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Item 5. Market for Registrant’s Common Equity

2021-03-29 compared with 2020-03-06 · 17 added, 310 removed, 11 unchanged (97% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY , RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET INFORMATION

Our common stock began trading on The Nasdaq Global Select Market on May 9, 2019.

Our common stock trades under the symbol “MIST”.

Prior to the commencement of trading on the Nasdaq Global Select Market on May 9, 2019, there was no public market for our common stock.

Our common shares began trading on The Nasdaq Global Select Market on May 9, 2019.

Our common shares trade under the symbol “MIST”.

Prior to the commencement of trading on the Nasdaq Global Select Market on May 9, 2019, there was no public market for our common shares.

HOLDERS OF RECORD

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as one shareholder.

Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of shareholders represented by these record holders.

Because many of our shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.

Recent Sales of Unregistered Securities

From January 1, 2019 through May 9, 2019, the date of the filing of our registration statement on Form S-8 (File No.

333-231347), we issued and sold an aggregate of 18,150 common shares to our service providers and former service providers upon the exercise of stock option awards under our Stock Option Plan, or the 2011 Plan, at exercise prices ranging from $1.12 to $1.54 per share, for aggregate proceeds of $25 thousand.

From January 1, 2019 through May 9, 2019, the date of the filing of our registration statement on Form S-8 (File No.

333-231347), and pursuant the terms of the 2011 Plan, we granted to our service providers stock option awards to purchase an aggregate of 116,742 common shares, at an exercise price of $9.42 per share.

The offers, sales and issuances of the securities described in the preceding paragraphs were deemed to be exempt from registration under Rule 701 promulgated under the Securities Act, or Rule 701, in that the transactions were by an issuer not involving any public offering or under Section 4(a)(2) of the Securities Act or under compensatory benefit plans and contracts relating to compensation as provided under Rule 701.

The recipients of such securities were our employees, directors or consultants and received the securities under our 2011 Plan.

Appropriate legends were affixed to the securities issued in these transactions.

Use of Proceeds from Initial Public Offering of Common Stock

On May 13, 2019, we completed our initial public offering and issued 6,325,000 common shares at an initial offering price of $15.00 per share (inclusive of 825,000 common shares pursuant to the full exercise of an overallotment option granted to the underwriters in connection with the offering).

We received net proceeds from the IPO of $85.4 million, after deducting underwriting discounts and commissions.

None of the expenses associated with the IPO were paid to directors, officers, persons owning 10% or more of any class of equity securities, or to their associates.

Jefferies LLC, Cowen and Company, LLC and Piper Jaffray & Co.

acted as lead book-running managers.

Oppenheimer & Co.

acted as lead manager for the IPO.

Our common shares began trading on The Nasdaq Global Select Market on May 9, 2019.

The offer and sale of the shares were registered under the Securities Act on Registration Statement on Form S-1 (Registration No.

333-230846), which was declared effective on May 8, 2019.

There has been no material change in the planned use of proceeds from our IPO as described in our Prospectus.

We invested the funds received in cash equivalents and other marketable securities in accordance with our investment policy.

We have not used any of the proceeds from the IPO.

On July 29, 2020, we entered into an Open Market Sale Agreement℠, or the Sales Agreement, with Jefferies LLC or Jefferies with respect to an at-the-market offering program , or the ATM Program, under which we may issue and sell our common shares having an aggregate offering price of up to $50 million through Jefferies as our sales agent or principal.

The common shares to be sold under the Sales Agreement, if any, will be offered and sold pursuant to our shelf registration statement on Form S-3 (File No.

333-239318), which was declared effective by the Securities and Exchange Commission on July 6, 2020.

We have not sold shares under the ATM program as of the date of this filing.

On October 22, 2020, we entered into an underwriting agreement with Jefferies and Piper Sandler & Co.

as representatives of the several underwriters, or collectively, the Underwriters, relating to the issuance and sale of (i) 5,095,897 common shares, without par value, at a price to the public of $5.25 per share, and (ii) pre-funded warrants to purchase 4,761,903 Common Shares at an exercise price equal to $0.01 per share, at a price to the public of $5.24 per common share underlying the pre-funded warrants, or the Offering.

Pre-Funded Warrants.

The gross proceeds to us from the Offering were $51.7 million, including proceeds from the exercise of the Underwriters' option to purchase additional shares.

The securities were offered and sold pursuant to our shelf registration statement on Form S-3 (File No.

333-239318), which was declared effective by the Securities and Exchange Commission on July 6, 2020, a base prospectus dated July 6, 2020 and the related prospectus supplement dated October 22, 2020 and a related registration statement (File No.

333-249623) filed on October 22, 2020 in accordance with Rule 462(b) under the Securities Act of 1933, as amended.

The offering closed on October 27, 2020.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

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Not Applicable.

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

You should read the following discussion and analysis of our financial condition and results of operations together with “Selected Consolidated Financial Data”

and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

This discussion contains forward‑looking statements based upon current expectations that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward‑looking statements as a result of various factors, including those discussed in “Risk Factors”

and in other parts of this Annual Report on Form 10-K.

We are a biopharmaceutical company focused on the development and commercialization of innovative cardiovascular medicines.

Our lead product candidate etripamil is a novel, potent and short-acting calcium channel blocker that we designed as a rapid-onset nasal spray to be self-administered by patients.

We are developing etripamil to treat paroxysmal supraventricular tachycardia, or PSVT, atrial fibrillation, and other cardiovascular indications.

PSVT is a rapid heart rate condition characterized by episodes of supraventricular tachycardia, or SVT, that start and stop without warning.

Episodes of SVT are often experienced by patients with symptoms including palpitations, sweating, chest pressure or pain, shortness of breath, sudden onset of fatigue, lightheadedness or dizziness, fainting and anxiety.

Calcium channel blockers have long been approved for the treatment of PSVT as well as other cardiac conditions.

Calcium channel blockers available in oral form are frequently used prophylactically to control the frequency and duration of future episodes of SVT.

For treatment of episodes of SVT, approved calcium channel blockers are administered intravenously under medical supervision, usually in the emergency department.

The combination of convenient nasal-spray delivery, rapid-onset and short duration of action of etripamil has the potential to shift the current treatment paradigm for episodes of SVT away from the burdensome and costly emergency department setting.

If approved, we believe that etripamil will be the first self-administered therapy for the rapid termination of episodes of SVT wherever and whenever they occur.

Our development program for etripamil for the treatment of PSVT consists of three Phase 3 clinical trials, one Phase 2 trial, and Phase 1 trials.

We believe this clinical trial program, if successful, will be sufficient to support approval in the United States and the European Union.

NODE-301 is our ongoing, placebo-controlled Phase 3 safety and efficacy trial, which is being conducted in North America.

NODE-301 may serve as a single pivotal efficacy trial required for approval by the US Food and Drug Administration, or FDA.

The trial is being conducted in two parts.

NODE-301A will continue until the trial’s adjudication committee has evaluated data from the treatment of 150 SVT events with blinded study drug (etripamil or placebo).

All pivotal efficacy analyses will be conducted on data from NODE-301A.

NODE-301B will follow patients already enrolled in NODE-301 who did not take the study drug in NODE-301A.

Data from NODE-301B will be analyzed as a pivotal safety and supportive efficacy data set, and will contribute to potentially valuable sub-population analyses and pharmaco-economic assessments.

Following consultation with the FDA in 2019, we confirmed the two-part design, along with an increase in the sample size of NODE-301A from 100 to 150 adjudicated SVT events.

The upsize of the trial satisfies a request from the European Medicines Agency, or EMA.

NODE-302 is our ongoing Phase 3 open-label safety extension trial.

Patients who complete NODE-301 may enroll in NODE-302 and receive up to an additional 11 doses of etripamil.

We designed NODE‑302 to evaluate the safety of etripamil when self‑administered without medical supervision and to monitor the safety and efficacy of etripamil for the treatment of multiple episodes of SVT.

All patients randomized in NODE‑301 will be eligible for NODE‑302.

Patients who have successfully dosed with the study drug and completed a study closure visit will be eligible to enroll in NODE‑302 to manage any subsequent episodes of SVT.

Eligibility will also be contingent on satisfying all inclusion and exclusion criteria, including not experiencing a serious adverse event related to the study drug or the study procedure that precludes the self‑administration of etripamil.

We initiated NODE‑302 in December 2018 and the trial is ongoing.

Trial safety results will contribute to the etripamil safety database.

NODE-303 is our ongoing Phase 3 open label safety trial, which is being conducted primarily in North America, Europe and Latin America.

We designed NODE‑303 to evaluate the safety of etripamil when self‑administered without medical supervision, and to evaluate the treatment safety and efficacy of etripamil on multiple SVT episodes.

The trial is designed to enroll up to 3,000 patients in order to collect data on approximately 1,000 patients taking etripamil in an at-home setting.

A more accurate sizing of the trial will be determined once an overall size of the safety dataset is determined for NDA filing following future discussions with the FDA and other regulatory authorities.

Based on a review of the NODE-301 safety data available in June 2019, the FDA and multiple European and Latin American regulatory authorities have agreed to allow patient enrollment in NODE-303 without an in-office safety test dose, which is a safeguard required in the NODE-301 trial, and in a broad patient population including patients taking concomitant beta-blockers and calcium channel blockers.

We completed our Phase 2 clinical trial of etripamil for the treatment of PSVT in the United States and Canada, with results published in the Journal of the American College of Cardiology.

Investigators reported an 87% termination rate of episodes of SVT within 15 minutes at the dose selected for our Phase 3 trials versus a 35% termination rate for placebo.

We have also completed two Phase 1 clinical trials in healthy volunteers, characterizing the pharmacokinetics and pharmacodynamic effect of etripamil.

As with PSVT, calcium channel blockers are also approved for use in intravenous form for the treatment of some episodes of atrial fibrillation in which patients experience rapid ventricular rates.

We plan to initiate in 2020 a Phase 2 proof-of-concept clinical trial in a controlled setting to evaluate the potential effectiveness of etripamil to reduce ventricular rate in atrial fibrillation patients who present to the clinic with rapid ventricular rate.

The trial will enroll approximately 50 patients, randomized to etripamil 70 mg versus placebo, with a primary endpoint of reduction in ventricular rate.

As we generate more data on the safety and efficacy profile of etripamil in PSVT and atrial fibrillation with rapid ventricular rate, we will continue to assess whether etripamil could be developed to potentially fulfill other areas of unmet medical need.

Since the commencement of our operations in 2003, we have devoted substantially all of our resources to performing research and development activities in support of our product development efforts, hiring personnel, raising capital to support and expand such activities, providing general and administrative support for these operations and, more recently preparing for commercialization.

We operate our business utilizing a significant outsourcing model.

As such, our team is composed of a relatively smaller core of employees who direct a significantly larger number of team members who are outsourced in the forms of vendors and consultants to enable execution of our operational plans.

We do not currently have any products approved for sale, and we continue to incur significant research and development and general administrative expenses related to our operations.

Since inception, we have incurred significant operating losses.

For the years ended December 31, 2019 and 2018, we recorded net losses of $53.7 million and $23.2 million, respectively.

As of December 31, 2019, we had an accumulated deficit of $111.8 million.

We expect to continue to incur significant losses for the foreseeable future.

We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary development activities required for obtaining regulatory approval and preparing for potential commercialization of our product candidates.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on other research and development activities.

We expect our expenses will increase substantially over time as we:

continue our ongoing and planned development of etripamil, including our Phase 3 clinical trials of etripamil for the treatment of PSVT;

seek marketing approvals for etripamil for the treatment of PSVT and other cardiovascular indications;

establish a sales, marketing, manufacturing and distribution capability, either directly or indirectly through third parties, to commercialize etripamil or any future product candidate for which we may obtain marketing approval;

build a portfolio of product candidates through development, or the acquisition or in-license of drugs, product candidates or technologies;

initiate preclinical studies and clinical trials for etripamil for any additional indications we may pursue, including the clinical trials for the treatment of atrial fibrillation with rapid ventricular rate and angina, and for any additional product candidates that we may pursue in the future;

maintain, protect and expand our intellectual property portfolio;

hire additional clinical, regulatory and scientific personnel;

add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts;

incur additional legal, accounting and other expenses associated with operating as a public company.

Reverse Share Split

On April 26, 2019, in connection with our initial public offering, or IPO, our Board of Directors approved an amendment to our articles of incorporation to effect a 1-for-5.3193 reverse share split of our common shares, convertible preferred shares and the share options of the Company.

Accordingly, all common shares, convertible preferred shares, share options and per share amounts in the consolidated financial statements and MD&A have been retroactively adjusted for all periods presented to give effect to the reverse share split.

The reverse share split was effected on April 26, 2019.

Initial Public Offering

On May 13, 2019, we completed our IPO, whereby we issued 5,500,000 common shares at a public offering price of $15.00 per share.

The shares began trading on The Nasdaq Global Select Market on May 9, 2019.

On May 15, 2019, the underwriters fully exercised their option to purchase an additional 825,000 common shares at the public offering price of $15.00 per share.

We received net proceeds from the IPO and the over-allotment exercise of $85.4 million, after deducting underwriting discounts and commissions and other offering expenses.

Upon the closing of the IPO, 24,490,742 common shares were outstanding, which included all outstanding shares of our preferred shares that converted into 17,550,802 common shares.

Components of Results of Operations

Research and Development Expenses

Research and development expenses consist primarily of salaries and fees paid to external service providers and also include personnel costs, including share‑based compensation expense and other related compensation expenses.

We expense research and development costs in the periods in which they are incurred.

Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third‑party service providers.

To date, substantially all of our research and development expenses have been related to the preclinical and clinical development of etripamil.

Historically, we have incurred research and development expenses that primarily relate to the development of etripamil for the treatment of PSVT.

As we advance etripamil or other product candidates for other indications, we expect to allocate our direct external research and development costs across each of the indications or product candidates.

Further, while we expect our research and development costs for the development of etripamil in

atrial fibrillation with rapid ventricular rate and angina to increase in preparation for each of their respective Phase 2 clinical trials, we expect our research and development expenses related to the development of etripamil for PSVT to remain a large majority of our research and development expenses.

The following table shows our research and development expenses by type of activity for the years ended December 31, 2019 and 2018.

(in thousands)

Clinical and pre-clinical

Drug manufacturing and formulation

Regulatory and other costs

investment tax credits

Total research and development expenses

We expect our research and development expenses to increase substantially as we increase personnel costs, including share‑based compensation, and as we continue the development of etripamil and pursue regulatory approval.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time‑consuming.

We are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates, if at all.

We recognize the benefit of Canadian research and development tax credits as a reduction of research and development costs for fully refundable investment tax credits.

General and Administrative Expenses

General and administrative expenses include personnel and related compensation costs, expenses for outside professional services, rent expense and other general administrative expenses.

Personnel costs consist of salaries, bonuses, benefits, related payroll taxes and share‑based compensation.

Outside professional services consist of legal, accounting and audit services and other consulting fees.

We expect to increase our administrative headcount significantly as we advance etripamil and any future product candidates through clinical development, which will also increase our general and administrative expenses.

Commercial Expenses

Commercial expenses consist primarily of personnel and related compensation costs, market and health economic research, and market development activities for PSVT and, to a much lesser extent, atrial fibrillation with rapid ventricular rate and angina.

The focus of these expenses is three-fold:

first, we want to leverage rigorous primary and secondary research to fully understand our target disease states from the perspective of the patient, healthcare provider, and payer;

second, we want to understand and document the burden of disease posed by PSVT from an epidemiology, healthcare resource use, and cost perspective;

and third, we want to engage our target patient, physician, and payor stakeholders with evidence-based and compliant educational materials that serve to increase the awareness and understanding of the impact of PSVT on patients and the overall healthcare system.

Starting approximately one year before we file our new drug application, or NDA with the FDA, we anticipate our commercial expenses will increase substantially as we invest in the infrastructure and personnel required to launch our first product in the United States.

Interest Income

Interest income primarily consists of interest income from our cash equivalents and short‑term investments.

Results of Operations

Comparison of the Years Ended December 31, 2019 and 2018

The following table summarizes our results of operations:

(in thousands)

Operating expenses

Research and development, net of tax credits

General and administrative

Total operating expenses

Loss from operations

Interest income, net of bank charges

Loss and comprehensive loss before income taxes

Income tax (recovery) expense

Net loss and comprehensive loss

Research and Development Expenses

Research and development,or R&D expenses increased by $25.1 million, or 149%, for the year ended December 31, 2019 compared to the year ended December 31, 2018.

Spending during 2019 was primarily related to advancing our Phase 3 efficacy and safety trials in etripamil for the treatment of PSVT and increases in headcount related expenses to support the trials and activities important for regulatory approvals.

We spent $28.8 million on these programs in 2019 and $9.1 million in 2018.

We recorded personnel and related R&D costs of $13.5 million for 2019 and $8.0 million in 2018.

We also recognized $0.4 million and $0.3 million of R&D investment tax credits provided by the provincial government of Québec for the years ended December 31, 2019 and December 31, 2018, respectively.

Tax credits are recorded as a reduction of our R&D expenses.

General and Administrative Expenses

General and administrative expenses increased by $4.0 million, or 129% for the year ended December 31, 2019 compared to the year ended December 31, 2018.

During 2019, we increased our administrative headcount and, as a result, compensation and related personnel costs increased when compared to 2018.

In addition, we incurred increased spending for consulting fees, recruiting fees and professional fees, including legal and accounting services incurred to support our IPO.

Following the IPO, insurance costs increased in the second quarter of 2019 to support risk management activities as a public company.

Commercial Expenses

Commercial expenses increased by $5.0 million, or 127%, for the year ended December 31, 2019 when compared to 2018.

During this period, commercial expenses reflect increased commercial headcount and related costs, increase in additional commercial and market research, increases in the scope of our patient engagement activities, and costs of a medical affairs team focused on engaging key opinion leaders’

and raising disease awareness.

Interest Income, Net

Interest income, net of bank charges was $2.6 million and $0.7 million for the years ended December 31, 2019 and 2018, respectively.

The increase in 2019 reflects increased earnings on cash and cash equivalents to the proceeds from the October 2018 Series D preferred share financing and the net cash proceeds from the IPO and over-allotment exercised in May 2019.

For the foregoing reasons, we had net losses of $55.2 million and $23.2 million for the years ended December 31, 2019 and 2018, respectively.

Liquidity and Capital Resources

Sources of Liquidity

Prior to our IPO, we financed our operations primarily through sales of our convertible preferred shares to accredited investors generating net proceeds of $138.8 million.

In May 2019, we received net proceeds of $85.4 million from our IPO.

We have incurred operating losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses for at least the next several years.

As of December 31, 2019, we had $119.8 million cash & cash equivalents and short-term investments of NIL and an accumulated deficit of $113.5 million.

Based on our current operating plan, we expect our existing cash, cash equivalents and short-term investments will be sufficient to fund our operations for at least the next 12 months based on our most recent forecast.

Funding Requirements

We use our cash primarily to fund research and development expenditures.

We expect to incur an increase in research and development expenses as well as general and administrative expenses and commercial activities as our R&D progresses.

We expect to incur increasing operating losses for the foreseeable future as we continue the clinical development of our product candidate.

At this time, due to the inherently unpredictable nature of clinical development, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval, and commercialize etripamil or any future product candidates, if at all.

For the same reasons, we are also unable to predict when, if ever, we will generate revenue from product sales or whether, or when, if ever, we may achieve profitability.

Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations.

In addition, we have exclusive development and commercialization rights for etripamil for all indications that we may pursue and as such have the potential to license development and or commercialization rights for etripamil to a potential partner.

We plan to establish commercialization and marketing capabilities using a direct sales force to commercialize etripamil in the United States.

Outside of the United States, we are considering commercialization strategies that may include collaborations with other companies.

For other new product candidates, our efforts are focused on licensing development and/or commercialization rights from potential partners.

In the case of either in-licensing or out-licensing, we cannot forecast when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development and commercialization plans and capital requirements.

The timing and amount of our operating expenditures will depend largely on:

the timing, progress and results of our ongoing and planned clinical trials and other development activities of etripamil in PSVT and in other cardiovascular indications;

the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of etripamil for additional indications or any future product candidates that we may pursue;

our ability to establish collaborations on favorable terms, if at all;

the ability of vendors and third-party service providers to accurately forecast expenses and deliver on expectations;

the costs, timing and outcome of regulatory review of etripamil and any future product candidates;

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

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

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

the extent to which we acquire or in-license other product candidates and technologies.

Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financing.

We may also consider entering into collaboration arrangements or selectively partnering for clinical development and commercialization.

The sale of additional equity would result in additional dilution to our shareholders.

The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items.

If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs.

Any of these actions could materially and adversely affect our business, financial condition, results of operations and prospects.

The following table summarizes our cash flows for the periods indicated:

(in thousands)

Net cash (used in) provided by:

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents during the period

Operating Activities

In 2019, we used $51.2 million of cash in operating activities, which consisted of a net loss of $55.2 million offset by a net change of $2.9 million in our net operating assets and non‑cash charges of $1.2 million.

The non‑cash charges primarily consist of share‑based compensation expense for grants to employees.

The change in our net operating assets and liabilities was primarily due to a net increase of $3.5 million for accounts payable, a net decrease of $0.2 million for research and development tax credits, interest and sales tax receivable and offset by an increase of $0.5 million for prepaid expenses.

In 2018, we used $21.0 million of cash in operating activities, which consisted of a net loss of $23.2 million offset by a net change of $1.5 million in our net operating assets and non‑cash charges of $0.6 million.

The non‑cash charges primarily consist of share‑based compensation expense for grants to employees.

The change in our net operating assets and liabilities was primarily due to a net increase of $2.9 million for accounts payable and accrued liabilities offset by an increase of $1.3 million for prepaid expenses and a net increase of $0.1 million for research and development tax credits, interest and sales tax receivable.

Investing Activities

For the year ended December 31, 2019, there was a net use of cash of $0.4 million mainly related to cash used for the acquisition of property and equipment.

Short-term investment acquisitions used $35.0 million in cash and provided the same amount of redemptions leaving a balance of nil in short-term investments.

For the year ended December 31, 2018 , our investing activities provided $16.0 million of cash due to the redemption of approximately net $16.0 million of short‑term investments that we had acquired during the year ended December 31, 2017.

Financing Activities

In 2019, the IPO and the exercise by the underwriters of their option to purchase additional common shares provided a net cash consideration of $85.4 million.

In 2018, our financing activities provided $80.1 million of cash, primarily consisting of the proceeds from the issuance of Class D1 and Class D2 preferred shares in October 2018 .

Additionally, in the years ended December 31, 2019 and 2018, exercise of share options provided $44 thousand and $461 thousand, respectively.

Off‑Balance Sheet Arrangements

We have not entered into any off‑balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Contractual Obligations

We enter into contracts in the normal course of business with clinical research organizations (CRO), contract manufacturing organizations (CMO) and other third parties for clinical trials, preclinical research studies and testing and manufacturing services.

These contracts are generally cancelable at our option with various notice requirements as defined in the contract.

Payments due upon cancellation consist of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to and through the date of cancellation.

These payments are not included as the amount and timing of these payments are not known.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements as at December 31, 2019, which have been prepared in accordance with United States generally accepted accounting principles, or U.S.

GAAP and on a basis consistent with those accounting principles followed by us.

The preparation of these audited consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Significant estimates and judgments include, but are not limited to, research and development tax credits recoverable, research and development expenses, and share-based compensation.

Accordingly, actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Effective January 1, 2019, the company adopted ASC Topic 842, and changed the manner in which it accounts for leases under the new standard.

For a description of this critical accounting policy and the impact of the change, see Note 3 of the consolidated financial statements.

a) Research & Development Expenses —

Accruals and Tax Credits

Research and development costs are charged against income in the period of expenditure.

Our research and development costs consist primarily of salaries and fees paid to contract research organizations, CROs, and to contract manufacturing organizations, or CMOs.

Clinical trial expenses include direct costs associated with CROs, direct CMO costs for the formulation and packaging of clinical trial material, as well as investigator and patient‑related costs at sites at which our trials are being conducted.

Direct costs associated with our CROs and CMOs are generally payable on a time‑and‑materials basis, or when milestones are achieved.

The invoicing from clinical trial sites can lag several months.

We record expenses for our clinical trial activities performed by third parties based upon estimates of the percentage of work completed of the total work over the life of the individual trial in accordance with agreements established with CROs and clinical trial sites.

We determine the estimates through discussions with internal clinical personnel, CROs and CMOs as to the progress or stage of completion of trials or services and the agreed‑upon fee to be paid for such services based on facts and circumstances known to us as of each consolidated balance sheet date.

The actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.

If the actual timing of the performance of services of the level of effort varies from the estimate, we will adjust the accrual accordingly.

Adjustments to prior period estimates have not been material.

We recognize the benefit of Canadian research and development tax credits as a reduction of research and development costs for fully refundable investment tax credits and as a reduction of income taxes for investment tax credits that can only be claimed against income taxes payable when there is reasonable assurance that the claim will be recovered.

Effective January 1, 2019, the Company adopted ASC 842, Leases (ASC 842), using the required modified retrospective approach and utilizing the effective date as its date of initial application.

As a result, prior periods are presented in accordance with the previous guidance in ASC 840, Leases (“ASC 840”).

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.

The Company does not have financing leases.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term.

Certain adjustments to the right-of-use asset may be required for items such as incentives received.

The interest rate implicit in lease contracts is typically not readily determinable.

As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet.

The Company typically only includes an initial lease term in its assessment of a lease arrangement.

Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

c) Share‑Based Compensation

We recognize compensation costs related to share options granted to employees, consultants and directors based on the estimated fair value of the awards on the date of grant.

We estimate the grant date fair value, and the resulting share‑based compensation expense, using the Black‑Scholes option‑pricing model.

This Black‑Scholes option pricing model uses various inputs to measure fair value, including estimated fair value of our underlying common shares at the grant date, expected term, estimated volatility, risk‑free interest rate and expected dividend yields of our common shares.

The grant date fair value of the share‑based awards is recognized on a straight‑line basis over the requisite service periods, which are generally the vesting period of the respective awards.

Forfeitures are accounted for as they occur.

As there had been no public market for our common shares prior to May 13, 2019, the estimated fair value of our common shares has been determined by our board of directors as of the date of each option grant, with input from management, considering third‑party valuations of our common shares as well as our board of directors’

assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third‑party valuation through the date of the grant.

These third‑party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’

Accounting and Valuation Guide, Valuation of Privately‑Held‑Company Equity Securities Issued as Compensation .

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgment.

As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our share‑based compensation expense could be materially different.

Following the completion of our initial public offering on May 13, 2019, we have determined the per share fair value of our common shares based on the closing price of our common shares as reported by The Nasdaq Stock Market on the date of grant.

The following table summarizes, by grant date, the number of underlying common shares and the associated per‑share exercise price, which was the fair value per share as determined by our board of directors on the applicable grant date, for share options granted during the years ended December 31, 2018 and 2019:

Common Shares

Options Granted

February 21, 2018

August 15, 2018

October 26, 2018

November 21, 2018

November 27, 2018

February 18, 2019

March 9, 2019

March 20, 2019

August 8, 2019

September 9, 2019

September 16, 2019

October 31, 2019

November 12, 2019

The intrinsic value of all outstanding options as of December 31, 2019 was $32.7 million, based on the fair value of our common shares of $16.01 per share at December 31, 2019, of which approximately $17.4 million related to vested options and approximately $15.5 million related to unvested options.

Recent Accounting Prononcements

Refer to Note 2, “Summary of Significant Accounting Policies,”

in the accompanying notes to our audited consolidated financial statements for a discussion of recent accounting pronouncements.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company”

such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.

We have irrevocably elected to “opt out”

of this provision and, as a result, we comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity