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Item 7. Management’s Discussion and Analysis

2023-03-29 compared with 2022-03-24 · 121 added, 114 removed, 182 unchanged (56% of the section changed)

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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.

Company Overview

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 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.

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

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

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.

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.

Food and Drug Administration, or FDA, on our proposal to alter the size and design of our ongoing RAPID trial as well as the overall program based on the data from the NODE-301 trial.

The FDA indicated that the two trials, the RAPID trial and the completed NODE-301 trial, could potentially fulfill the efficacy requirement for our planned NDA for etripamil in patients with PSVT.

Under an updated statistical analysis plan, or SAP, the primary efficacy endpoint for both the RAPID and NODE-301 trials will be defined as time to conversion over the first 30 minutes, with a target p-value of less than 0.05 for each trial.

This endpoint supports the desire of patients to rapidly address their PSVT symptoms during an episode and ideally avoid visiting the emergency department.

Later and earlier time points will also be assessed as part of secondary analyses to fully characterize the efficacy profile of etripamil.

When employing the updated SAP retrospectively to the NODE-301 data, results in 54% of etripamil patients vs.

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

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

NODE-302 is our Phase 3 open-label safety extension of the NODE-301 trial.

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

NODE-302 is a multi-center, open label study designed to evaluate the safety of etripamil nasal spray when self-administered by patients without medical supervision for spontaneous episodes of SVT in an outpatient setting.

Eligibility was also 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 completed NODE-302 in late 2020 with a data set of 245 episodes with 105 patients dosed at least once out of 169 patients enrolled.

Trial results will contribute to the etripamil NDA safety database.

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.

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.

On October 17, 2022, we announced positive and statistically significant topline efficacy and safety data from the Phase 3 RAPID clinical trial of etripamil in patients with PSVT.

These results were further presented shortly thereafter, on November 7, 2022, as a Late-Breaking Clinical Trial at the American Heart Association Scientific Meetings (Chicago, IL).

RAPID, our multi-center, randomized, double-blind, placebo-controlled, event-driven Phase 3 trial, enrolled 706 patients across clinical sites in North America and Europe.

Patients were randomized 1:1 to a regimen of self-administering a first dose etripamil nasal spray, with a repeat dose 10 minutes later if symptoms persisted, or a matching placebo regimen.

Self-administration was prompted by a patient’s customary symptoms and was performed in the at-home setting without medical supervision.

The RAPID trial achieved its primary endpoint, with patients taking the etripamil regimen demonstrating a highly statistically significant and clinically meaningful difference in time to SVT conversion as compared to placebo.

A Kaplan Meier analysis demonstrated a significantly greater proportion of patients who took etripamil converted within thirty minutes compared to placebo (64.3% vs.

hazard ratio, or HR, 2.62;

95% CI 1.66, 4.15;

By 90 minutes post-study drug administration, 80.6% of etripamil patients converted versus 60.7% of placebo patients (HR = 1.93;

95% CI 1.349, 2.752;

p<0.001) and statistical significance was maintained throughout the 5-hour observation window.

Statistically significant reductions in time to conversion in patients who took etripamil were evident early and persisted throughout the observation window of the study compared to placebo.

The median time to conversion for patients in RAPID who self-administered etripamil was 17.2 minutes compared to 53.3 minutes for patients on placebo.

The safety and tolerability data from the RAPID trial continue to support the potential self-administration use of etripamil, with findings consistent with those observed in prior trials.

The most common randomized-treatment emergent adverse events, or RTEAEs, adverse events, or AEs, which occurred within 24 hours of etripamil administration, were related to the nasal local administration site.

Overall, the majority of RTEAEs were reported as mild (68%) or moderate (31%).

There were no serious AEs related to etripamil.

The use of additional medical interventions and emergency department utilization were important secondary measures of efficacy for both the RAPID and NODE-301 studies, although with the understanding that neither study was individually powered to expect statistical differences.

In a pre-planned analysis across both studies, patients who self-administered etripamil sought additional medical interventions 43% less frequently (15% vs.

p=0.013) and had 39% fewer emergency department visits (14% vs.

p=0.035) than patients in the placebo arm.

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

After consultation with the regulatory authorities, it was concluded that the test dose procedure was an unnecessary step for the self-administration of etripamil and it was removed from the requirements of the NODE-303 safety study.

The NODE-303 trial was initiated with an etripamil 70 mg single-dose regimen and the 70 mg optional repeat-dose regimen was introduced into the trial starting in the second half of 2021 following FDA acceptance of the protocol amendment.

The trial was sized in order to add to the safety data from the remainder of the development program, including those data already obtained from the RAPID, NODE-301 and NODE-302 trials, in order to fulfill the safety and exposure dataset needed for NDA filing.

Following the results from the RAPID study, initially obtained in October 2022, and the assessment of the total exposures to etripamil in the development program to date, we believe we have the safety dataset needed for review of the NDA for PSVT and have closed the NODE-303 study.

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 their 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

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 began enrollment in a Phase 2 proof-of-concept clinical trial, titled ReVeRA, in the first quarter of 2021 to evaluate the ability of etripamil to reduce ventricular rate in AFib-RVR episodes.

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 NODE-301 trial is a placebo-controlled Phase 3 safety and efficacy trial and the first trial ever conducted to treat attacks of PSVT in the at-home setting.

NODE-301 enrolled 431 patients across 65 sites in the United States and Canada.

Although the study did not meet its primary endpoint of time to conversion of SVT to sinus rhythm compared to placebo over the five-hour period following study drug administration in which patients wore a cardiac monitor, both prespecified and post hoc analyses at earlier time periods, namely at 30 minutes, showed significant treatment effects in favor of etripamil.

For example, in a post hoc analysis of the NODE-301 data, 54% of etripamil patients vs.

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

The safety and tolerability data from the NODE-301 trial support the potential self-administration use of etripamil, with the most common randomized treatment emergent adverse events, or RTEAEs, adverse events, or AEs, which occurred within 24 hours of etripamil administration, being related to the nasal local administration site.

Overall, the majority of RTEAEs were reported as mild (85%) to moderate (15%).

There were no serious AEs related to etripamil.

After reviewing the data from NODE-301 with the FDA in July 2020, the Agency indicated that an analysis period shorter than 5 hours would be appropriate to measure the efficacy of etripamil.

The FDA indicated that two trials, the RAPID and NODE-301 trials could potentially fulfill the efficacy requirement for our planned NDA for etripamil in patients with PSVT, both using time to conversion over the first 30 minutes with a target p-value of less than 0.05 as the primary endpoint.

AFIB RVR Phase 2 Proof of Concept Trial

The Phase 2, double-blind, placebo-controlled, proof-of-concept study, Reduction of Ventricular Rate in Patients with Atrial Fibrillation (ReVeRA), in patients with atrial fibrillation with rapid ventricular response (AFib/RVR), is being conducted in Canada and the Netherlands in collaboration with the Montreal Heart Institute, the WCN network, and other research centers.

The ReVeRA study is expected to enroll approximately 50 patients randomized 1:1 to receive either 70 mg of etripamil nasal spray or placebo to patients presenting with symptomatic AFib/RVR.

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.

The trial is being conducted in the 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 $114.1 million of cash and cash equivalents at December 31, 2021.

We had $7.6 million of cash and cash equivalents and $56.9 million of short-term investments at December 31, 2022.

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

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Recent Developments

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

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.

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

With respect to clinical development, we have taken measures to maintain patient safety and trial continuity and to preserve study integrity.

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.

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.

We will continue to monitor the impact of COVID-19 on our planned clinical sites and patient enrollment activities.

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.

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, 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.

Board Appointment

On March 21, 2023, the board of directors voted to elect Seth H.Z.

Fischer to the Board, effective as of March 21, 2023.

Fischer brings to the Board over 40 years of experience in the pharmaceutical and medical device industry, including 29 years in various leadership roles at Johnson & Johnson.

Fischer currently serves as a member of the Board of Directors of Agile Therapeutics, Inc.

(AGRX), Marinus Pharmaceuticals, Inc.

(MRNS), Spectrum Pharmaceuticals, Inc.

(SPPI), and Esperion Therapeutics, Inc.

Exchange Agreement

On March 22, 2023, we entered into an exchange agreement, or the Exchange Agreement, with entities affiliated with RTW, or the Exchanging Stockholders, pursuant to which the Company exchanged an aggregate of 1,059,000 shares of the Company’s common shares owned by the Exchanging Stockholders for pre-funded warrants, or the Exchange Warrants, to purchase an aggregate of 1,059,000 common shares, with an exercise price of $0.001 per share and no expiration date.

The Exchange Warrants are exercisable immediately.

A holder of the Exchange Warrants (together with its affiliates and other attribution parties) may not exercise any portion of an Exchange Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would beneficially own more than 9.99% of the Company’s outstanding common shares immediately after exercise, which percentage may be increased or decreased to any other percentage specified not in excess of 9.99% at the holder's election upon 61 days’ notice to the Company subject to the terms of the Exchange Warrants.

Strategic Financing Transactions

On March 27, 2023, we entered into a purchase and sale agreement, or the Royalty Purchase Agreement, and a note purchase agreement, or the Note Purchase Agreement, with RTW and certain of its affiliates.

Pursuant to the Royalty Purchase Agreement, RTW agreed to purchase, following the U.S.

Food and Drug Administration approval of etripamil (subject to certain conditions), in exchange for a purchase price of $75.0 million, the right to receive a tiered quarterly royalty payments, or the royalty interest, on the annual net product sales of etripamil in the United States in an amount equal to:

(i) 7%, or the Initial Tier Royalty, of annual net sales up to $500 million, (ii) 4% of annual net sales greater than $500 million and less than or equal to $800 million, and (iii) 1% of annual net sales greater than $800 million.

If certain revenue thresholds for aggregate annual net sales in the United States are not met, the Initial Tier Royalty will increase to 9.5% beginning on January 1 of the following calendar year until a subsequent sales threshold is attained, at which time the Initial Tier Royalty would revert back to 7%.

The Royalty Purchase Agreement contains various representations and warranties, covenants, indemnification obligations and other provisions customary for transactions of this nature, including the grant of a back-up security interests in the purchased royalties and certain assets related to etripamil and restrictions on the incurrence of additional indebtedness.

Pursuant to the Note Purchase Agreement, we will issue and sell $50 million principal amount of 6.0% Convertible Senior Notes due 2029, or the 2029 Convertible Notes, to the holders, which is expected to close on March 29, 2023.

The 2029 Convertible Notes will be our senior secured obligations and will be guaranteed on a senior secured basis by our wholly owned subsidiary, Milestone Pharmaceuticals USA, Inc.

Interest at the annual rate of 6.0% is payable quarterly in cash or, at our option, payable in kind for the first three years.

The maturity date for the 2029 Convertible Notes will be March 31, 2029, or the Maturity Date.

The obligations under the 2029 Convertible Notes will be secured by substantially all of our and our subsidiary guarantor’s assets.

Each $1,000 of principal of the 2029 Convertible Notes (including any interest added thereto as payment in kind) is convertible into 191.0548 shares of our common shares, equivalent to an initial conversion price of approximately $5.23 per share, subject to customary anti-dilution adjustments.

In addition, following a notice of redemption or certain corporate events that occur prior to the Maturity Date, we will, in certain circumstances, increase the conversion rate for a Holder who elects to convert its 2029 Convertible Notes in connection with such notice of redemption or corporate event.

Subject to specified conditions, on or after March 27, 2027, the 2029 Convertible Notes are redeemable by us if the closing sale price of the common shares exceeds 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The Note Purchase Agreement contains customary terms and covenants, including negative covenants, such as limitations on indebtedness, liens, disposition of royalty interest and mergers.

The Note Purchase Agreement also contains customary events of default, including defaults related to payment compliance, material inaccuracy of representations and warranties, covenant compliance, bankruptcy and insolvency proceedings, cross defaults to certain other agreements, judgment default and certain clinical trial failures.

The descriptions of the Royalty Purchase Agreement and the Note Purchase Agreement are not complete and are qualified in its entirety by reference to the complete text of the Royalty Purchase Agreement and the Note Purchase Agreement, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2023.

The Macroeconomic Climate

The recent trends towards rising inflation may also materially adversely affect our business and corresponding financial position and cash flows.

Inflationary factors, interest rates and overhead costs may adversely affect our operating results.

Rising interest and inflation rates also present a recent challenge impacting the U.S.

economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.

Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labor, due to supply chain constraints, consequences associated with COVID-19 and the Russia-Ukraine war, and employee availability and wage increases, which may result in additional stress on our working capital resources.

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.

Our revenues of $5 million for the year ended December 31, 2022 compared to $15 million for the year ended December 31, 2021 are from the license agreement with Ji Xing and are comprised of upfront and milestone payments.

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

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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 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.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming and is subject to uncertainties and delays, including as a result of the ongoing COVID-19 pandemic.

Further, we expect our research and development costs to increase for the development of etripamil in atrial fibrillation with rapid ventricular rate, and we expect our research and development expenses related to the development of etripamil for PSVT decrease as a percentage of our total research and development expenses.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming and is subject to uncertainties and delays.

As a result of the uncertainties discussed above, 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, lease expense, insurance expense and other general administrative expenses.

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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.

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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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.

We generated revenue of $5.0 million for the year ended December 31, 2022 compared to $15.0 million for the year ended December 31, 2021.

This revenue is from the license agreement with Ji Xing and is comprised of upfront and milestone payments.

Research and Development Expenses

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Research and development expenses increased by $1.2 million, or 3% for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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.

Clinical expenses increased by $4.3 million mainly due to an increase of $4.2 million in clinical consulting fees and CRO costs due to the conduct of the RAPID Phase 3 trial.

This increase was partially offset by a $2.1 million decrease in drug manufacturing and formulation mainly due to a decrease of $2 million in drug manufacturing and formulation consulting and CMO cost and further offset by a $1.0 million decrease in regulatory costs mainly due to $0.8 million decrease in regulatory consulting and employee related expenses.

General and Administrative

General and administrative expenses increased by $3.3 million, or 26.8% for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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.

The primary contributors to the increase was due to the increase of personnel related costs and an increase in professional and consulting costs.

Personnel related costs increased by $2.3 million, including a $1.6 million increase in non-cash compensation, as a result of hiring more full-time employees.

Further, professional and consulting fees also increased by $1 million to meet the needs of the our growing operations.

Commercial expenses increased by $2.1 million, or 29.9%, for the year ended December 31, 2022, compared to the same period in the December 31, 2021.

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

This increase is a result of additional personnel and professional costs required to expand operations in anticipation of the potential market approval and commercialization.

Interest Income, net

Interest income, net, was $1.3 million and $0.2 million for the year ended December 31, 2022 and 2021, respectively.

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

The increase in interest income was due to higher interest rates earned on investments in 2022 when compared to 2021.

Liquidity and Capital Resources

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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.

As of December 31, 2022, we had cash and cash equivalents of $7.6 million, short-term investments of $56.9 million and an accumulated deficit of $266.3 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.

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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.

The COVID-19 pandemic has had an impact on our business, operations and clinical development timelines.

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 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.

During the year ended December 31, 2022, we issued 361,236 shares under the Sales Agreement, resulting in net proceeds of $2.6 million (net of issuance costs of $0.1 million).

We expect that our current operating plan, existing cash and cash equivalents and the $50 million in funding contained within the Strategic Financing Agreement signed on March 27, 2023 to be sufficient to fund our operations for at least the next 12 months 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.

Funding Requirements

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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.

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 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;

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

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

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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 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.

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Operating Activities

Net cash used in operating activities during the year ended December 31, 2022 was $52.5 million, which consisted of a net loss of $58.4 million and a net cash decrease of $3.3 million in our operating assets and liabilities, in addition to non-cash charges of $9.2 million primarily related to share-based compensation.

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 $2.6 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 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 31, 2022, we redeemed $29.0 million of short-term investments and we acquired $85.9 million of short-term investments, in addition we acquired $0.3 million in property and equipment.

These short-term investment acquisitions resulted in a growth of $56.9 million in short term investments for the year ended December 31, 2022.

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

Financing Activities

In the year ended December 31, 2022, our financing activities provided cash of $3.1 million from the issuance of common shares under the Sales Agreement for proceeds of $2.6 million (net of issuance costs of $0.1 million) and a de minimis amount of proceeds from the exercise of share options and warrants.

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

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.

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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

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November 1, 2021

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.

January 4, 2022

February 15, 2022

March 21, 2022

April 1, 2022

April 11, 2022

July 18, 2022

August 1, 2022

August 8, 2022

August 15, 2022

August 29, 2022

September 8, 2022

November 2, 2022

November 8, 2022

The intrinsic value of all outstanding options as of December 31, 2022 was $3.8 million, based on the fair value of our common shares of $3.96 per share at December 31, 2022.

Recent Accounting Pronouncements

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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