Milestone Pharmaceuticals Inc. — Q1 2019 Form 10-Q
Business context and reporting period. This unaudited filing covers the three months ended March 31, 2019. Milestone is a Phase 3 clinical-stage biopharmaceutical company developing etripamil, a self-administered nasal spray intended to treat episodes of paroxysmal supraventricular tachycardia (PSVT). The company had no approved products or product revenue. Financial amounts below are in U.S. dollars; statements are prepared under U.S. GAAP.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / comparator |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense, net | $7.765 million | $3.091 million |
| General and administrative expense | $0.979 million | $0.439 million |
| Commercial expense | $2.186 million | $0.725 million |
| Total operating expenses / operating loss | $10.930 million | $4.255 million |
| Interest income, net | $0.500 million | $0.090 million |
| Net loss | $10.452 million | $4.181 million |
| Net loss per share, basic and diluted | $17.32 | $15.57 |
| Net cash used in operating activities | $14.733 million | $4.723 million |
Balance sheet and liquidity at March 31, 2019: Cash and cash equivalents were $71.239 million; short-term investments were $0.029 million. Total assets were $77.588 million and total liabilities were $4.256 million. The company reported no debt. Accumulated deficit was $68.722 million. With no revenue, operating or profit margins are not meaningful.
Material changes versus the prior comparable period
- Net loss increased by $6.271 million, or 150%; total operating expenses increased by 157%.
- R&D expense rose 151%, primarily reflecting advancement of Phase 3 PSVT trials and related headcount. Commercial expense increased 202%, with added commercial staffing, market research, patient advocacy and medical-affairs activity. G&A increased 123%, including higher personnel and professional fees related in part to IPO preparation.
- Operating cash use increased by $10.010 million. The quarter included a $4.1 million increase in prepaid expenses, mainly contract research and IPO-related costs. Cash and cash equivalents declined from $85.947 million at year-end 2018 to $71.239 million at quarter-end.
- Interest income increased to $0.500 million, attributed to higher cash balances following the October 2018 preferred-share financing.
Outlook, commentary and risks
- Management expected top-line data from the Phase 3 PSVT efficacy trial in the first half of 2020. The program also included two open-label safety studies; one began in December 2018 and the other was expected to begin in the second half of 2019. Phase 2 trials in atrial fibrillation and angina were planned for the second half of 2019 and 2020, respectively.
- Management cited an 87% termination rate of induced PSVT within 15 minutes at the Phase 2 dose selected for Phase 3, versus 35% for placebo. The company cautioned that Phase 2 was conducted in a controlled setting and its results may not predict outpatient, patient-administered Phase 3 outcomes.
- The Phase 3 efficacy program relied on one pivotal efficacy trial with a p-value threshold of p<0.01. The filing says FDA could require additional efficacy trials; the company noted that typical guidance generally involves two trials with p<0.05.
- Key clinical risks include patient recruitment and retention, unpredictable PSVT episodes, correct self-administration and cardiac monitoring, and possible adverse effects. Three serious adverse events in Phase 2 were considered possibly related to etripamil, including a second-degree AV block that resolved.
- The company expected increasing losses and expenses for the foreseeable future and no product revenue for an uncertain period. Management said cash, cash equivalents and short-term investments together with IPO proceeds were expected to fund operations into the third quarter of 2021; a risk-factor disclosure instead says existing resources alone were expected to last into the second quarter of 2021. These estimates differ and depend on assumptions that may prove incorrect.
- After quarter-end, the company completed its IPO: 6.325 million common shares were sold at $15 per share, generating approximately $85.5 million of net proceeds. All preferred shares converted into 17,550,802 common shares. The company said it had not yet used IPO proceeds. A 1-for-5.3193 reverse stock split was effected on April 26, 2019; share and per-share data were retrospectively adjusted in the filing.
- Effective January 1, 2019, adoption of the lease standard added a $0.282 million right-of-use asset and lease liabilities to the March 31 balance sheet; the company reported no material effect on results or cash flows. No material legal proceedings or off-balance-sheet arrangements were reported. Management concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Confirm the Phase 3 trial’s enrollment, event accrual, safety, endpoint results and timing, and whether regulators require another efficacy trial.
- Reconcile the stated cash runway estimates: into Q3 2021 with IPO proceeds versus into Q2 2021 based on existing resources.
- Track cash burn and the use of IPO proceeds against the company’s development and operating plans.
- Assess the gap between Phase 2 controlled-setting results and Phase 3 outpatient self-administration, including device reliability and the disclosed serious adverse events.
- Review dilution and share-count effects of the IPO, preferred-share conversion, reverse split and equity plans; the filing’s Q1 weighted-average share and per-share figures reflect the pre-IPO reporting period.