Milestone Pharmaceuticals Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. U.S. dollars unless noted. Milestone is a clinical-stage biopharmaceutical company developing etripamil, a self-administered nasal spray for cardiovascular conditions. It had no approved products or product-sales revenue.
Financial performance
| Metric (US$ millions) | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Collaboration revenue | 15.0 | — | 15.0 | — |
| Research and development expense, net | 9.4 | 8.6 | 18.0 | 20.5 |
| General and administrative expense | 3.0 | 3.0 | 5.7 | 5.7 |
| Commercial expense | 1.8 | 1.5 | 3.2 | 3.7 |
| Operating income (loss) | 0.7 | (13.1) | (11.9) | (29.9) |
| Net income (loss) | 0.8 | (13.0) | (11.7) | (29.3) |
| Operating cash flow | Not stated for quarter | Not stated for quarter | (11.5) | (34.6) |
Q2 net income reflected the one-time $15 million Ji Xing upfront collaboration payment; it is not indicative of recurring product revenue. No gross margin is reported, and margins are not a useful indicator given the company’s development-stage operations and collaboration revenue.
Liquidity, balance sheet and capital
- At June 30, cash and cash equivalents were $97.8 million and short-term investments were $38.0 million, totaling $135.8 million. Current assets were $144.4 million versus current liabilities of $5.3 million.
- Total liabilities were $5.9 million, principally accounts payable, accruals and operating lease liabilities. The filing reports no borrowings or debt.
- Accumulated deficit was $175.2 million. Management expected existing resources to fund operations into mid-2023 and stated it saw no substantial doubt about going concern for at least 12 months from the filing date.
- Six-month financing cash inflow was $4.9 million from a private placement of pre-funded warrants; investing cash inflow of $32.0 million reflected redemption of short-term investments. The company also had an unused at-the-market program of up to $50 million.
Material changes and business developments
- Compared with Q2 2020, Q2 2021 operating expenses increased 9% to $14.3 million, while the $15 million collaboration payment turned an operating loss into operating income. For the first half, operating expenses fell 10% and net loss narrowed 60%, primarily reflecting lower clinical-trial spending versus the prior-year period and the collaboration revenue.
- On May 15, 2021, Milestone granted Ji Xing exclusive etripamil development and commercialization rights in mainland China, Hong Kong, Macau and Taiwan. Ji Xing is responsible for regional development and regulatory activities; Milestone retains certain manufacturing responsibilities. Milestone recognized the $15 million non-refundable upfront payment when technology transfer was completed on June 22.
- The agreement provides for up to $107.5 million in future development and sales milestones, plus tiered royalties described as ranging from low-double-digit to high-double-digit percentages of net sales. These amounts are contingent and were not recognized as revenue in the period.
- Ji Xing acquired $5 million of pre-funded warrants as part of the transaction; the private placement generated approximately $4.9 million net proceeds. At June 30, 29.846 million common shares and 12.328 million pre-funded warrants were outstanding.
Outlook, clinical progress and risks
- The pivotal RAPID Phase 3 PSVT trial uses an updated primary endpoint of conversion within 30 minutes and permits a repeat dose after 10 minutes if symptoms persist. The company expected topline results in the second half of 2022.
- The first part of NODE-301 did not meet its original primary endpoint over five hours. A retrospective analysis using the updated 30-minute endpoint found conversion in 54% of etripamil patients versus 35% on placebo (p=0.02). This analysis does not replace the need for prospective pivotal-trial results.
- NODE-302 was completed in late 2020. Enrollment and site initiation for NODE-303 and RAPID, and initiation of the ReVeRA Phase 2 AFib-RVR study, had been affected by COVID-19. ReVeRA data were expected after RAPID topline results.
- Management expected rising R&D and commercial spending and continuing operating losses for the foreseeable future. Profitability and timing of any product-sales revenue remain uncertain; additional financing may be needed sooner if plans or market access to capital change.
- Key risks include clinical efficacy and safety outcomes, regulatory approval, manufacturing and supply, intellectual-property protection, competition, financing needs and further pandemic-related disruption. The filing reported no material change to previously disclosed risk factors.
Most important facts for investors to verify
- RAPID enrollment, execution of the repeat-dose protocol and prospective primary-endpoint results, including the anticipated timing of topline data.
- Whether the Ji Xing technology transfer and collaboration economics lead to future milestones, royalties or supply obligations; the upfront payment is non-recurring.
- Actual cash burn and whether the stated mid-2023 runway remains achievable as clinical and commercialization spending evolves.
- Potential dilution from outstanding pre-funded warrants, options and any future equity financing.
- Ongoing effects of COVID-19 and other site, recruitment, regulatory or manufacturing delays on clinical timelines.