500 million, 4% on sales above $500 million through $800 million, and 1% above $800 million. The initial tier can increase to 9.5% if specified sales thresholds are not met. This was a contingent future funding source, not cash received in Q1.
- Milestone exchanged 1,059,000 common shares held by RTW-affiliated entities for immediately exercisable pre-funded warrants with a $0.001 exercise price; no cash proceeds were received. At March 31, 33.3 million common shares and 9.6 million pre-funded warrants were outstanding.
Outlook, clinical progress and risks
- The company reported positive Phase 3 RAPID topline results for PSVT, previously announced in October 2022: 64.3% of etripamil patients versus 31.2% of placebo patients converted within 30 minutes; median time to conversion was 17.2 versus 53.3 minutes. The company said it believed the development program had the safety dataset needed for PSVT NDA review and had closed the NODE-303 safety study. Regulatory approval remains uncertain.
- The Phase 2 ReVeRA trial is evaluating etripamil for AFib-RVR and was expected to enroll approximately 50 patients. The company anticipates increased development, administrative and commercial spending and continuing operating losses for the foreseeable future; it cannot reliably estimate development costs, timing to approval, or when product revenue or profitability may occur.
- Key risks include clinical and regulatory failure or delay, manufacturing and supply issues, financing needs, commercialization and market acceptance, intellectual property, and healthcare pricing and reimbursement changes. The filing also cites inflation, interest rates, geopolitical conditions and market volatility as potential pressures, though it reported no material impact from inflation to date.
- The company reported no material legal proceedings and no material changes to previously disclosed risk factors other than healthcare legislative reform risk. Management concluded disclosure controls were effective at a reasonable-assurance level.
Investor facts to verify
- Progress, timing and regulatory requirements for a PSVT NDA, and whether RAPID and NODE-301 data support approval.
- Cash use against management’s stated minimum 12-month funding outlook, including future clinical and commercialization spending.
- Conditions and timing for the potential $75 million royalty transaction, including the September 30, 2025 FDA-approval condition and the resulting royalty economics.
- Debt covenants, collateral, interest-payment choices, conversion dilution and any effect of the secured notes on future financing flexibility.
- Share and warrant dilution, including the pre-funded warrants, outstanding options and potential conversion of notes.