What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-24 compared with 2021-03-29 · 120 added, 159 removed, 176 unchanged (61% of the section changed)

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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 rapid ventricular rate, or AFib-RVR, and other cardiovascular indications.

We are developing etripamil for the treatment of specific arrhythmias with a lead indication to treat paroxysmal supraventricular tachycardia, or PSVT, with subsequent indications to treat atrial fibrillation and rapid ventricular rate, or AFib-RVR, and other cardiovascular indications.

Etripamil - Pivotal Clinical Program in PSVT

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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.

In March 2020, we reported topline results of the first part of the NODE-301 pivotal trial of etripamil for the treatment of PSVT, which is a placebo-controlled Phase 3 safety and efficacy trial.

The first part of NODE-301, which enrolled a total of 431 patients across 65 sites in the United States and Canada, did not meet its primary endpoint of time to conversion of SVT to sinus rhythm compared to placebo over the five hour period in which patients wore a cardiac monitor following study drug administration.

Our late-stage etripamil clinical program for the treatment of PSVT is currently executing on two ongoing Phase 3 safety and efficacy trials, RAPID and NODE-303.

The RAPID study is our ongoing pivotal Phase 3 safety and efficacy trial.

This study enrolled its first patient in November 2020 and topline data is expected in mid-second half 2022.

NODE-303 is an open-label global safety trial enrolling patients to collect safety data that when combined with the safety data from the rest of the program will form the safety dataset to be evaluated by the FDA and other regulatory agencies to form the basis for marketing approval.

We have also completed our first Phase 3 safety and efficacy trial of etripamil, NODE-301, and its open-label safety extension trial, NODE-302.

In addition to our PSVT clinical program, we began enrollment of patients in a Phase 2 proof-of-concept clinical trial titled ReVeRA in the first quarter of 2021 to evaluate the potential effectiveness of etripamil to reduce ventricular rate during AFib-RVR episodes.

In March 2020, we reported topline results of the NODE-301 pivotal trial of etripamil for the treatment of PSVT, which is a placebo-controlled Phase 3 safety and efficacy trial.

NODE-301, which enrolled a total of 431 patients across 65 sites in the United States and Canada, did not meet its primary endpoint of time to conversion of SVT to sinus rhythm compared to placebo over the five hour period in which patients wore a cardiac monitor following study drug administration.

In July 2020, we announced that we received guidance from the U.S.

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35% of placebo patients converted within 30 minutes (HR 1.87, p=0.02).

We also discussed the clinical benefit of 54% conversion rate with the FDA.

We believe, based on interactions with PSVT treating physicians and cardiovascular thought leaders, that a 50% conversion rate within 60 minutes is a clinically-meaningful outcome given the symptomatic nature of SVT episodes and the lack of approved at-home treatments.

Based on discussions with the FDA regarding maximizing the treatment effect of etripamil, the RAPID trial will allow for repeat administration of study drug (either 70 mg of etripamil or placebo) for patients who have not experienced symptom relief within ten minutes of the first study drug administration.

This repeat dose regimen, which is similar to current PSVT treatment practices in the emergency department setting, is tailored to etripamil’s pharmacokinetic profile to deliver increased exposure over approximately the first 30 minutes following initial administration.

We expect that the repeat administration could benefit a broader group of patients, including those with more persistent episodes.

The RAPID study, which was originally designed to collect double-blind data from randomized patients who had not yet experienced an SVT event after the NODE-301 study reached its target number of adjudicated SVT events, will be amended and expanded to serve as a pivotal efficacy and safety study should the RAPID study meet its primary objective.

The study will include the 170 patients who are already enrolled, although many of those patients have been enrolled in the study for more than one year without reporting an SVT event.

The study will be completed after a total of 180 confirmed SVT events are reached, including those that have already occurred in the study.

Additional patients to be enrolled in the RAPID study will be randomized 1:1.

During the fourth quarter of 2020, we observed delays in our enrollment and clinical trial site startups for the RAPID study.

We believe the effects of the COVID-19 pandemic and its impact contributed to such delays.

As a result we have taken measures to increase the enrollment of patients by increasing the number of clinical trial sites, including more clinical sites planned in European countries to diversify and better protect the study recruitment against COVID’s geographical resurgences.

We are also increasing site specific support for clinical trial sites currently open.

We will continue to monitor the impact of COVID-19 on the study and expect to continue these enrollment enhancing initiatives throughout 2021.

While we monitor the effect of those initiatives, we are maintaining our guidance of achieving topline data from the RAPID trial in late 2021 or early 2022.

The FDA agreed that the single and repeat administrations of etripamil could be pooled and compared to placebo for the primary analysis, resulting in no increase in the study’s sample size.

Applying the same primary endpoint to the RAPID study, powering the study at 90% and using alpha of 0.05 to detect a 19% difference of etripamil versus placebo in 30 minute time to conversion that was observed in the NODE-301 study results in the size of 180 confirmed PSVT events.

The RAPID study, is designed very similarly to NODE-301 however, will introduce a new treatment regimen to the program.

Based on discussions with the FDA regarding maximizing the treatment effect of etripamil, the RAPID trial allows for repeat administration of study drug (either 70 mg of etripamil or placebo) for patients who have not experienced symptom relief within ten minutes of the first study drug administration.

This repeat dose regimen, which is similar to current PSVT treatment practices in the emergency department setting, is tailored to the pharmacokinetic profile of etripamil to deliver increased exposure over approximately the first 30 minutes following initial administration.

We believe that the repeat administration could benefit a broader group of patients, including those with more persistent episodes.

In the NODE-301 study, 32% of etripamil patients and 14% of placebo patients converted to sinus rhythm within 10 minutes.

The FDA agreed that the single and repeat administrations of etripamil could be pooled and compared to placebo for the primary analysis, resulting in no increase in the sample size.

Etripamil - Safety Studies in PSVT

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NODE-303 is a Phase 3, multi-center, open-label safety trial, evaluating the safety of etripamil when self-administered without medical supervision, and evaluating the treatment safety and efficacy of etripamil on multiple SVT episodes.

We originally designed this trial to enroll enough patients to collect data on 1,000 patients taking etripamil in an at-home setting.

With the expanded size of the RAPID trial, we expect the size of the NODE-303 study to be reduced.

We expect to determine a more accurate sizing of the trial 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 agreed to allow patient enrollment in NODE-303 without an in-office safety test dose, which was required in the NODE-301 trial, and in a broad patient population including patients taking concomitant beta-blockers and calcium channel blockers.

We are in the process of initiating patient access programs that have as their primary objective providing further access to etripamil to patients who have participated in the clinical development registration trials to treat future SVT episodes.

These programs will be tailored to meet the regulatory requirements in the territories in which the clinical sites are located.

The study initiated with the etripamil 70 mg single dose regimen and the 70 mg repeat dose regimen was introduced into the trial starting in the second half of 2021 following FDA acceptance of the protocol change.

The trial is designed to add to the safety data from the remainder of the development program, including both the NODE-301 and RAPID trials, in order to fulfill the safety data set needed for NDA filing.

Our plan is to ascertain the final sizing of the trial following future discussions with the FDA and other regulatory authorities.

We are conducting patient access programs to provide further access to etripamil to patients who have participated in the clinical development registration trials to treat future SVT episodes.

These programs are tailored to meet the regulatory requirements in the territories in which the clinical sites are located.

Atrial Fibrillation and Rapid Ventricular Rate

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The Phase 2 double blind, placebo controlled, proof-of-concept, which will be conducted in Canada in collaboration with the Montreal Heart Institute and other research centers, is expected to enroll approximately 50 patients randomized 1:1 to receive either 70 mg of etripamil nasal spray or placebo.

The primary endpoint will assess reduction in ventricular rate, with key secondary endpoints including the time to achieve the maximum reduction in rate and the duration of the effect.The trial is to be conducted in the hospital or emergency department setting under medical supervision.

We anticipate reporting data from this study following disclosure of top line results of the RAPID trial.

The primary endpoint will assess reduction in ventricular rate, with key secondary endpoints including the time to achieve the maximum reduction in rate and the duration of the effect.

The trial is to be conducted in the hospital or emergency department setting under medical supervision.

Operations Overview

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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 had $142.3 million of cash, cash equivalents and short-term investments at December 31, 2020.

Although we implemented certain cost-cutting measures in 2020, we nevertheless expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We had $114.1 million of cash and cash equivalents at December 31, 2021.

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.

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Recent Developments

Changes to the Board of Directors

On September 21, 2020, our Board of Directors appointed Lisa M.

Giles and Robert J.

to the Board of Directors, effective October 1, 2020.

Giles has over 35 years of extensive and significant experience in the pharmaceutical, diagnostic, and device industries, including enterprise strategic planning, R&D and Commercial planning, operations, and business development, and Dr.

Wills has over 35 years of extensive and significant experience in the pharmaceutical industry, including preclinical and clinical research and development, business development and strategic partnering.

On February 15, 2022, the Company announced the appointment of David Bharucha, M.D., Ph.D., as Chief Medical Officer.

Bharucha is a cardiac electrophysiologist who brings to Milestone over thirty years of global drug development and clinical experience across a range of therapeutic areas, with a focus on cardiovascular medicine.

He replaces Francis Plat, M.D., who transitioned to Chief Scientific Officer of the Company and, following the completion of the Phase 3 RAPID trial in the second half of 2022, will transition further to serve in an advisory capacity.

COVID-19 Business Update

While we are experiencing business or financial impact from the ongoing COVID-19 pandemic at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

In March 2020, our global workforce transitioned to working remotely and this may otherwise adversely impact our business (see below for discussion on Clinical Development impacts).

The periods of reduced global economic activity and volatility, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our global workforce is utilizing a hybrid remote and office based model and this adjustment may adversely impact our business (see below for discussion on Clinical Development impacts).

In addition, working at home policies could increase cybersecurity risk and communication disruptions.

Since March of 2020, certain governments have implemented and continually adjusted restrictions as the spread and severity of the COVID-19 virus impacted their territories.

We continue to closely monitor the COVID-19 situation as we evolve our business continuity plans and response strategy.

The ongoing pandemic has resulted in many state, local and foreign governments implementing, and continually making adjustments to, restrictions as the spread and severity of the COVID-19 virus has impacted their territories, including as it relates to newer strains such as the Delta and Omicron variants.

We continue to closely monitor the pandemic as we evolve our business continuity plans and response strategy.

Clinical Development

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For our clinical development programs, we have experienced disruptions or delays in our ability to initiate trial sites and enroll and assess patients, and such disruptions or delays may continue.

Since our last quarterly filing, the COVID-19 pandemic has impacted our ability to maintain patient enrollment in our NODE-303 study as some of the initiated clinical sites have closed their practices to further enrollment.

We believe that the corresponding overall impact on the etripamil PSVT program will be lessened as we downsize the NODE-303 study and allocate resources to the recently initiated RAPID trial.

The COVID-19 pandemic has delayed the initiation of many proposed RAPID clinical trial sites as some health care institutions have prioritized their resources for pandemic related activities with some precluding the initiation of new clinical trials.

It has also delayed the initiation of enrollment for our ReVeRA trial of etripamil for AFib-RVR due to closures of clinical sites.

The COVID-19 pandemic continues to impact patient enrollment rates in all of our clinical studies.

While COVID-19 resurgences around the world impact different geographies and clinical sites to varying degrees and at different times, the PSVT clinical program average overall enrollment rate has stabilized in 2021.

During the first three quarters of 2021, the COVID-19 pandemic delayed the initiation of many proposed RAPID clinical trial sites as some health care institutions prioritized their resources for pandemic related activities with some precluding the initiation of new clinical trials or conduct of existing trials.

It also delayed the initiation of enrollment for our ReVeRA trial of etripamil for AFib-RVR performed in the acute care hospital setting in Quebec, Canada, due to closures of clinical sites as well as to the increased stress that COVID-19 places on Emergency Departments logistics and staff.

Given the uncertainty and differing and evolving restrictions applicable to clinical trial sites and participants, additional disruptions and delays are possible.

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We could also see an impact on the ability to supply study drug, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise.

addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.

If the COVID-19 pandemic continues and persists for an extended period of time, and if phased reopenings stall or are limited due to continued spread of COVID-19, we could experience further significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Corporate Development

We expect that our current operating plan and existing cash and cash equivalents and short-term investments will be sufficient to fund our operations and we do not envision any events or conditions that may cast substantial doubt on our ability to continue as a going concern for at least the next 12 months.

During 2020, we focused our efforts on the development of etripamil PSVT program, and we expect to expand our development activities with respect to our etripamil AFib-RVR program in 2021.

Our operating plan may further change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

Furthermore, the COVID-19 pandemic continues to evolve and has resulted in a significant disruption of global financial markets.

It is not possible to reliably estimate the length and severity of this disruption.

If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.

In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.

If the COVID-19 pandemic continues and persists for an extended period of time, and if phased reopening’s stall or are limited due to continued spread of COVID-19, including variants, we could experience further significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Other Financial and Corporate Impacts

While we expect the COVID-19 pandemic to continue to affect our business operations and financial results, the extent of the impact on our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our common shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Canada, Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease.

While we expect the COVID-19 pandemic to continue to affect our business operations and financial results, the extent of the impact on our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our common shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, business closure requirements in the United States, Canada, Europe and other countries, the timing and unpredictability of achieving widespread vaccination rates, the effectiveness of any vaccines against new variants, and the timing of the return of the global economy to pre-pandemic levels.

In addition, we may be impacted by general economic, political, and market conditions, including deteriorating market conditions due to investor concerns regarding inflation and Russian hostilities in Ukraine and overall fluctuations in the financial markets in the United States and abroad.

Components of Results of Operations

We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales in the near future.

Our revenues for the current year are from the license and collaboration agreement with Ji Xing and are comprised of a non-refundable upfront cash payment received on June 22, 2021.

For additional information about our Revenue, see “Note 2— Summary of Significant Accounting Policies, and Note 3 - Revenue.”

Research and Development Expenses

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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 AFib-RVR to increase for initiation of our proof of concept clinical trial, we expect our research and development expenses related to the development of etripamil for PSVT to remain a very large majority of our total research and development expenses.

following table shows our research and development expenses by type of activity for the years ended December 31, 2020 and 2019, respectively.

(in thousands)

Clinical and pre-clinical

Drug manufacturing and formulation

Regulatory and other costs

investment tax credits

Total research and development expenses

Further, while we expect our research and development costs for the development of etripamil in atrial fibrillation with rapid ventricular rate to increase for initiation of the ReVeRA clinical trial as we continue to expand this trial, we expect our research and development expenses related to the development of etripamil for PSVT to remain a very large majority of our total research and development expenses.

We expect our research and development expenses to increase as we continue the development of etripamil and prepare to pursue regulatory approval.

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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, AFib-RVR.

Commercial expenses consist primarily of personnel and related compensation costs, market and health economic research, and market development activities for PSVT and, to a lesser extent, AFib-RVR.

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 payor;

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, personnel, and operational expenses required to launch our first product in the United States, if approved.

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 and AFib-RVR from an epidemiology, healthcare resource use, and cost perspective;

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

Starting approximately six months to 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, personnel, and operational expenses required to launch our first product in the United States, if approved.

Interest Income

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Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations:

Year ended December 31,

(in thousands)

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Loss from operations

Interest income, net of bank charges

Loss and comprehensive loss before income taxes

Income tax recovery

Net loss and comprehensive loss

Interest income, net

Loss before income taxes

Income tax benefit

We generated revenue of $15 million from upfront payments under the License Agreement during the year ended December 31, 2021.

Research and Development Expenses

Research and development, or R&D expenses decreased by $7.5 million, or 18%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

This decrease was due to the conclusion of the NODE 301 Part 1 study in the first quarter of 2020 and the RAPID Phase 3 study initiated only in late 2020.

Spending was primarily related to advancing our Phase 3 efficacy and safety trials in etripamil for the treatment of PSVT.

We spent $21.5 million on these programs in 2020 and $28.8 million in 2019.

We recorded personnel and related R&D costs of $13.4 million in 2020 and $13.5 million in 2019, including non-cash compensation costs related to share-based compensation expense.

We also recognized $0.4 million of R&D investment tax credits provided by the provincial government of Québec for the years ended December 31, 2020 and 2019.

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

General and Administrative Expenses

The following table shows our research and development expenses by type of activity for the periods indicated.

Year ended December 31,

(in thousands)

Drug manufacturing and formulation

Regulatory and other costs

R&D tax credits

Total R&D expenses

Research and development expenses increased by $4.2 million, or 12.1% for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Clinical trial expense increased by $2.9 million mainly due to an increase of $1.5 million in clinical personnel related costs, higher clinical consulting fees and CRO costs due to advancing RAPID Phase 3 efficacy and safety trials in etripamil for the treatment of PSVT along with an increase in non-cash compensation costs related to share-based compensation expense.

General and Administrative

General and administrative expenses increased by $2.1 million, or 20.6% for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Following our initial public offering, or IPO, in May 2019, insurance costs increased to support risk management activities as a public company.

In addition, we incurred increased spending related to consulting, recruiting and professional fees to support the increased compliance requirements of being a public company.

Additionally, during the year ended December 31, 2020, compensation and related personnel costs increased when compared to the same period in 2019 due to an increase in administrative headcount, including non-cash compensation cost related to share-based compensation expense.

Commercial Expenses

Commercial expenses decreased by $3.0 million, or 33%, for the year ended December 31, 2020 when compared to the same period in 2019.

We reduced operating expenses in the second quarter of 2020 in order to focus our efforts on an optimized clinical development pathway for etripamil.

The cuts primarily affected pre-commercialization activities.

The primary contributor to the increase was due to the increase of personnel related costs for general and administrative expenses of $1.4 million.

This comprises $1.0 million non-cash compensation cost increase compared to prior year related to share-based compensation expense mainly due to high stock option valuation in 2020 and $0.4 million primarily due to the reversal of temporary salary implemented in June 2020.

Commercial expenses increased by $1.1 million, or 18.0%, for the year ended December 31, 2021, compared to the same period in 2020.

The increase is due to marketing and personnel related costs, mainly resulting from an increase in non-cash compensation costs related to share-based compensation expense.

Interest Income, net

Interest income, net of bank charges was $0.7 million and $2.6 million for the years ended December 31, 2020 and 2019, respectively.

The reduction in interest income is mainly a result of lower interest rates earned on investments in 2020 when compared to 2019 and of lower cash balances in 2020 compared to the same period in 2019.

For the foregoing reasons, we had net losses of $50.0 million and $55.2 million for the years ended December 31, 2020 and 2019, respectively.

Interest income, net, was $0.2 million and $0.7 million for the year ended December 31, 2021 and 2020, respectively.

The reduction in interest income was due to lower interest rates earned on investments in 2021 when compared to 2020.

Liquidity and Capital Resources

Sources of Liquidity

Prior to the 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 the IPO.

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

As of December 31, 2020, we had cash, cash equivalents and short-term investments of $142.3 million and an accumulated deficit of $163.5 million.

In July 2020, we entered into a securities purchase agreement with affiliates of RTW Investments LP, an existing shareholder (the Purchasers), to sell and issue to the Purchasers in a private placement, pre-funded warrants to purchase up to an aggregate of 6,655,131 of the our common shares, at a purchase price of $3.7465 per pre-funded warrant for aggregate proceeds of $25 million before deducting offering expenses.

The private placement closed on July 24, 2020.

On July 29, 2020, we entered into the Sales Agreement with Jefferies with respect to 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.

We have not yet sold any common shares under the ATM Program.

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

as representatives of 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.

The gross proceeds were $51.7 million before deducting offering expenses, including proceeds from the exercise of the Underwriters' option to purchase additional shares.

The securities were offered and sold pursuant to 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.

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

As of December 31, 2021, we had cash and cash equivalents $114.1 million and an accumulated deficit of $206.3 million.

On May 15, 2021, pursuant to the License Agreement, we and affiliates of RTW Investments, LP, (RTW), or the Purchasers, entered into a securities purchase agreement pursuant to which we issued to the Purchasers, in a private placement, pre-funded warrants to purchase up to an aggregate of 910,746 of our common shares at a purchase price of $5.48 per pre-funded warrant, or the Private Placement.

The gross proceeds to us from the Private Placement, excluding proceeds from the exercise price of the warrants, were approximately $5.0 million.

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.

We have evaluated whether material uncertainties exist relating to clinical trials, the COVID-19 pandemic and the impact on market conditions.

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Government orders and restrictions in order to control the spread of the disease have impacted patient recruitment, enrollment and follow-up visits at clinical sites.

At the date of the publication of our quarterly report, it is not possible to reliably estimate the length and severity of these developments.

We expect that our current operating plan, existing cash, cash equivalents, short-term investments and access to financing sources to be sufficient to fund our operations and determined that there are no events or conditions that may cast substantial doubt on our ability to continue as a going concern for at least the next 12 months from the date of this filing.

At the date of the publication of our annual report, it is not possible to reliably estimate the length and severity of these developments.

We expect that our current operating plan, existing cash and cash equivalents and access to financing sources to be sufficient to fund our operations and determined that there are no events or conditions that may cast substantial doubt on our ability to continue as a going concern for at least the next 12 months from the date of this filing.

Based on our cash and cash equivalents as of December 31, 2021, including the upfront payment from Ji Xing and proceeds from the equity investment from the Purchasers, we expect to be able to support our ongoing operations into mid-2023.

Funding Requirements

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We expect our research and development expenses to increase as we continue the development of etripamil and prepare to pursue regulatory approval.

We expect to incur an increase in general and administrative expenses notwithstanding our temporary salary reductions and other measures implemented in June 2020, and an increase in expenses related to commercial activities in 2021 as we focus our efforts on the clinical pathway and potential commercialization of etripamil.

We expect to incur an increase in general and administrative expenses, and an increase in expenses related to commercial activities in 2022 as we focus our efforts on the clinical pathway and potential commercialization of etripamil.

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.

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.

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

We have recently entered into such agreement Ji Xing, which is futher discussed below.

On May 15, 2021, we entered into the License Agreement with Ji Xing, which is an entity affiliated with RTW Investments, LP, (RTW) a beneficial owner of approximately 14.4% of the Company’s common shares.

Under the License Agreement, we granted Ji Xing exclusive development and commercialization rights to any pharmaceutical product that uses a device to deliver the Company’s proprietary calcium channel blocker known as etripamil by nasal spray for all prophylactic and therapeutic uses in humans in the following territories:

People’s Republic of China, including mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan (the Territory).

Ji Xing will be responsible for development and regulatory activities in the Territory, and we will remain responsible for certain manufacturing activities in the Territory, subject to the supply agreement subsequently entered into by us and Ji Xing as contemplated by the License Agreement (the Supply Agreement).

We received a non-refundable upfront cash payment of

$15 million and the right to future payments of up to $107.5 million in total development and sales milestone payments.

In addition, we are entitled to receive tiered royalty payments ranging from a percentage in the low double digits to the high double digits of Net Sales (as defined in the License Agreement) of all products sold in the Territory.

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

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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.

In addition, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets.

If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.

In addition, the COVID-19 pandemic has resulted in periods of reduced global economic activity and volatility.

If the disruption contributes to future periods of disruption of the global financial markets, we could experience an inability to access additional capital, which could in the future negatively affect our operations.

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.

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

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

Year ended December 31,

(in thousands)

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Operating Activities

In 2020, we used $50.7 million of cash in operating activities, which consisted of a net loss of $50.0 million and a net change of $5.8 million in our net operating liabilities and offset by non-cash charges of $5.0 million mainly related to share-based compensation expense for grants to employees, board directors and consultants.

The change in our net operating assets and liabilities was mainly due to a decrease of $2.1 million for accounts payable and accrued liabilities and an increase of $3.6 million for prepaid expenses.

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.

Net cash used in operating activities during the year ended December 31, 2021 was $33.2 million, which consisted of a net loss of $42.9 million and a net change of $2.3 million in our operating assets and liabilities, in addition to non-cash charges of $7.4 million related to share-based compensation and depreciation expenses.

Net cash used in operating activities during the year ended December 31, 2020 was $50.7 million, which consisted of a net loss of $50.0 million and a net change of $5.7 million in our operating assets and liabilities offset by non-cash charges of $5.0 million related to share-based compensation and depreciation expenses.

Investing Activities

In 2020, we used $90.0 million of cash from the acquisition of short-term investments and we received $20.0 million of cash from maturities.

In 2019, there was a net use of cash of $0.4 million mainly related to cash used for the acquisition of property and equipment.

In 2019, short-term investment acquisitions used $35.0 million in cash and provided the same amount of maturities leaving a balance of nil in short-term investments.

In the year ended December 31, 2021, we redeemed $85.0 million of short-term investments and we acquired $15.0 million of short-term investments.

In the year ended December 30, 2020, we redeemed $20.0 million of short-term investments and we acquired $90.0 million of short-term investments.

Financing Activities

In 2020, our financing activities provided $73.2 million which consisted primarily of $24.8 million of net proceeds from the private placement of pre-funded warrants to existing shareholders in July 2020, $48.1 million of net proceeds from an offering of common shares and pre-funded warrants in October 2020.

In 2019, the IPO provided net cash consideration of $85.4 million.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

In the year ended December 31, 2021, our financing activities provided $5.0 million, consisting of net proceeds from the Private Placement and a de minimis amount of proceeds from the exercise of share options.

In the year ended December 31, 2020, our financing activities provided $73.2 million, consisting of net proceeds of $24.9 million from the Private Placement, $23.2 million from the pre-funded warrants in a public offering, $24.8 million from the pre-funded warrants and proceeds of $0.3 million from the exercise of share options.

Contractual Obligations

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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.

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, 2020, which have been prepared in accordance with United States generally accepted accounting principles, or U.S.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements as at December 31, 2021, 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.

The preparation of these 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.

Significant estimates and judgments include, but are not limited to:

● 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, CMOs and clinical trial sites which in turn impact the research & development expenses.

● Estimate of the grant date fair value share options granted to employees, consultants and direct, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model.

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, we adopted ASC Topic 842, Leases, 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 4 of our consolidated financial statements.

a) Research & Development Expenses — Accruals and Tax Credits

a) Research & Development Expenses — Accruals

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

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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.

Our leases are presented based on ASC 842, using the required modified retrospective approach and utilizing the effective date as its date of initial application.

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.

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

We typically only include an initial lease term in its assessment of a lease arrangement.

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

c) Share-Based Compensation

b) 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.

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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 estimated volatility creates a critical estimate because we have not been a public company long enough to demonstrate our own historical volatility.

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 prior to that date was 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, 2020 and 2021:

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Options Granted

January 6, 2020

January 23, 2020

February 10, 2020

June 26, 2020

June 29, 2020

October 1, 2020

March 1, 2021

March 24, 2021

April 26, 2021

June 14, 2021

August 30, 2021

September 13, 2021

September 16, 2019

October 1, 2021

November 1, 2021

January 6, 2020

January 23, 2020

February 10, 2020

June 26, 2020

June 29, 2020

October 1, 2020

The intrinsic value of all outstanding options as of December 31, 2021 was $11.7 million, based on the fair value of our common shares of $6.55 per share at December 31, 2021, of which $9.8 million related to vested options and $1.9 million related to unvested options.

Recent Accounting Pronouncements

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.

Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to our consolidated financial statements for a discussion of recent accounting pronouncements.

Emerging Growth Company Status

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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 7. Management’s Discussion and Analysis