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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-38899
Milestone Pharmaceuticals Inc.
(Exact name of registrant as specified in its charter)
Québec
(State or Other Jurisdiction of Incorporation or Organization)
1111 Dr. Frederik-Phillips Boulevard, Suite 420
Montréal, Québec CA
(Address of Principal Executive Offices)
Not applicable
(I.R.S. Employer Identification No.)
H4M 2X6
(Zip Code)
Registrant’s telephone number, including area code (514)-336-0444
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares
Trading Symbol(s)
MIST
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐
No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive‐based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D‐1(b).☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value (approximate) of the registrant’s common equity held by non-affiliates based on the closing price of a share of the registrant’s common
share for The Nasdaq Stock Market on June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter) was $95.9 million.
As of March 21st, 2024, the total number of shares outstanding of the registrant’s Common Shares was 53,149,778 shares, net of treasury shares.
Portions of the registrant’s definitive proxy statement for the registrant’s 2024 annual meeting of stockholders, to be filed within 120 days after the close of the
registrant’s fiscal year, are incorporated by reference into Part III of this Annual Report.
DOCUMENTS INCORPORATED BY REFERENCE:
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TABLE OF CONTENTS
Special Note Regarding Forward-Looking Statements
Summary of Risk Factors
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
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“Milestone Pharmaceuticals” and the Milestone logo appearing in this Annual Report on Form 10-K are unregistered
trademarks of Milestone Pharmaceuticals Inc. All other trademarks, trade names and service marks appearing in this
Annual Report on Form 10-K are the property of their respective owners. Solely for convenience, the trademarks and trade
names in this Annual Report on Form 10-K may be referred to without the ® and ™ symbols, but such references should
not be construed as any indicator that their respective owners will not assert their rights thereto.
This Annual Report on Form 10-K contains references to United States dollars and Canadian dollars. All dollar amounts
referenced, unless otherwise indicated, are expressed in United States dollars. References to “$” are to United States dollars
and references to “C$” are to Canadian dollars.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements about us and our industry that involve substantial
risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report on Form 10-
K, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects,
plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as "aim," "anticipate," "assume," "believe," "contemplate,"
"continue," "could," "design," "due," "estimate," "expect," "goal," "intend," "may," "objective," "plan," "predict,"
"positioned," "potential," "seek," "should," "target," "will," "would" and other similar expressions that are predictions of or
indicate future events and future trends, or the negative of these terms or other comparable terminology.
We have based these forward-looking statements largely on our current expectations and projections about future events
and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial
needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and
assumptions, including risks described in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-
K, regarding, among other things:
● the initiation, timing, progress and results of our current and future clinical trials of etripamil, including our
Phase 3 clinical trials of etripamil for the treatment of paroxysmal supraventricular tachycardia, our Phase 2
clinical trial of etripamil for the treatment of atrial fibrillation and rapid ventricular rate, and of our research and
development programs;
● our ability to develop and, if approved by regulatory authorities, commercialize etripamil in China, Hong Kong,
Macau and Taiwan through our license agreement with Ji Xing Pharmaceuticals;
● our plans to develop and commercialize etripamil and any future product candidates;
● our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
● our ability to establish collaborations or obtain additional funding;
● our ability to obtain regulatory approval of our current and future product candidates;
● our expectations regarding the potential market size and the rate and degree of market acceptance of etripamil and
any future product candidates;
● our ability to fund our working capital requirements and expectations regarding the sufficiency of our capital
resources;
● the implementation of our business model and strategic plans for our business, etripamil and any future product
candidates;
● our intellectual property position and the duration of our patent rights;
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● developments or disputes concerning our intellectual property or other proprietary rights;
● our expectations regarding government and third-party payor coverage and reimbursement;
● our ability to compete in the markets we serve;
● the impact of government laws and regulations;
● developments relating to our competitors and our industry; and
● the factors that may impact our financial results.
The foregoing list of risks is not exhaustive. Other sections of this Annual Report on Form 10-K may include additional
factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly
changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all
risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking
statements.
In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking
statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking
statement contained in this Annual Report on Form 10-K, we cannot guarantee that the future results, levels of activity,
performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You
should refer to the section titled "Risk Factors" for a discussion of important factors that may cause our actual results to
differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking
statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation
to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. The
Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, or the
Securities Act, do not protect any forward-looking statements that we make in connection with this Annual Report on Form
10-K.
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SUMMARY OF RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those described in Item 1A “Risk Factors”. These
risks include, but are not limited to the following:
● We have incurred significant operating losses since inception and anticipate that we will continue to incur
substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
● We will require substantial additional funding to finance our operations. If we are unable to raise capital when
needed, we could be forced to delay, reduce or terminate our development of etripamil or other operations.
● Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to
relinquish rights to our product candidates.
● Economic uncertainty, including related to inflation, may adversely affect our results of operations.
● We have only one product candidate, etripamil, for which we are currently pursuing clinical development. Our
future success is substantially dependent on the successful clinical development and regulatory approval of
etripamil. If we are not able to obtain required regulatory approvals for etripamil or any future product candidates,
we will not be able to commercialize etripamil or any future product candidates and our ability to generate
revenue will be adversely affected.
● We may not be successful in our efforts to expand our pipeline of product candidates beyond etripamil for
paroxysmal supraventricular tachycardia.
● The development of additional product candidates is risky and uncertain.
● Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials and
we cannot assure you that any ongoing, planned or future clinical trials will lead to results sufficient for the
necessary regulatory approvals.
● Our business, operations and clinical development timelines and plans have been adversely affected by the effects
of health epidemics, and could be affected by future health epidemics.
● We may encounter substantial delays or difficulties in our clinical trials.
● Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be
delayed, made more difficult or rendered impossible by multiple factors outside our control.
● If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market
and sell etripamil or any future product candidates, we may not be successful in commercializing etripamil or any
future product candidates, if and when they are approved.
● Even if etripamil or any future product candidates receive marketing approval, they may fail to achieve market
acceptance by physicians, patients, third-party payors or others in the medical community necessary for
commercial success.
● Even if we successfully obtain approval for etripamil, its success will be dependent on its use in accordance with
labeled instructions for use.
● If the market opportunities for etripamil and any future product candidates are smaller than we estimate, our
business may suffer.
● Coverage and adequate reimbursement may not be available for etripamil or any future product candidates, which
could make it difficult for us to gain market acceptance.
● Even if we obtain and maintain approval for etripamil or any future product candidates from the Food and Drug
Administration, or FDA, we may never obtain approval of etripamil or any future product candidates outside of
the United States, which would limit our market opportunities and could harm our business.
● Even if we obtain regulatory approval for etripamil or any future product candidates, they will remain subject to
ongoing regulatory oversight.
● We will rely on third parties to produce clinical and commercial supplies of etripamil and any future product
candidates.
● We rely on third parties to conduct, supervise and monitor our preclinical studies and clinical trials, and if those
third parties perform in an unsatisfactory manner, it may harm our business.
● Etripamil is intended to be used with a nasal spray device, which may result in additional regulatory and supply
risks.
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● If we are unable to obtain and maintain patent protection for etripamil or any future product candidates, or if the
scope of the patent protection obtained is not sufficiently broad, our competitors could develop and
commercialize drugs similar or identical to ours, and our ability to successfully commercialize our product
candidates may be impaired.
● Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel.
● The market price of our common shares has been and may continue to be volatile and fluctuate substantially, and
you could lose all or part of your investment.
● Our common shares are thinly traded and our shareholders may be unable to sell their shares quickly or at market
price.
● Concentration of ownership of our common shares among our existing executive officers, directors and principal
shareholders may prevent new investors from influencing significant corporate decisions.
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PART I
ITEM 1. BUSINESS
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 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 heart
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.
PSVT is a condition that causes a patient’s heart to suddenly start beating faster than normal. It can be life-altering as
PSVT is highly symptomatic, characterized by unpredictable attacks of a racing heart, often exceeding 150 beats per
minute. Symptoms of PSVT arise suddenly and may include palpitations, sweating, chest pressure or pain, shortness of
breath, sudden onset of fatigue, lightheadedness or dizziness, fainting, and anxiety, causing many patients to interrupt their
daily activities at the time of symptom-onset. The impact and morbidity from an episode of PSVT can be especially
detrimental in patients with underlying cardiovascular or medical conditions, such as heart failure, obstructive coronary
disease, or dehydration. The uncertainty of when such an attack of PSVT will strike or how long it will persist is often
anxiety-provoking, reduces patients’ quality of life and prevents participation in many desired activities. Drugs approved
for the treatment of PSVT attacks include adenosine, verapamil, and diltiazem, with all being administered intravenously
under medical supervision, usually in the emergency department. Other oral drugs are sometimes used to treat attacks in a
concept called “pill in the pocket.” However, those drugs have never been proven effective or safe and are not approved
for this use. Doctors are frustrated by the lack of effective treatment options besides a prolonged, unpleasant, and costly
trip to the emergency department or, for some patients, an invasive ablation procedure. PSVT is traumatic for patients,
frustrating for healthcare providers, and costly for payors. With no pharmaceutical innovation in the treatment of PSVT for
more than 30 years and a movement in the healthcare system to enable patient centered care, there is an opportunity to help
patients living with PSVT to take greater control over their PSVT attacks.
Atrial Fibrillation, or AFib, is a common form of arrhythmia with an irregular and often rapid heart rate that is often
markedly symptomatic and, without proper treatment, can increase the risk of stroke, heart failure, and other cardiovascular
complications. A common complication of AFib is a rapid ventricular rate, or AFib-RVR, which is frequently defined as a
heart rate ≥ 110 beats per minute. The occurrence of a rapid ventricular rate in patients with atrial fibrillation increases the
likelihood of marked symptoms including heart palpitations, shortness of breath and weakness. There are two commonly
used pharmacological approaches to chronically manage AFib, rhythm control and rate control. Regardless of the chronic
approach, when faced with a sudden episode of AFib-RVR, acute rate control is needed, and most treatments are oral AV-
nodal targeted drugs such as a beta blocker or calcium channel blockers. However, these oral rate control drugs, when used
acutely, do not adequately provide immediate or adequate ventricular rate control due to a 30- to 90-minute delayed onset
of action, and, as a result, many patients need faster and more certain rate-reduction and symptom-resolution and so seek
acute-medical care by going to the emergency department for treatment utilizing intravenous rate control and/or electrical
cardioversion of their atrial fibrillation. Similar to PSVT, patients feel a loss of control by needing to visit the emergency
department for overcoming their atrial fibrillation attack and the unpredictable nature of RVR episodes; doctors are
frustrated by the lack of options for patients to self-manage these acute rate attacks; and payor organizations would prefer
to treat the AFib-RVR attacks in a more cost effective and time-efficient manner.
Our objective is to develop and commercialize etripamil as a fast-acting, portable nasal spray treatment to be prescribed by
a physician or appropriate health-care professional such that the patient with the indicated arrhythmia can carry etripamil
with them for use wherever and whenever an attack of the arrhythmia occurs. If approved, we believe that etripamil will
provide the patient with a portable treatment to stop an attack at-home and to reduce the reliance on the emergency
department. We believe that this may help patients to live their lives with less concern over when their next PSVT attack
will occur. For health care providers, etripamil could represent a new tool they can offer to their patients to better self-
manage their PSVT attacks resulting in fewer calls to their office, a more efficient use of healthcare resources, and more
empowered, satisfied patients.
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Our recently completed and reported data from a Phase 2 clinical trial for assessing the safety and effectiveness of etripamil
in AFib-RVR. Similar to our approach for PSVT, we believe that etripamil has the potential to help the patient experiencing
a symptomatic episode of AFib-RVR to self-manage their condition by conveniently, reliably and quickly reducing their
elevated heart rate wherever and whenever the episode occurs, thereby reducing the need for emergency department
utilization that many patients currently seek. On November 11, 2023, we announced and publicly presented positive Phase
2 data reflecting that patients with AFib-RVR receiving etripamil nasal spray experienced rapid and statistically superior
ventricular rate reduction and improved symptom-relief compared to placebo. Safety and tolerability reported in the 56-
patient safety population who received etripamil was generally consistent with that observed in our PSVT program
discussed above. We believe these data support the further development of self-administered etripamil for the treatment of
AFib-RVR and are in dialogue with FDA concerning Phase 3 development for this indication.
We believe that PSVT is a large and under-recognized market that we estimate affects approximately two million
Americans and results in over 150,000 emergency department visits and hospital admissions and up to 80,000 ablations per
year. From this diagnosed population, we define the target addressable market for etripamil as 40% to 60% of patients who
experience frequent and longer, moderate to severe episodes each year. After being exposed to the data from the RAPID
clinical study in market research, Cardiologists reported a willingness to prescribe etripamil to approximately 50% of the
patients with PSVT in their care, which suggests 500,000 to 800,000 patients can potentially be treated with etripamil in
the peak year. Additionally, we believe that these target patients will use etripamil to treat a median of five episodes per
year based on the projected number of longer or more intense episodes (self-reported) experienced by the patient. This
implies demand in the US for etripamil of 2.5 million to 4 million episodes treated in the peak year.
An estimated five million Americans suffer from AFib. The incidence of AFib is expected to grow to approximately 10
million by 2025 and up to about 12 million by 2030. A subset of patients with AFib experience episodes of abnormally
high heart rate most often accompanied by palpitations, shortness of breath, dizziness, and weakness. While these episodes,
known as AFib-RVR, may be treated by oral calcium channel blockers and/or beta blockers, patients frequently seek acute
care in the emergency department to address symptoms. In 2016, nearly 800,000 patients were admitted to the emergency
department due to AFib symptoms. Treatment for such symptoms typically includes medically supervised intravenous
administration of calcium channel blockers or beta blockers, or electrical cardioversion. With little available data for AFib-
RVR, we believe based on our initial market research that 30% to 40% of patients with AFib experience one or more
symptomatic episodes of RVR per year that require treatment, suggesting a target addressable market of approximately
three to four million patients in 2030 for etripamil in patients with AFib-RVR.
New Drug Application Status
In October 2023 we submitted a New Drug Application, or NDA, for marketing approval in the United States for etripamil
for the treatment of PSVT. On December 26, 2023 we announced that we received a refuse-to-file, or RTF, letter from the
FDA. Upon preliminary review, the FDA determined that the NDA was not sufficiently complete to permit substantive
review. The FDA requested clarification about the time of data recorded for adverse events in our Phase 3 clinical trials;
FDA did not express concerns about the nature or severity of adverse events, or AEs.
In February 2024, we held a Type A Meeting with the FDA to determine next steps for the filing for marketing approval.
The FDA indicated that the timing of AEs in question had minimal impact on the overall characterization of the etripamil
safety profile, based on the FDA’s review of the affected data which was mainly related to AEs associated with local drug
administration site tolerability and, importantly, did not appear to affect the assessment of serious adverse events and/or
AEs of special interest for a calcium channel blocker. To align with the FDA’s guidance in preliminary response to our
questions presented to the FDA in our Type A Meeting request, we plan to restructure the data sets that capture timing of
reported AEs, reformat certain data files to facilitate FDA’s analyses, and resubmit the NDA. Based on the guidance
received during the Type A Meeting, we expect that this approach will address the RTF from the FDA. The FDA has not
requested that we complete additional clinical efficacy or safety trials prior to resubmitting the NDA. We expect a standard
NDA review period following resubmission of the NDA for etripamil for PSVT. The NDA resubmission is planned for the
second quarter of 2024.
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In connection with the revised timeline for NDA submission, we have undertaken certain cash conservation measures to
reduce spend through program deferrals and team restructuring and expect that our existing cash resources will fund
operations into 2026, including through the expected Prescription Drug User Fee Act date for the NDA resubmission. We
expect the implementation of these cash conservation measures to be substantially completed in the first quarter of 2024. If
FDA approval is granted, we expect to receive a $75 million payment under an existing royalty agreement, which is
intended to fund the potential commercial launch of etripamil for PSVT.
Our Pipeline
The figure below sets forth the status and focus of etripamil:
PSVT Clinical Development Highlights
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 Session at the American Heart Association Scientific Sessions 2022
(Chicago, IL) and subsequently published in The Lancet (June 2023). 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. 31.2%; hazard ratio, or HR, 2.62; 95% CI 1.66, 4.15; p<0.001). 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.
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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. 25%; p=0.013) and had 39% fewer
emergency department visits (14% vs. 22%; p=0.035) than patients in the placebo arm.
In March 2023, we completed NODE-303 a Phase 3, multi-center, open-label safety trial, evaluating the safety of etripamil
when self-administered without medical supervision over multiple, separate SVT episodes. Data from the completed
NODE-303 open-label safety and RAPID extension studies are included in the etripamil PSVT NDA submission to the
FDA.
AFib-RVR Clinical Development Highlights
In mid-2023, we held a pre-IND meeting with FDA and received guidance indicating that we could follow a supplemental
NDA, or sNDA, regulatory pathway for the marketing approval for etripamil for the indication of AFib-RVR. The sNDA
pathway potentially permits a single pivotal efficacy study to be sufficient for filing for marketing approval if etripamil is
already approved for PSVT. In the first quarter of 2024, we met with the FDA in a Type A meeting. In this meeting FDA
reiterated its prior guidance regarding the availability of an sNDA pathway. FDA further concurred with respect to key
study elements including powering, inclusion criteria, patient population, and statistical analyses, and offered clarification
with respect to the endpoints to guide the design of the Phase 3 study. We anticipate progressing to an End of Phase 2
meeting in mid-2024 as an important step to finalize the registrational study protocol.
On November 11, 2023, we presented positive Phase 2 data from the ReVeRA study, as a Featured Science Presentation at
the American Heart Association Scientific Meetings (Philadelphia, PA) and as simultaneously published in Circulation:
Arrhythmia and Electrophysiology. The data reflected that patients with AFib-RVR receiving etripamil nasal spray
experienced rapid and statistically superior ventricular rate reduction and improved symptom-relief compared to placebo.
In summary, the data demonstrated that etripamil NS was effective in patients with AF-RVR in substantially reducing VR
(difference between etripamil vs. placebo in maximum reduction from baseline: -29.91 bpm; p < 0.0001). The median time
to maximum reduction in VR was 13 min, and the duration of effect (reduction in VR from baseline) was at least 150 min.
The median duration of maintaining a VR <100 bpm was 45.5 min in the first 60 min following drug in the etripamil arm.
Etripamil treatment was associated with significant improvement in symptom relief and in treatment satisfaction as
measured by the Treatment Satisfaction Questionnaire 9, or TSQM-9, patient-reported outcome instrument. Safety and
tolerability reported in the 56-patient safety population who received etripamil was generally consistent with that observed
in our PSVT program. The majority of common AEs were localized to the drug-administration site, and there was a low
incidence of serious adverse events.
Our Strategy
Our goal is to identify, develop and commercialize innovative cardiovascular medicines, including etripamil for the
treatment of PSVT, AFib-RVR and other cardiovascular indications, and additional clinical stage compounds for other
cardiovascular conditions. The key elements of our business strategy to achieve this goal include the following:
•
•
Successfully complete development and obtain regulatory approval of etripamil for the treatment of PSVT.
We are focused on efficiently developing and obtaining approval for etripamil to treat patients with PSVT.
We intend to first seek regulatory approval in the United States, followed by Europe and other major markets.
Expand the scope of cardiovascular indications for etripamil beyond PSVT. We are investigating, in a
Phase 2 proof of concept study, the use of etripamil for the treatment of patients with AFib-RVR. We believe
that etripamil could benefit patients with AFib-RVR based on the approved use of intravenous, or IV, calcium
channel blockers in this indication. We are also exploring the additional cardiovascular opportunities for the
use of etripamil.
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• Maximize the value of our programs by maintaining flexibility to commercialize our product candidates
independently or through collaborative partnerships. We currently have exclusive development and
commercialization rights for etripamil for our initial indications of PSVT and AFib-RVR. We have
commercialization plans and are establishing commercialization and marketing capabilities in order to
commercialize etripamil in the United States. Outside of the United States, we are considering
commercialization strategies that may include collaborations with other companies.
•
Leverage our expertise and experience to expand our pipeline of product candidates. We seek to maximize
our commercial opportunities by acquiring or in-licensing product candidates for indications with significant
unmet need with a focus on novel treatments for cardiovascular or other conditions. Our leadership team has
extensive experience in developing and commercializing successful drugs. We intend to leverage the
collective talent within our organization and our network to guide our development plans and pipeline
expansion.
Cardiac and Pharmacologic Basis of Development Programs
Normal Conduction
Within the right atrium, one of the heart’s upper chambers, sits a specialized structure called the sinus node. The sinus
node, serving as the heart’s intrinsic pacemaker, generates an electrical signal which spreads throughout both atria and then
is transmitted down to the lower chambers, the ventricles, via another specialized electrical tissue, the atrio-ventricular, or
AV, node, which is shown in the figure below. Upon reaching the ventricles, the electrical signal them to contract, pumping
blood out to the lungs and the rest of the body. Another heartbeat does not occur until a new signal is generated from the
sinus node and the cycle repeats. Under normal conditions, passage from the sinus node over the AV node is the only way
for the electrical impulse to travel from the atria down to the ventricles.
The electrical signal of each heartbeat can be detected by placing sensors known as electrodes over the skin, and recorded
over time in a tracing known as an electrocardiogram, or ECG. The ECG measures signal voltage and duration. To the
trained interpreter, an ECG conveys a large amount of information about the structure and function of the heart, including
among other things, heart rate and rhythm. Under normal physiologic conditions, an ECG has a characteristic pattern of
waves corresponding to the electrical activity, contraction and relaxation of each heart chamber. This normal functioning is
referred to as sinus rhythm and occurs at a heart rate of between 60 and 100 beats per minute at regular intervals.
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As seen in the figure below, the various waves of an ECG tracing corresponding to the events of a single heartbeat are
named with the letters P, Q, R, S and T. The interval between the P wave and the R wave, known as the PR interval, is a
measure of conduction over the AV node. A normal PR interval is 0.12-0.20 seconds.
ECG Tracing Graph – Heartbeat
Arrhythmias
A disruption in the heart’s normal rhythm or conduction of electrical signals is called an arrhythmia. An arrhythmia can
take the form of the heart beating too quickly, too slowly, or with an irregular pattern. A faster than normal heart rate is a
tachycardia; a slower than normal heart rate is a bradycardia. Symptoms of an arrhythmia can include palpitations,
lightheadedness or dizziness, chest pain, shortness of breath, or sweating; these symptoms can be markedly severe, and in
advanced cases of some arrhythmias, resultant signs can include worse morbidities and even mortality. PSVT and atrial
fibrillation are two of the most commonly occurring arrhythmias. While PSVT is characterized by a faster than normal
heart rate where the heart beats at regular intervals, with AFib-RVR the heart often beats faster than normal and with an
irregularly irregular rhythm. Pharmacologic treatment of PSVT focuses on terminating the arrhythmia using an agent to
prolong the refractoriness (the recovery time between consecutive activations) of the AV node or to prolong conduction
over the AV node. With AFib-RVR, there are two approaches to treatment: rate control to reduce the heart rate and rhythm
control to restore sinus rhythm and prevent AFib recurrences.
Etripamil
We designed the molecule of etripamil and we are developing the drug, a novel, potent and rapid-onset calcium channel
blocker, as a nasal spray to be administered by the patient to terminate episodes of transient cardiovascular conditions as
they occur. Rapid pharmacological action is both appropriate and sufficient to resolve an episode of SVT. We have
completed Phase 3 development for PSVT. We are also developing etripamil to provide acute ventricular rate control for
patients with symptomatic episodes of atrial fibrillation with rapid ventricular rate and are exploring other therapeutic
applications in which a patient-administered, rapid-onset, non-dihydropyridine calcium channel blocking agent could
provide patient benefit.
In our work to develop potential therapies, we sought to create new chemical entities as analogs of known molecular
classes with clinically validated mechanisms of action. Our goal was to preserve the beneficial pharmacology of existing
molecules while altering their pharmacokinetic profile with focused medicinal chemistry to produce drugs that are fast
acting. As a result, we created a series of novel non-dihydropyridine, L-type calcium channel blockers containing chemical
ester moieties that preserved the desired pharmacology on the heart but that could be rapidly metabolized in the blood by
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serum esterases. Etripamil resulted from this effort as a new chemical entity with a fast pharmacodynamic effect in
humans, relative to oral calcium channel blockers.
We believe that the following attributes of etripamil make it a better treatment candidate for certain episodic cardiovascular
conditions than current standards of care:
•
•
Action: Etripamil is designed to be rapidly metabolized by blood-borne esterases, with the goal of reducing
long-term side effects that may occur with chronic drug therapy.
Absorption: Etripamil is designed to be absorbed into the bloodstream in less than 10 minutes through the
inner lining of the nose, yielding a rapid-onset pharmacologic pattern consistent with parenterally
administered drugs.
● Administration: Etripamil is designed, and has been investigated, to empower patients to self-administer
treatment outside of a medical setting and as prompted by a patient’s symptoms.
PSVT
PSVT is a serious, markedly symptomatic, and recurring cardiac arrhythmia, which is caused by altered electrical
conduction within the heart, involving the AV node and over an abnormal electrical circuit in the substantial majority of
cases. In the most common form of PSVT, AV nodal reentrant tachycardia, or AVNRT, there is an abnormal limb of
electrical circuitry within the AV node which represents the substrate of the tachycardia. This abnormal circuitry is the
basis for a reentrant arrhythmia which results in excessively rapid beating of both the atria and ventricles.
In the next most common form of PSVT, atrioventricular reciprocating tachycardia, or AVRT, there is an abnormal limb of
electrical tissue, or bypass tract, that directly connects the atria and the ventricles. In AVRT, the bypass tract allows the
signal to travel between the atria and ventricles as a “short circuit.” AVRT involves the AV node, in addition to the bypass
tract. Thus, for both AVNRT and AVRT – two PSVT types that require the AV node as a part of their abnormal circuit, or
AV-nodal dependent PSVTs – a drug which targets the AV node can represent a potential treatment. Non-dihydropyridine
calcium channel blockers are a class of drugs that target the AV node, reflecting why etripamil has been an excellent
therapeutic candidate for AVNRT and AVRT termination.
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Current Treatment Options for PSVT
Treatment for PSVT depends on the frequency, duration, and severity of the episodes as well as patient preference. Current
options for patients with PSVT to terminate an episode of SVT include vagal maneuvers, IV medication or external shock
delivered in the emergency department. Additionally, some practitioners prescribe oral medications, such as calcium
channel blockers, beta blockers and antiarrhythmic drugs to be taken at the onset of an episode. However, these oral
medications interventions are generally not acutely effective. Long-term strategies include chronic drug therapy to reduce
the frequency of episodes and cardiac ablation to potentially cure the disease. Patients may also elect to not treat their
symptoms and simply endure episodes of SVT when they occur.
Vagal maneuvers are commonly attempted to terminate an episode, with low to modest success rates. These are
physiological maneuvers that stimulate the vagus nerve, which can terminate an SVT episode. These include gagging,
massaging one carotid artery, holding one’s breath and bearing down (Valsalva maneuver), immersing one’s face in ice-
cold water, or coughing.
Currently approved acute pharmacological therapy for the treatment of an acute episode of SVT includes IV administration
of approved AV nodal-blocking agents in an acute care setting. The current standard of care for treatment of episodes of
SVT is adenosine, but prior to its approval in 1990, episodes of SVT were treated with IV calcium channel blockers, such
as verapamil or diltiazem. When given as a rapid IV bolus, adenosine blocks conduction over the AV node, thereby
interrupting the arrhythmia circuit and restoring the heart back to sinus rhythm. Adenosine temporarily stops the heart and
patients have reported experiencing chest tightness, flushing and a sense of impending death. Physicians report that patients
tell them that they feel like they are going to die. Adenosine is eliminated from the body in less than one minute but cannot
be self-administered as it requires IV access. In-hospital IV administrations are associated with higher healthcare costs and
are also unsettling and inconvenient for the patient. IV calcium channel blockers also slow conduction over the AV node
during the course of several minutes. However, they are associated with the risk of excessive slowing of the heart rate and
low blood pressure. According to treatment guidelines, patients in the acute care setting who fail pharmacologic treatment
for PSVT could then receive direct current cardioversion, where an electric shock is applied to the heart to return it to sinus
rhythm.
In an attempt to prophylactically control the frequency and duration of future SVT episodes, many patients will take
chronic daily oral medications that modulate AV nodal conduction, such as beta blockers, L-type non-dihydropyridine
calcium channel blockers, or antiarrhythmic drugs. Despite chronic daily oral medication, breakthrough SVT episodes that
require visits to the emergency department may still occur, albeit for some patients at a reduced frequency. Chronic
medication can lead to side effects such as sexual dysfunction or fatigue in the case of beta blockers and constipation in the
case of verapamil. Some patients discontinue chronic oral medication due to intolerable side effects. Based on our market
research, we estimate that approximately two thirds of patients with PSVT have been prescribed chronic medications such
as beta blockers or calcium channel blockers to prevent SVT episodes or to treat other concomitant conditions such as
hypertension.
The only potentially curative treatment available at the present time for PSVT is ablation, an invasive procedure, which
works by directly cauterizing or freezing the short circuit that is the cause of the abnormal rhythm. This is achieved in an
electrophysiology lab via catheters that are run through the patient’s groin vessels and into the heart and uses burning or
freezing techniques to destroy the heart’s abnormal electrical tissue. Ablation single-procedure success rates for PSVT are
reported to be 91% to 96%. However, we estimate that less than 10% of patients with PSVT per year choose this option,
which we believe is due primarily to anxiety related to the procedure. Although ablations are generally considered to be
safe by the treating community, as with any invasive procedure there are potential complications, which include bleeding,
blood clots, pericardial tamponade, and transient or permanent heart block, with the latter requiring permanent pacemaker
implantation.
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Market Opportunity – Paroxysmal Supraventricular Tachycardia (PSVT)
We believe that PSVT is a large and under-recognized market that we estimate affects approximately two million
Americans and results in over 600,000 healthcare claims in the United States alone per year, including more than 150,000
emergency department visits and hospital admissions and up to 80,000 ablations. Furthermore, we estimate that
approximately 300,000 people are diagnosed with PSVT each year in the United States. We derive these estimates from the
analysis of longitudinal claims data, which we believe is the most accurate method available to estimate the epidemiology
of PSVT. A study in the Journal of Clinical Electrophysiology published in 2021 concluded that excluding patients with
comorbid Atrial Fibrillation or Atrial Flutter, or AFib/AFL, leads to a conservative estimate of PSVT treated prevalence in
the U.S. of approximately 1.3 million, while including those with comorbid AFib/AFL suggests a U.S. treated prevalence
of approximately 2.1 million, with approximately 190,000 to 310,000 corresponding new cases each year.
Other published sources that attempt to quantify the epidemiology of PSVT, such as the MESA study published in the
Journal of the American College of Cardiology in 1998, and the PREEMPT study published in the Journal of the American
Heart Association in 2018, provide important demographic and clinical characteristic data on patients with PSVT. For
example, in the MESA study, fewer than 40% of the adjudicated incident cases of PSVT would have been detected had the
investigators limited their screening to those patients identified by the PSVT ICD9 Code (427.0). In addition, 21% of the
incident patients with PSVT in the MESA study also had a diagnosis of atrial fibrillation (18%) or atrial flutter (6%). As an
epidemiology tool, however, we believe these studies underestimate the incidence and prevalence of PSVT due to the
episodic nature of the disease as well as the variability in the duration of the episodes, as the investigators in both studies
relied only on data from patients presenting to healthcare settings acutely, with the episode confirmed on ECG during the
encounter, to estimate the incidence and prevalence of PSVT.
Current treatment for PSVT also consumes significant healthcare resources. Research published in the American Journal of
Cardiology in 2020 shows that costs for patients rose significantly in the pre-diagnosis year due to the difficulty of
obtaining an accurate diagnosis. In the year following diagnosis, costs triple for those less than 65 years of age and double
for those over 65 years of age, compared to matched controls. Total healthcare expenditures in the year following PSVT
diagnosis ranged from $20,000 to $30,000 per patient, significantly higher than the expenditures observed for patients
without PSVT (approximately $6,500 per patient). Significant increases for both age groups were noted for emergency
department visits. For those less than 65, the average cost of hospitalizations doubled as their inpatient rates quadrupled. Of
note, catheter ablations following diagnosis represent only 23% of this increased spend, meaning most costs are unrelated
to ablations. In total, approximately $3 billion is spent annually in the U.S. on the management of PSVT.
Our Clinical Development Program for the Treatment of Paroxysmal Supraventricular Tachycardia
Current treatments do not address the medical need for a rapidly acting, effective, safe and patient-administered treatment
that can be taken outside of a hospital or acute care setting at the onset of an SVT episode to restore the heart back to sinus
rhythm. We believe that etripamil will fill this unmet need. We completed a Phase 1 clinical trial (study MSP-2017-1096),
which supported the selection of four doses of etripamil for Phase 2 development, followed by a Phase 2 clinical trial in
adult patients to evaluate the effects of four doses in patients with PSVT. Both trials assessed nasally administered
etripamil compared to placebo. Based on discussions with the FDA, we initiated a major Phase 3 clinical trial (NODE-301)
in July, 2018 to assess the efficacy and safety of etripamil in the at-home setting and released topline data in March 2020.
We have completed a second pivotal Phase 3 trial (RAPID) which demonstrated highly statistically significant efficacy to
convert PSVT and favorable safety/tolerability of the drug. We have completed additional Phase 1 clinical trials, one that
further characterized the PK and PD of intranasal etripamil in Japanese and non-Japanese healthy volunteers; a second that
further characterized pharmacokinetics and safety of administering the drug in single- vs. repeated-dose approaches. We
have also completed an open label Phase 3 safety trial (NODE-302), which provided further drug access to patients that
had previously participated in the NODE-301 trial. The primary objective of the NODE-302 trial is to assess the safety of
etripamil 70 mg in patients over multiple episodes. We completed a third Phase 1 clinical trial, assessing the impact of a
repeat-dose regimen, in which patients take a second 70 mg dose of etripamil 10 minutes after a first dose of 70 mg, on the
PK and safety of etripamil. We have completed NODE-303, which is an open label Phase 3 study that has the objective of
collecting further safety data.
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Phase 1 Clinical Data
We completed a Phase 1 clinical trial (MSP-2017-1096), in healthy volunteers, which was designed to assess the safety, PK
profile, and cardiac pharmacology of intranasally administered etripamil in a randomized, double-blind, placebo controlled,
single ascending dose trial. The trial’s primary objective was to determine the maximum tolerated dose or maximum
feasible dose of two different formulations of etripamil administered via the nasal route in healthy, adult male subjects. All
doses of etripamil were generally well tolerated, and there was no difference in the safety profile and PK between the two
formulations of etripamil, referred to as MSP2017A and MSP2017B. The most commonly reported side effects were
localized to the administration site, e.g., nasal irritation and nasal congestion. Potential concerns such as syncope, pre-
syncope, lightheadedness, or decreases in systolic blood pressure below 90 mmHg or AV nodal blocks of second degree or
worse were not observed. The study of formulation MSP2017A was stopped at 60 mg and MSP2017B was further studied
at higher doses (105 mg and 140 mg). The Phase 1 results supported the selection of four doses of etripamil for Phase 2
development. We are using these Phase 1 data, and resultant Phase 2 data, to support further clinical development of
etripamil in two indications: PSVT and AFib-RVR.
PK analyses have demonstrated rapid absorption and elimination following nasal administration of etripamil, as well as
dose proportional systemic exposure, or area under the curve, and maximum plasma concentration for etripamil and its
primary inactive metabolite. These findings were consistent across a range of seven doses of drug tested up to 140 mg. The
140 mg dose was the maximal feasible dose because neither the concentration (350 mg/mL) nor the volume (200 µL) of
solution administered in each nostril could be increased. Due to these characteristics of formulation and delivery, a
maximum tolerated dose of etripamil was not established. The figure below shows the rapid absorption via the nasal route
and the rapid decrease in plasma concentration of etripamil.
Phase 1: (MSP-2017-1096)
Pharmacokinetic Profile of Etripamil Plasma Concentrations
Error bars indicate standard error of the mean
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Prolongation of the PR interval as measured by ECGs, which reflects the impact of drug on AV-nodal conduction, was
utilized as the pharmacodynamic, or PD, measure. A linear relationship was observed between the dose of etripamil and
prolongation of the PR interval. The 60 mg, 105 mg, and 140 mg doses demonstrated a 10% or greater PR prolongation,
which is shown in the figure below. This correlates with the reported slowing of conduction over the AV node that is
necessary to convert an SVT episode to sinus rhythm. Such slowing of AV-nodal conduction, reflected by PR interval
prolongation, has been observed clinically and through investigations with known intravenous AV-nodal targeted agents
such as verapamil, adenosine, and tecadenoson.
Phase 1: (MSP-2017-1096) - Pharmacology
We completed a second Phase 1 trial, NODE-102, comparing the PK and PD of etripamil 35 mg, 70 mg, and 105 mg
versus placebo in Japanese and non-Japanese healthy volunteers. Once we determined there was no difference in PK and
PD of etripamil between Japanese and non-Japanese participants, we pooled the data from the overall populations into a
single dataset. We believe this trial provides further justification for the selected 70 mg dose in our Phase 3 program
broadly and may be used to support further clinical development of etripamil in Japan.
As shown in the figure below, we observed a correlation between the PK profile of etripamil 70 mg, measured by change in
PR interval from baseline over time, and the plasma concentrations of etripamil. With regard to pharmacodynamics, an
approximate 10% increase in the PR interval has been reported to be a marker of meaningful prolongation in AV-nodal
conduction that is needed to terminate an episode of PSVT. The data as demonstrated on the blue line on the graph below
indicates that etripamil 70 mg is potentially impacting AV nodal conduction at meaningful levels for a period up to
approximately 50 minutes.
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Phase 1: (MSP-2017-1205) NODE-102
The Phase 3 RAPID study incorporated a repeat-dose administration regimen of the study drug (70 mg of etripamil or
placebo). Specifically, patients were instructed to administer a repeat administration of study drug if they did not
experience relief from symptoms of PSVT within 10 minutes of the first administration of study drug. This tailored, staged
drug regimen utilizes a repeat-dose similar to current PSVT treatment practices with intravenous drugs in the emergency
department setting. Pharmacologic data supporting a repeat-dose approach were obtained from a Phase 1 study. A repeat
dose regimen (two doses of 70 mg etripamil administered 10 minutes apart) was tested in study NODE-103. As shown in
the figure below, this regimen resulted in greater systemic exposure to etripamil, as measured by an apparently increased
second maximum concentration after the second administration, as well as an elevated total Area Under the Curve,
compared to single-dose administration of 70 mg. Furthermore, from visual inspection of the data, the intended two-bolus
PK plot can be observed.
We believe these PK data supports the hypothesis underlying our RAPID trial regimen that a second administration will
augment etripamil exposure, while maintaining safety, and will improve impact of the drug on AV-nodal conduction
thereby resulting in a greater therapeutic effect.
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Phase 1: (NODE-103). One dose of 70-mg etripamil vs. repeat dose regimen administered 10 minutes apart
Error bars = standard error
Phase 2 Clinical Data
We completed a Phase 2 multicenter, randomized, double-blind, placebo controlled clinical trial in the United States and
Canada, NODE-1, to evaluate the effects of four doses of etripamil in patients with PSVT. In order to demonstrate the
effectiveness and safety of etripamil to terminate SVT in a controlled setting, we conducted the study in the
electrophysiology, or EP, laboratory setting, where an SVT episode could be induced in patients scheduled to undergo an
EP study and ablation. The primary objective of this trial was to demonstrate the superiority of at least one dose of
etripamil over placebo in terminating SVT. The secondary objectives were to determine the minimally effective dose of
etripamil, to establish a dose related efficacy trend for etripamil, and to evaluate the safety of etripamil in a clinical setting.
The trial was statistically powered at more than 80% to show a 50% absolute difference of etripamil versus placebo.
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The trial enrolled 199 patients, of which 95 withdrew prior to dosing: 70 due to inability to induce (n=42) or to sustain
(n=28) SVT, five based on physician discretion, one lost to follow up, one due to withdrawal of consent, and 18 for other
reasons. The mean age of patients was 52.2 years (range, 19 to 85 years). As shown in the figure below, SVT was induced
and sustained for five minutes in 104 patients, who were randomized into one of five dosing cohorts. Four cohorts received
intranasal doses of etripamil (35 mg, 70 mg, 105 mg, or 140 mg) and one cohort received matching placebo. All doses of
study drug were delivered in a double-blind fashion in which healthcare providers administered four 100 µL sprays from
four different single-spray devices. There were no imbalances in baseline characteristics across the five treatment groups.
The mean heart rate in SVT at time = 0 was 177 bpm in the placebo group and 168 bpm, 173 bpm, 180 bpm, and 155 bpm
in the etripamil 35-mg, 70-mg, 105-mg and 140-mg groups, respectively.
Phase 2: (MSP-2017-1109) NODE 1 – Clinical Trial Design
The primary endpoint in this clinical trial was the conversion of SVT to sinus rhythm within 15 minutes after
administration of etripamil or placebo. As shown in the figure below, the percentage of patients in whom SVT converted to
sinus rhythm within 15 minutes of study drug administration was 65% with 35 mg etripamil, 87% with 70 mg, 75% with
105 mg and 95% with 140 mg, compared with 35% in the placebo arm. The three highest doses of etripamil showed
statistically significant conversion rates compared with placebo. Statistical significance expresses the probability that the
results of a particular study could have occurred purely by chance. Statistical significance is assessed by the FDA and other
health regulatory agencies in evaluating marketing approval applications. FDA and other regulatory agencies review the
strength of the statistical evidence and whether it supports the claims of the applicant. The primary endpoint, statistical
methods for the trial and a p-value boundary for achieving statistical significance for a clinical trial are typically defined
before the trial begins. If the probability of observing the calculated statistic is smaller than the p-value boundary, the
primary endpoint is considered statistically significant. P-value is a conventional statistical method for measuring the
statistical significance of clinical results. A p-value of 0.05 or less represents statistical significance, meaning there is a less
than 1in 20 likelihood that the observed results occurred by chance. The FDA utilizes statistical significance, as measured
by p-value, as an evidentiary standard of efficacy and typically requires a p-value of 0.05 or less to demonstrate statistical
significance.
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Phase 2: (MSP-2017-1109) NODE 1 - Etripamil Conversion Rates from SVT to Sinus Rhythm
In a post-hoc analysis conducted to inform our Phase 3 trial design, the patients’ times to conversion of SVT to sinus
rhythm were examined. As shown in the following Kaplan Meier plot, patients successfully converting to sinus rhythm
during the 15-minute study window, the three highest doses of etripamil (140 mg, 105 mg, and 70 mg) demonstrated
statistically significant shorter time to conversion of SVT compared with placebo. The 70-mg dose showed a rapid onset of
action with a median time to conversion of less than three minutes after nasal administration of etripamil. Doses of drug
above 70 mg, given as single-dose administrations in this study, did not yield meaningfully greater degrees of conversion
of SVT. These data contributed greatly to selection of etripamil dose for the Phase 3 program.
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Phase 2: (MSP-2017-1109) NODE 1 – Etripamil Time to Conversion from Supraventricular Tachycardia to Sinus
Rhythm
Overall, etripamil was well tolerated, and the most common adverse events were localized to the nasal route of
administration, e.g., nasal irritation or nasal congestion, reported by up to 60% and 45% of patients, respectively, after
etripamil (versus none after placebo). Specifically, the 70-mg dose was reported to have 48% nasal irritation and 26% nasal
congestion; however, these were transient and required no specific intervention. Most adverse events were mild (44.2%) or
moderate (24.0%) across all treatment groups. At least one adverse event considered related to the study drug, according to
the investigator assessment, was reported in 17 (85.0%) patients in the etripamil 35-mg group, 18 (78.3%) in the 70-mg
group, 15 (75.0%) in the 105-mg group, 20 (95.2%) in the 140-mg group and 4 (20.0%) in the placebo group. The
incidence of adverse events was not dose-dependent. Hypotension, or low blood pressure, was reported as an adverse event
in two patients, one in the 105-mg group and one in the 140-mg group. Neither event led to sequelae or a serious
classification.
A total of three patients experienced severe adverse events that were considered possibly related to etripamil. One patient
who received a 35-mg dose of etripamil experienced facial flushing, shortness of breath, and chest discomfort. One patient
who received a 105-mg dose of etripamil had nausea and vomiting, as well as a severe and serious cough. One patient who
received a 140-mg dose of etripamil experienced a severe adverse event of second-degree AV block with relative
hypotension, beginning five minutes after conversion to sinus rhythm; the AV block resolved after 43 minutes, was without
sequelae observed, and ablation was subsequently performed. There were no adverse events that led to study
discontinuation or death.
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Calcium channel blockers have the potential to cause hypotension as a side effect. Thus, in our Phase 2 clinical trial, we
recorded vital signs, including heart rate and blood pressure, before induction of SVT and every two minutes for 30
minutes after study drug was given (see figure below). We observed no meaningful reduction in mean blood pressure in the
35 mg or 70 mg etripamil cohorts but observed a transient decrease in the mean blood pressure in the two highest cohorts,
105 mg, and 140 mg. Due to the induction of SVT, the mean systolic blood pressure decreased at time 0 compared to the
average at 20 and 10 minutes before SVT induction. Compared to baseline and time 0, systolic blood pressure
measurements recorded from two minutes to 16 minutes post study drug administration showed no decrease in mean
systolic blood pressure in the placebo or 35-mg groups, and maximum mean decreases of 2 mm Hg four minutes post dose
in the 70-mg group, 17 mm Hg six minutes post dose in the 105-mg group, and 20 mm Hg six minutes and eight minutes
post dose in the 140-mg group. As illustrated in the figure below, mean blood pressure reductions in these two groups were
transient.
Phase 2: (MSP-2017-1109) NODE 1 – Etripamil Systolic Blood Pressure Over Time
* p < 0.05 vs baseline.
Baseline is defined as the average of the -20 and -10 minutes pre-dose measurements. Time 0 is defined as the average of
the measurements during SVT between -5 and 0 minutes before study drug administration. Mean and standard error (SEs)
values were calculated based on available data at the relevant time point. MSP-2017 means etripamil. Error bars indicate
standard error of the mean.
Based on the combination of efficacy and safety data from our Phase 2 trial, we selected the 70 mg dose of etripamil for
our subsequent clinical trials.
Clinical Development of Etripamil for a PSVT Indication
In accordance with on our interactions with regulatory agencies, our Phase 3 clinical program has included:
•
RAPID, a confirmatory pivotal efficacy trial to assess the time to conversion of PSVT to sinus rhythm due to
treatment with etripamil compared to placebo in the at-home setting and, in this trial, utilizing an optional
repeat-dose regimen.
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•
•
•
NODE-301 part 1, a pivotal efficacy trial to assess the time to conversion of PSVT to sinus rhythm due to
treatment with etripamil compared to placebo in the at-home setting.
NODE-302, an open-label extension of NODE-301 that enrolled patients who completed NODE-301 in order
to collect safety data on subsequent (recurrent) episodes in the at-home setting, and.
NODE-303, an open-label global safety trial to complete the safety assessment of etripamil in the at-home
setting to support an NDA and other regulatory filings.
Phase 3 Clinical Trials
RAPID Study. The RAPID trial was a placebo-controlled, double-blinded, randomized, event-driven Phase 3 clinical trial
conducted in the United States, Canada, and Europe to evaluate 70 mg of etripamil (with an optional repeat dose of drug)
versus placebo in terminating an SVT episode in the at-home setting. RAPID, also named NODE-301 part 2, was
originally intended 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. After receiving guidance from the FDA on our
Phase 3 program, we amended and expanded NODE-301 part 2 and renamed it the RAPID trial; and, with regulatory
agreement, RAPID is inferentially separate from NODE-301 part 1. The RAPID trial, an event-driven trial like the prior
Phase 3 one, was projected to enroll approximately 500 patients and was defined to be completed after a total of 180
confirmed SVT events occurred. Patients enrolled in the RAPID trial were randomized 1:1 (etripamil:placebo). The
graphic below shows the design of the RAPID trial. The protocol amendment changing NODE-301 part 2 to RAPID, and
incorporating an important repeat-dose treatment regimen, was implemented across all clinical study sites over 2021. Prior
to the RAPID / repeat-dose amendment being fully implemented, a total of 34 patients dosed themselves with single dose
study drug of which 29 were confirmed by the adjudication committee to be SVT (i.e., groups C+D in the trial design
graphic, which had been randomized 2:1, etripamil:placebo).
Phase 3: (MSP-2017-1138) RAPID – Trial Design
(1) Arms C and D (single-dose regimen) will be only the patients enrolled under NODE-301 who have had an episode prior
to the RAPID Study protocol amendment
(2) Wilcoxon analysis modeling from NODE-301 data
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Under the RAPID statistical analysis plan (SAP), the primary efficacy endpoint for the study was defined as time to
conversion over the first 30 minutes, with a target p-value of less than 0.05. (This endpoint was agreed upon with FDA and
other regulatory bodies because it, when assessed in either a prespecified or in a post hoc analysis for NODE-301 part 1,
was statistically significant and showed a compelling treatment effect.) This endpoint supports the desire and need of
patients to address their PSVT symptoms rapidly during an episode and have a normal cardiac rhythm restored during a
time-window that would avoid additional medical intervention and visiting an emergency department. Based on
interactions with PSVT-treating physicians and cardiovascular thought leaders, it is clear that a 50% conversion rate within
60 minutes would be a clinically meaningful outcome given the highly symptomatic nature of SVT episodes and the lack
of approved at-home treatments. In addition to its clinical relevance, primary assessment by 30 minutes is a time aligned
with the drug’s known pharmacologic characteristics.
The design of the RAPID study was based on power calculations utilizing NODE-301 Part-1 study data. The Kaplan–
Meier probabilities of conversion to sinus rhythm by 30 minutes as 54% under etripamil treatment and 35% under placebo
were the basis for effect-size assumptions, and indicated that 180 patients, each with a PSVT event confirmed by
adjudication, would provide 90% power to detect a 19% relative-reduction treatment difference for the primary endpoint at
a 2-sided-significance level of 0·05. It was anticipated that ≥500 patients would be randomized to accrue requisite
confirmed PSVT events. Later and earlier time point data from NODE-301 part 1 for time to conversion, for patient
reported outcomes, and for emergency department utilization were used to define assessments for secondary analyses in
RAPID; these secondary analyses were pre-planned to fully characterize the efficacy profile of etripamil.
RAPID was performed at approximately 160 study sites in North America and Europe and enrolled patients with similar
inclusion and exclusion criteria as the prior randomized Phase 3 study. Key eligibility criteria included, similar to the prior
Phase 3 study: patients were aged ≥18 years with electrocardiogram-documented history of PSVT with sustained,
symptomatic episodes (≥20 minutes). In the RAPID study, as prompted by PSVT symptoms, patients self-administered a
first 70-mg etripamil or placebo dose and, if symptoms persisted beyond 10 minutes, a repeat dose of study drug (70-mg
etripamil or placebo). Continuously recorded electrocardiographic data were blindly adjudicated for the primary endpoint,
time-to-conversion of PSVT to sinus rhythm for ≥30 seconds by 30 minutes of first dose. Pre-defined secondary endpoints
assessed the robustness of the primary findings and measured use of additional medical interventions and emergency
department use for episodes of PSVT. Safety outcomes were assessed. This trial was registered at www.clinicaltrials.gov
(NCT03464019).
Among the 692 patients randomized, 184 self-administered the study drug for confirmed PSVT. Kaplan–Meier estimates of
conversion rates by 30 minutes were 64.3% with etripamil and 31.2% with placebo (hazard ratio=2.62; P<0.001), and
statistically significant differences were observed by 300 minutes as well (hazard ratio=1.70; P<0.001). Median time-to-
conversion was 17.2 minutes (etripamil) versus 53.5 minutes (placebo). The Kaplan–Meier plot of cumulative incidence of
conversion by 30 minutes is in the below figure.
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Primary Endpoint: Conversion of Adjudicated PSVT to NSR 30 min
There were reduced rates of additional medical interventions and emergency-department visits following etripamil
administration compared to placebo in the RAPID study, and these rates are consistent with those observed in NODE-301
part-1. Neither trial was sized to detect significantly different rates between treatment groups in need of additional acute
care. Thus, a predefined analysis was performed on a dataset pooled between RAPID and NODE-301 part-1, confirming
alignment between the studies’ findings, and showing reduced rates of additional medical interventions (25.4% under
placebo versus 14.6% under etripamil [P=0.013]) and emergency-department visits (22.4% under placebo versus 13.6%
under etripamil [P=0.035]). Risk-reductions observed in RAPID indicate that the number-needed-to-treat with etripamil to
convert an episode of PSVT within 30 minutes of drug administration is 3.0 and to prevent an emergency visit for PSVT is
14.1, within the range for effectiveness of a treatment for a symptomatic condition.
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The majority of adverse events were localized at the administration site and mild; there were no serious etripamil-related
events. A blinded, independent examination of ECG data by expert adjudicators showed no instances of AV block or
significant pauses during randomized drug administration or in the hours following that.
Results from the RAPID trial demonstrate that intranasal etripamil, self-administered in an at-home setting, with initial-
and repeat-dosing prompted by symptoms, was superior to placebo for rapid PSVT conversion and well-tolerated. This
symptom-prompted treatment approach was further supported by findings of improvement in patient-defined symptoms of
PSVT. Reduced rates of additional medical interventions and emergency-department visits observed with etripamil
potentially support this drug regimen for lessening the healthcare burden of PSVT.
NODE-301. NODE-301 is a placebo-controlled, double-blinded, randomized, event-driven Phase 3 clinical trial conducted
in the United States and Canada to evaluate 70 mg of etripamil versus placebo in terminating an SVT episode in the at-
home setting. As shown in the figure below, the primary endpoint is the time to conversion over a five-hour monitoring
period following the administration of the study drug. Prior to randomization, eligible patients administered a test dose of
70 mg of etripamil in the investigator’s office while in sinus rhythm in order to assess tolerability. Patients successfully
completing the test dose were randomly assigned to the etripamil or placebo cohorts (2:1 randomization) and sent home
with the study drug and a small portable electrocardiographic cardiac monitor to be used during patients’ subsequent SVT
episodes. Upon experiencing symptoms of an SVT episode, patients were instructed to first apply the cardiac monitoring
device to record ECG data, then attempt a vagal maneuver, and, if that was not successful in terminating the episode, to
then administer the study drug. Patients’ ECG data were recorded using the electrocardiographic cardiac monitoring device
for a period of five hours after study drug administration. Patients returned to the clinic for a follow up visit within one
week following their SVT event for collection of further information. NODE-301 enrolled 431 patients across 65 sites in
the United States and Canada, with 156 patients (107 etripamil, 49 placebo) receiving etripamil for an adjudicated true
PSVT episode.
In March 2020, we reported topline results of the NODE-301 trial, referred to as NODE-301 part 1. The first part of
NODE-301 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, however, prespecified and post hoc assessments at 30 minutes were
significant. The median time to conversion for etripamil was 25 minutes (95% CI: 16, 43) compared to 50 minutes (95%
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CI: 31,101) for placebo. As shown in the top figure below, despite the activity of etripamil to convert PSVT and its
separation from placebo in the first approximately 30 to 60 minutes following study drug administration, results from the
latter part of the analysis confounded the statistical analysis of the primary endpoint. Analysis of the first 30 minutes of the
Kaplan Meier curve, shown in the bottom graph below, and the post hoc results at that time point were a 54% rate of
conversion for the etripamil patients and 35% for the placebo patients. The results were statistically significant with a
hazard ratio of 1.87 and a p-value of 0.02. Prespecified landmark analyses were aligned with these post hoc findings and
also significant.
Phase 3: (MSP-2017-1138) NODE-301 Part 1 Efficacy – Time to Conversion over 5 Hours (Primary analysis) and
Time to Conversion over 30 minutes (post hoc analysis, aligned with prespecified analyses at 30 minutes)
The study also demonstrated statistically significant improvements in patients taking etripamil compared to those taking
placebo in the secondary endpoint of patient reported treatment satisfaction, as measured by a TSQM-9, including global
satisfaction (p=0.0069) and effectiveness scores (p=0.0015). Additionally, there was a trend towards improvement in
the percentage of patients seeking rescue medical intervention, including in the emergency department, with 15% and 27%
etripamil and placebo patients, respectively, reporting such intervention (p=0.12).
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Phase 3: (MSP-2017-1138) NODE-301 Key Secondary Efficacy Endpoints
Overall, etripamil was well tolerated when self-administered as a test dose during sinus rhythm or as a post-randomization
dose during symptomatic PSVT. The most common (≥5%) adverse events occurring within 24 hours of a test dose or those
occurring more frequently with etripamil within 24 hours of a randomized dose were nasal discomfort, nasal congestion,
epistaxis, rhinorrhea, throat irritation, and increased lacrimation, all of which were related to the nasal route of
administration. The incidence of all other adverse events, including those related to abnormal vital signs, laboratory results,
and ECG findings, was balanced between the 2 groups. No serious adverse events were observed within 24 hours of taking
the study drug.
NODE-302. NODE-302 is the open label extension trial of NODE-301. We designed NODE-302 to primarily evaluate the
safety of etripamil when self-administered without medical supervision and to monitor the safety and efficacy of etripamil
for the treatment of multiple episodes of SVT.
Patients who had successfully dosed with the study drug in NODE-301 and completed a study closure visit were eligible to
enroll in NODE-302 to manage any subsequent episodes of SVT. 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 initiated NODE-302 in December 2018. The trial completed enrollment in 2020 and the study was presented at the
Heart Rhythm Society Scientific Sessions as a late-breaking clinical trial in May 2022, and is in the process of being
published. Overall, the safety and tolerability profile of etripamil 70 mg was favorable and generally consistent with what
was observed in the NODE-301 study including for patients experiencing recurrent episodes.
NODE-303. NODE-303 is an open-label global safety trial enrolling patients who did not participate in NODE-301,
NODE-302, or RAPID in order 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, forming the basis for
marketing approval. We designed NODE-303 to evaluate the safety of etripamil when self-administered as prompted by
symptoms and without medical supervision, and to evaluate the safety and efficacy of etripamil over multiple episodes of
SVT. The NODE-303 trial is designed to closely reflect the expected utilization of etripamil in the post approval or ‘real-
world’ setting and, for example, does not include an in-office safety test dose and includes a broad patient population
including patients taking concomitant beta blockers and calcium channel blockers. In this study, patients had the
opportunity to manage up to four episodes of SVT. NODE-303 was initiated in October 2019 utilizing the single 70 mg
etripamil administration. In 2021, following FDA’s agreement, we initiated the change from the single 70 mg etripamil
administration to the 70 mg repeat-dose treatment regimen. The FDA’s acceptance was based on initial safety data of the
repeat-dose regimen experience gained in the RAPID study and the overall safety data from the etripamil clinical program.
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Atrial Fibrillation
AFib is a common arrhythmia with an irregular and often rapid heart rate that can increase the risk of stroke, heart failure,
and other heart-related complications. AFib can be, and often is, highly symptomatic. Symptoms include heart palpitations,
shortness of breath, fatigue, and weakness, and underlying cardiac disorders can be worsened. Episodes of atrial fibrillation
can come and go, or patients may have AFib that does not resolve. Although the heart arrhythmia in AFib itself usually is
not life-threatening, it is a serious medical condition that sometimes requires emergency treatment. Additionally, AFib is
associated with elevated risk of embolism and stroke and anticoagulant medications, also called blood thinners, are
commonly prescribed to manage this risk. Uncertainty around symptom timing and episode length may impact a patient’s
quality of life. During AFib, the heart’s two upper chambers, the atria, beat chaotically and irregularly—out of coordination
with the two lower chambers, the ventricles, of the heart, as shown in the figure below.
Classification of AFib is used to determine the appropriate treatment modality for patients. The American Heart
Association, or AHA, and the American College of Cardiology, or ACC, categorize AFib patients based on disease
progression. These categories are defined as follows: paroxysmal, which involves AFib episodes that resolve
spontaneously within seven days of symptom onset; persistent, which involves AFib episodes that fail to terminate within
seven days of symptom onset and require treatment to convert back to sinus rhythm; long-standing persistent, which
involves atrial fibrillation episodes that last longer than one year despite continued attempts to restore sinus rhythm; and
permanent, which involves a joint decision by the treating provider and patient to no longer pursue cardioversion and leave
the patient in AFib, focusing on rate control and symptom management. Disease progression in AFib is common with
approximately 40% of AFib patients in the paroxysmal stage, 30% of AFib patients in the persistent and long-standing
persistent stage, and 30% of AFib patients in the permanent stage. For purposes of simplicity, we do not differentiate the
long-standing persistent classification from the persistent classification as the clinical impact of this differentiation has not
been characterized. Concomitant structural heart irregularities including valvular dysfunction and the presence of active
symptoms may also help to characterize patients and influence treatment decisions.
A common complication of atrial fibrillation is a rapid ventricular rate which can be defined as a heart rate of ≥110 beats
per minute. Rapid, irregular, and inefficient cardiac pumping function induced by a rapid ventricular rate accounts for
hemodynamic instability and many of the arrhythmia’s symptoms. Frequently, new-onset patients with atrial fibrillation
present with symptoms related to rapid ventricular rate.
Current Treatment Options for Atrial Fibrillation with Rapid Ventricular Rate
There are currently two major approaches to managing atrial fibrillation: rate control to lower a rapid heart rate, and
rhythm control to restore and maintain a regular (sinus) rhythm and to prevent recurrent atrial fibrillation. Either of these
management approaches, often performed by pharmacological means, may be given chronically or acutely, depending on
patient preference and episode frequency and severity. The decision to pursue rate and/or rhythm control for atrial
fibrillation episodes is dependent on a variety of factors, including episode severity, episode frequency, patient preference,
and safety and tolerability of treatments. Several rhythm control strategies exist, including electrical cardioversion,
catheter-based cardiac ablation, and anti-arrhythmic drug therapy. For rate control, the rapid heart rate of atrial fibrillation
is typically treated with AV nodal blocking drugs (for example, calcium channel blockers, beta blockers, or less commonly
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digoxin) to control symptoms and improve cardiac function/hemodynamic stability. Oral rate control drugs used acutely do
not provide immediate ventricular rate control due to a 30-to-60-minute delayed onset of action. Breakthrough episodes of
symptomatic atrial fibrillation often require urgent medical treatment with IV calcium channel blockers and beta-blockers
under medical supervision, usually in the emergency department to quickly reduce heart rate before transitioning a patient
back to oral therapy.
The “pill-in-pocket” anti-arrhythmic strategy is described by the AHA and ACC guidelines as the utilization of an oral
dose of flecainide or propafenone as an attempt to restore sinus rhythm shortly after the onset of symptomatic atrial
fibrillation. Neither drug referenced in the guideline is approved by any regulatory agency for the use outlined in the
guideline. Pill-in-pocket rhythm control strategies are considered by physicians for patients who demonstrate favorable
outcomes to these medications in the clinic and who are thought to be reliable enough to administer them appropriately.
Initial administration of pill-in-pocket medication is recommended in a monitorable setting due to potential AV node
dysfunction or a proarrhythmic response and may be preceded by beta-blocker or calcium channel blocker therapy if the
patient is not chronically rate controlled.
Rate controlling agents (for example, calcium channel blockers and beta blockers) may also be administered acutely on an
as needed (or PRN) basis. Though the AHA and ACC guidelines do not explicitly acknowledge this approach, participants
in market research conducted by us indicate a significant share of patients are managed this way. PRN rate control is more
prominently used in paroxysmal patients who do not tolerate chronic medications but experience symptomatic, infrequent
atrial fibrillation episodes. Our patient market research from 2018 estimated that approximately 40% of patients use an
additional rate control medication to manage acute symptoms of atrial fibrillation. Additionally, our physician market
research commissioned in 2021 suggests that both clinical/interventional cardiologists and electrophysiologists prescribe
PRN rate control for some of their paroxysmal and persistent patients.
Market Opportunity – Atrial Fibrillation with Rapid Ventricular Rate
The American Heart Association estimates that in 2016 approximately five million people suffered from AFib in the
United States. This estimate is projected to increase over the next ten years; the AHA suggests a prevalence of 12 million
by 2030, while the Centers for Disease Control (CDC) reports this prevalence as increasing to 12.1 million over the same
time period, representing an approximately 6% annual growth rate. From market research with treating physicians, we
estimate that approximately 40% of these patients have paroxysmal AFib, 30% have persistent AFib, and 30% have
permanent AFib. Acute episodes of symptomatic AFib are often treated with the approaches described above. However,
due to the concerning nature of AFib symptoms, patients often present to the emergency department. In the ED, patients
are treated with IV calcium channel blockers or beta-blockers to quickly reduce heart rate and/or anti-arrhythmic or
electrical cardioversion before transitioning a patient back to oral therapy. According to the Healthcare and Utilization
Project, 660,000 patient visits to the emergency department in 2016 were attributed to AFib (ICD-10 diagnosis codes I48.0,
I48.1, I48.2, I48.91). Additionally, approximately 465,000 patients were admitted to the hospital with AFib (same ICD-10
codes). Our qualitative and quantitative market research indicates that the target addressable market for etripamil in
patients with AFib-RVR is approximately 30-40% of the diagnosed population of patients with atrial fibrillation. We derive
this percentage estimate from 2021 market research studies conducted by us that involved qualitative interviews and
quantitative surveys that included a total of 275 electrophysiologists, general cardiologists, and interventional cardiologists.
The physicians in the two studies were asked to estimate the share of patients experiencing ≥1 symptomatic episode of
AFib-RVR requiring treatment per year. In response, physicians in the quantitative survey reported approximately 40% of
paroxysmal patients, 40% of persistent patients, and 30% of permanent patients met this classification. This research
suggests the share of patients experiencing ≥1 symptomatic episode of AFib requiring treatment may constitute 30-40% of
the prevalent AFib population on a weighted average basis.
We believe that etripamil has the potential to be developed such that it can be used by patients to rapidly reduce their heart
rate at home to provide a supplemental option to the acute oral rate or rhythm control strategy their physician would use.
When presented with a target product profile reflecting this potential use case, approximately two thirds of the physicians
in the 2021 market research study perceived utility in the product profile, which could serve as a “bridge” to the onset of
acute oral agents. According to physicians, it can take hours for patients to feel an alleviation of symptoms using acute oral
rate and rhythm control. During this time, patients may experience concerning symptoms that often prompt them to seek
emergency care. We believe that the combination of convenient delivery, potency, rapid onset
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and short duration of action of etripamil has the potential to move the current treatment setting for some acute episodes of
AFib out of the burdensome and costly emergency department.
Current AFib management consumes significant healthcare resources in the United States. The American Heart
Association published a report in 2016 summarizing the current and projected cost burden of cardiovascular diseases in the
United States. This report suggests atrial fibrillation resulted in $25 billion in direct medical costs in 2016 (approximately
7% of all cardiovascular diseases) and another $7 billion in indirect costs (i.e., $32 billion in total costs). Additionally, the
forecasted growth in atrial fibrillation prevalence is anticipated to result in healthcare expenditures of $46 billion in direct
costs and $10 billion in indirect costs in the United States by 2030.
Clinical Development Plan for Atrial Fibrillation with Rapid Ventricular Rate
The Phase 2, double-blind, placebo-controlled, study, Reduction of Ventricular Rate in Patients with Atrial Fibrillation
(ReVeRA), in patients with AFib-RVR, was conducted in Canada and the Netherlands in collaboration with the Montreal
Heart Institute, the WCN network, and other research centers. We began enrollment in ReVeRA in the first quarter of 2021
to evaluate the potential effectiveness of etripamil to reduce ventricular rate in patients with atrial fibrillation and rapid
ventricular rate. The randomized, placebo-controlled Phase 2 ReVeRA trial enrolled 87 patients aged 18 years and older
with symptomatic AFib, and dosed 56 patients with blinded study drug. Patients exhibited a ventricular rate of 110 or more
beats per minute (bpm) prior to receiving study drug (etripamil nasal spray or placebo NS). The trial was designed to assess
the reduction in ventricular rate (primary endpoint), the time to achieve maximum reduction in ventricular rate, duration of
effect, and patient satisfaction with treatment using TSQM-9 patient reported outcome, or PRO, tool (key secondary
endpoints).
Data from ReVeRA trial showed that delivery of etripamil nasal spray significantly and rapidly reduced ventricular rate,
with a time course consistent with the drug’s pharmacologic profile.
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Etripamil achieved the primary endpoint with high statistical significance with patients experiencing a ventricular rate
reduction of 29.91 bpm (95% confidence interval: -40.31, -19.52; p<0.0001) in the etripamil arm compared to placebo. The
maximum reduction in rate reported by a patient taking etripamil was 34.97 bpm. The median time to maximum reduction
in VR was 13 minutes in patients taking etripamil, and the duration of effect (reduction in VR from baseline) was at least
150 min. The median duration of maintaining a VR <100 bpm was 45.5 min in the first 60 min following drug in the
etripamil arm.
ReVeRA Primary Endpoint – Maximum Reduction in Ventricular Rate from Baseline
PRIMARY ENDPOINT: Maximum Reduction in VR
from Baseline
Placebo NS,
N=251
Etripamil NS, 70 mg,
N=241
Mean (95% CI), bpm
-5.06 (-7.44, -2.67)
-34.97 (-45.13, -24.87)
Difference in means (95% CI), bpm
p-value2
--
--
-29.91 (-40.31, -19.52)
<0.0001
1 Efficacy population (all randomized patients receiving study drug remaining in atrial fibrillation with adequately diagnostic ECG
recordings for at least 60 min post drug)
2 From ANCOVA; calculations adjust for variance in baseline
Bpm = beats per minute, CI = confidence interval, NS = nasal spray, VR = ventricular rate
--------------------------------
A greater number of patients taking etripamil achieved a ventricular rate of less than 100 bpm (58.3%) than those taking
placebo (4%). Furthermore, 67% of patients taking etripamil achieved ventricular rate reductions of more than 20% and
96% of patients receiving etripamil achieved more than 10% in ventricular rate reductions in the first 60 minutes compared
to 0% and 20% in patients taking placebo, respectively. Etripamil treatment was associated with significant improvement in
symptom relief and in treatment satisfaction as measured by the TSQM-9 patient-reported outcome instrument.
Using the TSQM-9, compared to placebo, patients treated with etripamil demonstrated significant improvements in
satisfaction ratings in the effectiveness domain (p<0.0001). As well, patient reported outcomes on the Relief of Symptoms
Question from the Effectiveness Domain showed statistically significant greater scores (greater satisfaction) with a p =
0.0002 for patients treated with etripamil compared to those treated with placebo, and with a treatment effect (delta) of 1.55
units.
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In ReVeRA, safety and tolerability reported in the 56-patient safety population who received etripamil was generally
consistent with that observed in our PSVT program. Treatment-emergent serious adverse events, or TESAEs, were rare,
with two occurring in one patient in the etripamil arm (3.7%) and four occurring in two patients in the placebo arm (6.9%).
The TESAEs in the etripamil arm (transient severe bradycardia and syncope, assessed as due to hyper-vagotonia occurred
in a patient with a history of vagal events, and fully resolved by placing the patient supine and was without sequelae. The
majority of common AEs were localized to the drug-administration site, and there was a low incidence of serious adverse
events. The most common (≥ 5%) adverse events were mild or moderate in intensity and included nasal discomfort,
rhinorrhea, increased lacrimation, throat irritation and dizziness.
In mid-2023, we held a pre-IND meeting with FDA and received guidance indicating a potential development path for
etripamil in AFib-RVR. The FDA agreed that to gain a labelled indication via supplemental NDA, or sNDA, a Phase 3,
randomized, placebo controlled, double blind clinical trial using a dosing regimen with self-administration of etripamil in
an at-home setting could be acceptable with the support of the already existing safety database from our PSVT trials. The
primary endpoint can be the reduction of ventricular rate, and the primary analysis would be on the intent to treat, or ITT,
population. In addition, the study would have to show statistical significance (p<0.05) on the key secondary endpoint of
symptom relief as a patient benefit, also in the ITT population. The secondary endpoint could use a PRO measure and the
application of a 7-point anchored scale was discussed with the FDA. In the first quarter of 2024, we met with the FDA in a
Type A meeting. In this meeting we confirmed prior FDA guidance on a single-study sNDA pathway. FDA further
concurred with respect to key study elements including powering, inclusion criteria, patient population, and statistical
analyses, and offered clarification with respect to the endpoints to guide the design of the Phase 3 study. We anticipate
progressing to an End of Phase 2 meeting in mid-2024 as an important step to finalize the registrational study protocol.
Etripamil in Other Therapeutic Applications
Our goal in expanding our pipeline around etripamil is to apply the same paradigm-changing aspiration that we have for
supraventricular tachycardias like PSVT and AFib-RVR to other cardiac and potentially non-cardiac conditions where we
believe that a rapid-onset dihydropyridine L-type calcium channel blocker could potentially deliver significant clinical and
quality of life benefits for patients. We believe that the insights that led to the development of etripamil for the treatment of
PSVT are relevant in other indications where AV-nodal blocking agents with blood vessel widening activity have
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demonstrated clinical utility. Both calcium channel blockers and beta blockers are commonly used to manage
supraventricular tachycardias like PSVT or AFib-RVR, and other conditions.
Sales and Marketing
Given our stage of development, we have commercialization plans but have not yet established a commercial organization
or distribution capabilities. If etripamil receives marketing approval, we plan to commercialize it in the United States
leveraging industry trends regarding staged deployment of resources, digital/omnichannel investments, and a focused,
specialty sales force that could consist of our own employees, outsourced sales professionals, or a hybrid model using both
internal and external resources. We believe that this commercial organization at the launch of etripamil will consist of a
field force of <100 individuals calling on primarily clinical cardiologists who treat large populations of patients with PSVT,
supported by strategic investments in digital and targeted non-personal promotion. As we establish reimbursement for
etripamil with commercial and Medicare payors, we anticipate that this investment in omnichannel promotion will grow,
targeting both prescribers and patients. Aligned to this expansion, our field force could grow to 150 to 200 field sales
representatives calling on top-prescribing clinical cardiologists, interventional cardiologists, electrophysiologists, and high-
volume primary care physicians who have a history of prescribing cardiovascular therapies. We believe an organization of
this size would allow us to reach prescribers that collectively care for a substantial portion of patients diagnosed with
PSVT in the United States. Given the importance of increasing awareness and educating patients with PSVT, we also
anticipate deploying focused direct-to-patient marketing campaigns for etripamil. We anticipate that our sales force could
also support the commercialization of additional product candidates treating cardiovascular diseases. We would expect to
conduct the initial buildout of our commercial organization following NDA submission for etripamil. At this time, we may
pursue and believe that we can maximize the value of etripamil by retaining commercialization rights in the United States
and entering into collaboration agreements for certain territories outside the United States, including the European Union.
Manufacturing
We currently rely on third party contract manufacturing organizations, or CMOs, for all of our required raw materials, nasal
spray device, active pharmaceutical ingredient, or API, and finished product for our clinical trials and for our preclinical
research. We require all of our CMOs to conduct manufacturing activities in compliance with current good manufacturing
practice, or cGMP, requirements. We have assembled a team of experienced employees and consultants to provide the
necessary technical, quality and regulatory oversight over our CMOs and have implemented a comprehensive plan for
audits of our CMOs. Currently, we have development contracts and quality agreements with our CMOs for the
manufacturing of etripamil drug substance and drug product. We currently have enough manufactured supply of etripamil
to complete our ongoing registration trials. We also may elect to pursue additional CMOs for manufacturing supplies of
regulatory starting materials in the future and for the filling of the nasal spray device, labeling, packaging, storage and
distribution of investigational drug products. We plan to continue to rely on third party manufacturers for any future trials
and commercialization of etripamil, if approved. We anticipate that these CMOs will have capacity to support commercial
scale production, but we do not have any formal agreements at this time with these CMOs to cover commercial production.
If etripamil is approved by any regulatory agency, we intend to enter into agreements with a third-party contract
manufacturer and one or more backup manufacturers for the commercial production of etripamil.
Competition
Drug development is highly competitive and subject to rapid and significant technological advancements. Our ability to
compete will significantly depend upon our ability to complete necessary clinical trials and regulatory approval processes,
and effectively market any drug that we may successfully develop. Our current and potential future competitors include
pharmaceutical and biotechnology companies, academic institutions and government agencies. The primary competitive
factors that will affect the commercial success of etripamil or any other product candidate for which we may receive
marketing approval, include differentiation of any competitor’s product regarding efficacy, safety, tolerability, dosing
convenience, price, coverage and reimbursement. A number of our potential competitors have substantially greater
financial, technical and human resources than we do and significantly greater experience in the discovery and development
of product candidates, as well as in obtaining regulatory approvals and commercializing those product candidates in the
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United States and in foreign countries. It is also possible that a competitor may develop a cure or more effective treatment
method for the diseases we are targeting, which could render our current or future product candidates non-competitive or
obsolete, or reduce the demand for our product candidates before we can recover our development and commercialization
expenses.
We are not aware of any approved drug or any drug candidate in clinical development for a patient with PSVT to self-
administer treatment to terminate SVT episodes. In the acute setting, IV treatments of generic drugs such as adenosine,
verapamil and diltiazem, are routinely given. Additionally, some practitioners prescribe oral medications, such as calcium
channel blockers, beta blockers and antiarrhythmics to be taken at the onset of an episode. However, these interventions are
not acutely effective and are not approved by the FDA or other regulatory agencies for this use.
For atrial fibrillation, there are a number of marketed generic antiarrhythmic drugs that are used for chronic and/or acute
rate control, such as metoprolol, propranolol, esmolol, pindolol, atenolol, nadolol, verapamil and diltiazem. We are aware
of several drugs or new formulations of existing drugs under development or recently under development for atrial
fibrillation, including InRhythm (flecainide), a sodium channel blocker in Phase 3 from InCarda Therapeutics, Inc., and an
IV and potentially oral small-molecule SK channel inhibitor being developed by Acesion Pharma for acute conversion and
chronic maintenance of sinus rhythm, respectively, in patients with AFib. Acesion’s lead asset, AAP30663, is the IV-
formulated short acting AFib conversion therapy for hospital use that has successfully completed a Phase 2 trial.
Intellectual Property
We have filed numerous patent applications pertaining to etripamil and possible future product candidates, formulations
containing etripamil, methods of making such formulations and clinical use. We strive to protect and enhance the
proprietary technology, invention and improvements that are commercially important to the development of our business
by seeking, maintaining, and defending our intellectual property. We also rely on know-how, continuing technological
innovation and potential in-licensing opportunities to develop, strengthen and maintain our position in the field of cardiac
arrhythmias, such as PSVT, and immediate rate control in atrial fibrillation, as well as other medical conditions affecting
the cardiovascular system. Additionally, we intend to rely on regulatory protection afforded through data exclusivity and
market exclusivity, as well as patent term extensions, where available.
As of December 31, 2023, our patent portfolio as it pertains to etripamil included:
• a patent family containing six U.S. patents, projected to expire in 2028, a pending U.S. patent application,
which, if granted, is projected to expire in 2028, as well as corresponding patents in Australia, Brazil, Canada,
China, Europe, Hong Kong, India, Japan, Mexico, New Zealand and South Korea, directed to etripamil,
pharmaceutical compositions including etripamil, and uses of etripamil such as to treat cardiac arrhythmias,
including PSVT and atrial fibrillation; and
• a patent family containing one U.S. patent, projected to expire in 2036, a pending U.S. patent application,
which, if granted, is projected to expire in 2036, as well as corresponding patents in Australia, Brazil, Canada,
China, Europe, Hong Kong, Israel, Japan, Mexico, Russia, South Africa, and Ukraine and corresponding
patent applications in China, Europe, Hong Kong, India, New Zealand, South Africa, and South Korea,
directed to formulations including etripamil, methods of making such formulations, and uses of such
formulations to treat cardiac arrhythmias, such as PSVT and atrial fibrillation.
• a patent family containing pending applications in the United States, Canada, and Europe, which, if granted,
is projected to expire in 2041, directed to uses of formulations including etripamil to treat cardiac
arrhythmias, such as PSVT and atrial fibrillation, or migraines.
The terms of individual patents may vary based on the countries in which they are obtained. Generally, patents issued for
applications filed in the United States are effective for 20 years from the earliest effective non-provisional filing date in the
absence, for example, of a terminal disclaimer shortening the term of the patent or patent term adjustment increasing the
term of the patent. In addition, in certain instances, a patent term can be extended to recapture a portion of the term
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effectively lost as a result of FDA regulatory review periods. The restoration period cannot be longer than five years and
the total term, including the restoration period, must not exceed 14 years following FDA approval. The duration of patents
outside the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from
the earliest non-provisional filing date.
In addition to patents and patent applications that we own, we rely on know-how to develop and maintain our competitive
position. We seek to protect our proprietary technology and processes, and obtain and maintain ownership of certain
technologies, in part, through confidentiality agreements and invention assignment agreements with our employees,
consultants, scientific advisors, contractors and commercial partners.
Our future commercial success depends, in part, on our ability to obtain and maintain patent and other proprietary
protection for commercially important technology, inventions and know-how related to our business; defend and enforce
our patents; and operate without infringing valid enforceable patents and proprietary rights of third parties. Our ability to
stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which
we have rights under valid and enforceable patents that cover these activities. With respect to our owned intellectual
property, we cannot be sure that patents will issue from any of the pending patent applications which we own or from any
patent applications that we may file in the future, nor can we be sure that any patents that may be issued in the future to us
will be commercially useful in protecting etripamil or any future product candidates and methods of using or
manufacturing the same. Moreover, we may be unable to obtain patent protection for certain aspects of etripamil or future
product candidates generally, as well as with respect to certain indications. See the section entitled “Risk Factors—Risks
Related to Our Intellectual Property” for a more comprehensive description of risks related to our intellectual property.
Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local levels, and in other countries, extensively
regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling,
advertising, promotion, distribution, marketing, import and export of pharmaceutical products, such as those we are
developing. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with
subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial
resources.
United States Government Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its
implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate
federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.
Failure to comply with the applicable United States requirements at any time during the drug development process,
approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the
FDA’s refusal to approve an NDA, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled
letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals
of government contracts, restitution, disgorgement or civil or criminal penalties.
The process required by the FDA before a drug may be marketed in the United States generally involves:
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completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the
FDA’s good laboratory practice, or GLP, regulations;
submission to the FDA of an IND, which must become effective before human clinical trials may begin;
approval by an independent institutional review board, or IRB, at each clinical site before each trial may be
initiated;
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performance of adequate and well controlled clinical trials, in accordance with good clinical practice, or GCP,
requirements to establish the safety and efficacy of the proposed drug for each indication;
submission to the FDA of an NDA;
satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product
is produced to assess compliance with cGMP requirements, and to assure that the facilities, methods and
controls are adequate to preserve the drug’s identity, strength, quality and purity;
satisfactory completion of an FDA inspection of selected clinical sites to assure compliance with GCPs and
the integrity of the clinical data;
payment of user fees; and
FDA review and approval of the NDA.
Preclinical Studies
Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to
assess potential safety and efficacy. An IND sponsor must submit the results of the nonclinical tests, together with
manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as
part of an IND. Some nonclinical testing may continue even after the IND is submitted. An IND automatically becomes
effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or
more proposed clinical trials and places the clinical trial on a clinical hold.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As
a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical Trials
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects
provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under
protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the
effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be
submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must
review and approve the plan for any clinical trial before it commences at that institution, and the IRB must continue to
oversee the clinical trial while it is being conducted. Information about certain clinical trials must be submitted within
specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov
website.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In Phase 1, the
drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety,
dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an initial indication of its
effectiveness. In Phase 2, the drug typically is administered to a limited patient population to identify possible adverse
effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine
dosage tolerance and optimal dosage. In Phase 3, the drug is administered to an expanded patient population, generally at
geographically dispersed clinical trial sites, in well controlled clinical trials to generate enough data to statistically evaluate
the safety and efficacy of the product for approval, to establish the overall risk benefit profile of the product and to provide
adequate information for the labeling of the product.
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Progress reports detailing the results of the clinical trials must be submitted, at least annually, to the FDA, and more
frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully
within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any
time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being
conducted in accordance with the IRB’s requirements, or if the drug has been associated with unexpected serious harm to
patients.
Marketing Approval
Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together
with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other
things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications.
In most cases, the submission of an NDA is subject to a substantial application user fee. Under the Prescription Drug User
Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a
standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months
from the date the NDA is submitted to the FDA because the FDA has approximately two months to make a “filing”
decision.
In addition, under the Pediatric Research Equity Act, certain NDAs or supplements to an NDA must contain data that are
adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric
subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and
effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or
all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with
orphan designation.
The FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, plan to ensure that the
benefits of the drug outweigh its risks. The REMS plan could include medication guides, physician communication plans,
assessment plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries or other risk
minimization tools.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for
filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional
information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional
information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission
is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among
other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed,
packaged or held meets standards designed to assure the product’s continued safety, quality and purity.
The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of
independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a
recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by
the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The
FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance
with cGMP requirements and adequate to assure consistent production of the product within required specifications.
Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance
with GCP requirements.
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The testing and approval process for an NDA requires substantial time, effort and financial resources, and takes several
years to complete. Data obtained from preclinical and clinical testing are not always conclusive and may be susceptible to
varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval of an
NDA on a timely basis, or at all.
After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and
inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in
some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions that
must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing in order
for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide
that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the
FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of
the drug with specific prescribing information for specific indications.
Even if the FDA approves a product, it may limit the approved indications for use of the product, require that
contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including
Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance
programs to monitor the product after commercialization, or impose other conditions, including distribution and use
restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and
profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-
marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding
new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and
FDA review and approval.
Post Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the
FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and
distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most
changes to the approved product, such as adding new indications, manufacturing changes or other labeling claims, are
subject to further testing requirements and prior FDA review and approval. There also are continuing annual user fee
requirements for any marketed products and the establishments at which such products are manufactured, as well as
application fees for supplemental applications with clinical data.
Even if the FDA approves a product, it may limit the approved indications for use of the product, require that
contraindications, warnings or precautions be included in the product labeling, including a boxed warning, require that
post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require
testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including
distribution restrictions or other risk management mechanisms under a REMS, which can materially affect the potential
market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results
of post-marketing studies or surveillance programs.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are
required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced
inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing
process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also
require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements
upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must
continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market.
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Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory
revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to
assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential
consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the
market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation
of product approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs
may be promoted only for the approved indications and in accordance with the provisions of the approved label, although
physicians, based on their independent medical judgement, may prescribe approved drugs for unapproved indications.
However, biopharmaceutical companies may share truthful and not misleading information that is otherwise consistent
with the labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting their promotion of off-
label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant civil,
criminal and administrative liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or
PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the
registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of
prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.
Federal and State Fraud and Abuse, Data Privacy and Security, and Transparency Laws and Regulations
In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws and regulations
restrict business practices in the biopharmaceutical industry. These laws may impact, among other things, our current and
future business operations, including our clinical research activities, and proposed sales, marketing and education programs
and constrain the business or financial arrangements and relationships with healthcare providers and other parties through
which we market, sell and distribute our products for which we obtain marketing approval. These laws include anti-
kickback and false claims laws and regulations, data privacy and security, and transparency laws and regulations,
including, without limitation, those laws described below.
The federal Anti-Kickback Statute prohibits any person or entity from, among other things, knowingly and willfully
offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging
for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other
federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The
federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the
one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory
exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe
harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing,
purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Several
courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving
remuneration is to induce referrals of federal healthcare covered business, the statute has been violated.
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A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have
committed a violation. In addition, the government may assert that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False
Claims Act or the civil monetary penalties laws.
Federal civil and criminal false claims laws, including the federal civil False Claims Act, which can be enforced by
individuals through civil whistleblower and qui tam actions, and civil monetary penalties laws, prohibits any person or
entity from, among other things, knowingly presenting, or causing to be presented, a false claim for payment to the federal
government or knowingly making, using or causing to be made or used a false record or statement material to a false or
fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to
the U.S. government. Several pharmaceutical and other healthcare companies have been prosecuted under these laws for
allegedly providing free product to customers with the expectation that the customers would bill federal programs for the
product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’
marketing of products for unapproved, and thus non-reimbursable, uses.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal
statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit
program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for
healthcare benefits, items or services. Also, many states have similar fraud and abuse statutes or regulations that apply to
items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
In addition, we may be subject to data privacy and security regulation by both the federal government and the states in
which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical
Health Act, or HITECH, and their respective implementing regulations, impose specified requirements on certain types of
individuals and entities relating to the privacy, security and transmission of individually identifiable health information.
Among other things, HITECH makes HIPAA’s security standards directly applicable to “business associates,” defined as
independent contractors or agents of covered entities, which include certain healthcare providers, healthcare clearinghouse
and health plans, that create, receive, maintain or transmit individually identifiable health information in connection with
providing a service for or on behalf of a covered entity, and their covered subcontractors. HITECH also increased the civil
and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and
gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce
HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the
privacy and security of health information in certain circumstances, many of which are not pre-empted by HIPAA, differ
from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical
supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with
specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to
payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and
chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals,
and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and
investment interests held by physicians and their immediate family members.
We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, state laws
that require drug manufacturers to report information related to payments and other transfers of value to physicians and
other healthcare providers or marketing expenditures, state laws that require drug manufacturers to report information on
the pricing of certain drugs, and state and local laws that require the registration of pharmaceutical sales representatives.
Because of the breadth of these laws and the narrowness of available statutory exceptions and regulatory safe harbors, it is
possible that some of our business activities could be subject to challenge under one or more of such laws. If our operations
are found to be in violation of any of the federal and state laws described above or any other governmental
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regulations that apply to us, we may be subject to significant criminal, civil and administrative penalties including
damages, fines, imprisonment, additional reporting requirements and oversight if we become subject to a corporate
integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages,
reputational harm, diminished profits and future earnings, disgorgement, exclusion from participation in government
healthcare programs and the curtailment or restructuring of our operations, any of which could adversely affect our ability
to operate our business and our results of operations. To the extent that any of our products are sold in a foreign country, we
may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing
requirements, including safety surveillance, anti-fraud and abuse laws, implementation of corporate compliance programs,
reporting of payments or transfers of value to healthcare professionals, and additional data privacy and security
requirements.
Coverage and Reimbursement
The future commercial success of our, or any of our collaborators’, product candidates, if approved, will depend in part on
the extent to which third-party payors, such as governmental payor programs at the federal and state levels, including
Medicare and Medicaid, private health insurers and other third-party payors, provide coverage of and establish adequate
reimbursement levels for our product candidates. Third-party payors generally decide which products they will pay for and
establish reimbursement levels for those products. In particular, in the United States, no uniform policy for coverage and
reimbursement exists. Private health insurers and other third-party payors often provide coverage and reimbursement for
products based on the level at which the government, through the Medicare program, provides coverage and
reimbursement for such products, but also have their own methods and approval process apart from Medicare
determinations. Therefore, coverage and reimbursement can differ significantly from payor to payor.
In the United States, the European Union, or EU, and other potentially significant markets for our product candidates,
government authorities and third-party payors are increasingly attempting to limit or regulate the price of products,
particularly for new and innovative products, which often has resulted in average selling prices lower than they would
otherwise be. Further, the increased emphasis on managed healthcare in the United States and on country and regional
pricing and reimbursement controls in the EU will put additional pressure on product pricing, reimbursement and usage.
These pressures can arise from rules and practices of managed care groups, judicial decisions and laws and regulations
related to Medicare, Medicaid and healthcare reform, pharmaceutical coverage and reimbursement policies and pricing in
general.
Third-party payors are increasingly imposing additional requirements and restrictions on coverage and limiting
reimbursement levels for products. For example, federal and state governments reimburse products at varying rates
generally below average wholesale price. These restrictions and limitations influence the purchase of products. Third-party
payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-
approved products for a particular indication. Third-party payors are increasingly challenging the price and examining the
medical necessity and cost-effectiveness of products, in addition to their safety and efficacy. We may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our product
candidates, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered
medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate
reimbursement rate will be approved. Adequate third-party payor reimbursement may not be available to enable us to
realize an appropriate return on our investment in product development. Legislative proposals to reform healthcare or
reduce costs under government insurance programs may result in lower reimbursement for our product candidates, if
approved, or exclusion of our product candidates from coverage and reimbursement. The cost containment measures that
third-party payors and providers are instituting and any healthcare reform could significantly reduce our revenues from the
sale of any approved product candidates. Even if favorable coverage and reimbursement status is attained for one or more
products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be
implemented in the future.
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Healthcare Reform
The United States and some foreign jurisdictions are considering enacting or have enacted a number of additional
legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our product
candidates profitably, if approved. Among policy makers and payors in the United States and elsewhere, there is significant
interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality
and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts, which
include major legislative initiatives to reduce the cost of care through changes in the healthcare system, including limits on
the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government-
funded health care programs, and increased governmental control of drug pricing.
There have been several U.S. government initiatives over the past few years to fund and incentivize certain comparative
effectiveness research, including creation of the Patient-Centered Outcomes Research Institute under the Patient Protection
and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or
collectively the PPACA. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s
product could adversely affect the sales of our product candidates.
The PPACA became law in March 2010 and substantially changed the way healthcare is financed by both third-party
payors. Among other measures that may have an impact on our business, the PPACA establishes an annual, nondeductible
fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents; a new Medicare
Part D coverage gap discount program; and a new formula that increases the rebates a manufacturer must pay under the
Medicaid Drug Rebate Program. Additionally, the PPACA extends manufacturers’ Medicaid rebate liability, expands
eligibility criteria for Medicaid programs, and expands entities eligible for discounts under the Public Health Service Act.
There have been executive, judicial and Congressional challenges to certain aspects of the PPACA. While Congress has not
passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have
been signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision that repealed, effective
January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to
maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In
addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated
“Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021,
also eliminated the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the
PPACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount that is owed by pharmaceutical
manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly
referred to as the “donut hole.” On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds
that argued the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.
Moreover, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that
initiated a special enrollment period for purposes of obtaining health insurance coverage through the PPACA marketplace.
The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules
that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs
that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance
coverage through Medicaid or the PPACA. Further, on August 16, 2022, President Biden signed the Inflation Reduction
Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health
insurance coverage in PPACA marketplaces through plan year 2025. The IRA also eliminates the "donut hole" under the
Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and
through a newly established manufacturer discount program. It is possible that the PPACA will be subject to judicial or
Congressional challenges in the future. It is unclear how additional healthcare reform measures of the Biden administration
will impact the PPACA.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. In August 2011, the
President signed into law the Budget Control Act of 2011, as amended, which, among other things, included aggregate
reductions to Medicare payments to providers of 2% per fiscal year, which began in 2013 and, following passage of
subsequent legislation, will continue until 2032 unless additional Congressional action is taken. Additionally, on March 11,
2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid
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drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple
source drugs, beginning January 1, 2024. In January 2013, the American Taxpayer Relief Act of 2012 was enacted and,
among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the
government to recover overpayments to providers from three to five years.
Further, there has been increasing legislative and enforcement interest in the United States with respect to drug pricing
practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and
state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between
pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. For
example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American
Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9,
2021, the Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug
Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress
could pursue as well as potential administrative actions HHS can take to advance these principles. In addition, the IRA,
among other things (i) directs HHS to negotiate the price of certain single-source drugs and biologics covered under
Medicare and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace
inflation. These provisions take effect progressively starting in fiscal year 2023. On August 29, 2023, HHS announced the
list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is
currently subject to legal challenges. It is currently unclear how the IRA will be implemented but is likely to have a
significant impact on the pharmaceutical industry. In response to the Biden administration’s October 2022 executive order,
on February 14, 2023, HHS released a report outlining three new models for testing by the CMS Innovation Center which
will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear
whether the models will be utilized in any health reform measures in the future. Further, on December 7, 2023, the Biden
administration announced an initiative to control the price of prescription drugs through the use of march-in rights under
the Bayh-Dole Act. On December 8, 2023, the National Institute of Standards and Technology published for comment a
Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes
the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights
have not previously been exercised, it is uncertain if that will continue under the new framework. At the state level,
legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product
access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation
from other countries and bulk purchasing. For example, on January 5, 2024, the FDA approved Florida’s Section 804
Importation Program, or SIP, proposal to import certain drugs from Canada for specific state healthcare programs. It is
unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to
legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by
the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for products covered
by those programs.
Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and varying
regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials,
marketing authorization, commercial sales and distribution of our product candidates. For example, in the EU, we must
obtain authorization of a clinical trial application, or CTA, in each member state in which we intend to conduct a clinical
trial. Whether or not we obtain FDA approval for a drug, we would need to obtain the necessary approvals by the
comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the drug in
those countries. The approval process varies from country to country and can involve additional product testing and
additional administrative review periods. The time required to obtain approval in other countries might differ from and be
longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval
in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory
process in others.
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Employees and Human Capital
Patients inspire all we do. Milestone employees are passionate about creating a solution for patients who suffer from PSVT
and other related illness as we work together on our mission to develop innovative cardiovascular medicines. We have built
a culture of high performance based on our core values:
◾ Patients First: Everything we do is with the patient in mind. We listen to and partner with patients and place their
well-being at the core of all our initiatives.
Our patients inspire us.
◾ Teamwork: Milestone employees support, challenge and care for each other.
Employees engage with one another through their teams, but also through our weekly gatherings, outings and
friendly competitions and challenges.
Collaboration is key.
◾ Entrepreneurial Mindset: Milestone places a high value on grit, courage and resolve. Milestone’s organizational
energy has the sense of a startup.
Employees are encouraged to think like an owner.
◾ Every Idea Matters: Sometimes the best ideas evolve from where it is least expected.
All ideas are welcome.
◾ Humility, Empathy and Integrity: We act individually and as a team with these three attributes in mind in all we
do.
We care to do what is right.
Our human capital objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our
existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate
selected employees, consultants and directors through the granting of stock-based compensation awards.
As of December 31, 2023, we had 47 full-time employees, 11 of whom were primarily engaged in research and
development activities. Five of these employees have an M.D. or Ph.D. degree. None of our employees is represented by a
labor union and we consider our employee relations to be excellent.
In the first quarter of 2024, we underwent a reduction in force resulting in 27 full-time employees remaining with the
Company.
Facilities
Our headquarters is currently located in Montréal (Québec), Canada and consists of 7,700 square feet of leased office space
under a lease that expires in November 2025. We also have a U.S. subsidiary in Charlotte, North Carolina that occupies
13,050 square feet of leased office space under a lease that expires in September 2027.
Legal Proceedings
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not
currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding
against us that we believe could have an adverse effect on our business, operating results or financial condition.
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Corporate Information
Our principal executive offices are located at 1111 Dr. Frederik-Philips Blvd., Suite 420, Montréal, Québec, Canada
H4M 2X6, and our telephone number is (514) 336-0444. Our US offices are located at 6210 Ardrey Kell Rd, Suite 650,
Charlotte, NC 28277 and our telephone number is (704) 848-5316.
Available Information
We maintain an internet website at www.milestonepharma.com and make available free of charge through our website our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act of 1934, or the Exchange Act. We make
these reports available through our website as soon as reasonably practicable after we electronically file such reports with,
or furnish such reports to, the Securities and Exchange Commission (“SEC”). You can review our electronically filed
reports and other information that we file with the SEC on the SEC’s website at http://www.sec.gov. We also make
available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10%
stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings
are provided to us by those persons. In addition, we regularly use our website to post information regarding our business,
product development programs and governance, and we encourage investors to use our website, particularly the
information in the section entitled “Investors,” as a source of information about us.
The information on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be
considered to be a part of this Annual Report on Form 10-K. Our website address is included in this Annual Report on
Form 10-K as an inactive technical reference only.
Investors and others should note that we announce material information to our investors using one or more of the
following: SEC filings, press releases and our corporate website, including without limitation the “Investors” and “Events
and Presentations” sections of our website. We use these channels, as well as social media channels such as LinkedIn, in
order to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure
obligations under Regulation FD. It is possible that the information we post on our corporate website or other social media
could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our
Company to review the information we post on the “Investors” and “Events and Presentations” sections of our corporate
website and on our social media channels. The contents of our corporate website and social media channels are not,
however, a part of this Annual Report.
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ITEM 1A. RISK FACTORS
An investment in shares of our common shares involves a high degree of risk. You should carefully consider the following
information about these risks, together with the other information appearing elsewhere in this Annual Report on Form 10-
K, consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” before deciding to invest in our common shares. The occurrence of any of the
following risks could have a material adverse effect on our business, financial condition, results of operations and future
growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we
have made in this report and those we may make from time to time. In these circumstances, the market price of our common
shares could decline, and you may lose all or part of your investment. We cannot assure you that any of the events
discussed below will not occur.
Risks Related to Our Financial Position and Capital Needs
We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial
operating losses for the foreseeable future and may never achieve or maintain profitability.
Since inception in 2003, we have incurred significant operating losses. Our net loss was $60.0 million and $58.4 million
for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of
$326.0 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable
future. Since inception, we have devoted substantially all of our efforts to research and preclinical and clinical development
of etripamil, as well as to expanding our management team and infrastructure. It could be several years, if ever, before we
have a commercialized drug. We expect that our existing cash and cash equivalents and short-term investments will be
sufficient to fund our operations for at least the next 12 months from the date of issuance of this 10-K for the year ending
December 31, 2023 and 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.
The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses
will increase if, and as, we:
•
•
•
•
•
continue our ongoing and planned development of etripamil, including our clinical trials of etripamil for the
treatment of PSVT and AFib-RVR;
seek marketing approvals for etripamil for the treatment of PSVT, AFib-RVR and other cardiovascular
indications;
establish a sales, marketing, manufacturing and distribution capability, either directly or indirectly with third
parties, to commercialize etripamil or any future product candidate for which we may obtain marketing
approval;
build a portfolio of product candidates through development, or the acquisition or in-license of drugs, product
candidates or technologies;
initiate preclinical studies and clinical trials for etripamil for any additional indications we may pursue, and
for any additional product candidates that we may pursue in the future;
• maintain, protect and expand our intellectual property portfolio;
•
•
hire additional clinical, regulatory and scientific personnel;
add operational, financial and management information systems and personnel, including personnel to
support our product development and planned future commercialization efforts; and
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•
incur additional legal, insurance related, accounting and other expenses associated with operating as a public
company.
To become and remain profitable, we must succeed in developing and eventually commercializing drugs that generate
significant revenue. This will require us to be successful in a range of challenging activities, including completing clinical
trials of etripamil and any future product candidates that way may pursue, obtaining regulatory approval, procuring
commercial-scale manufacturing, marketing and selling etripamil and any future products for which we may obtain
regulatory approval, as well as discovering or acquiring and then developing additional product candidates. We are only in
the preliminary stages of some of these activities. We may never succeed in these activities and, even if we do, may never
generate revenues that are significant enough to achieve profitability.
Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the
timing or amount of expenses or when, or if, we will be able to achieve profitability.
Our expenses could increase beyond our expectations if we are required by the U.S. Food and Drug Administration, or
FDA, the European Medicines Agency or other regulatory authorities to perform studies in addition to those we currently
expect, or if there are any delays in the initiation and completion of our clinical trials or the development of etripamil or
any future product candidates.
For example, we received a refusal to file letter from the FDA for the NDA for self-administered etripamil nasal spray for
the treatment of PSVT in December 2023. Upon preliminary review, the FDA determined that the NDA, submitted in
October 2023, was not sufficiently complete to permit substantive review. In the refusal to file letter the FDA requested
information about the time of data recorded for adverse events in our Phase 3 clinical trials. We held a Type A Meeting
with FDA in February 2024. To align with FDA’s guidance in preliminary response to our questions presented to the FDA
in our Type A Meeting request, we will need to restructure the data sets that capture timing of reported AEs, reformat
certain data files to facilitate FDA’s analyses, and resubmit the NDA. We plan to resubmit the NDA for self-administered
etripamil nasal spray for the treatment of PSVT in the second quarter of 2024. There is no guarantee that we will be able to
resubmit the NDA on the expected timeline or that the FDA will accept the NDA for review following resubmission and,
even if it does, there is no guarantee that the FDA will approve our NDA or, if approved, that we will ever generate
sufficient revenue to achieve profitability.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
Our failure to become and remain profitable would decrease the value of our Company and could impair our ability to raise
capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the
value of our common shares could also cause you to lose all or part of your investment.
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess
our future viability.
We are a clinical-stage company founded in 2003, and our operations to date have been largely focused on raising capital,
organizing, staffing our Company and undertaking preclinical studies and conducting clinical trials for etripamil. As an
organization, we have not yet demonstrated an ability to successfully complete clinical development, obtain regulatory
approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and
marketing activities necessary for successful commercialization. Consequently, any predictions about our future success or
viability may not be as accurate as they could be if we had a longer operating history or a history of successful clinical
development and commercialization of products.
We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in
achieving our business objectives. We will need to transition at some point from a company with a research and
development focus to a company capable of supporting commercial activities. We may not be successful in such a
transition.
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Additionally, we expect our financial condition and operating results to continue to fluctuate from quarter to quarter and
year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the
results of any quarterly or annual periods as indications of future operating performance.
We will require substantial additional funding to finance our operations. If we are unable to raise capital when needed,
we could be forced to delay, reduce or terminate our development of etripamil or other operations.
Based on our research and development plans, we expect that our existing cash and cash equivalents and short-term
investments will be sufficient to fund our operations for at least the next 12 months from the date of issuance of this 10-K
for the year ended December 31, 2023 and 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. However, we will need to
obtain substantial additional funding in connection with our continuing operations and planned activities. Our future capital
requirements will depend on many factors, including:
•
•
•
•
•
•
•
•
•
•
the timing, progress of NDA filing and results of our ongoing and planned clinical trials of etripamil in PSVT,
AFib-RVR and in other indications;
the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of
etripamil for additional indications or any future product candidates that we may pursue;
our ability to establish collaborations on favorable terms, if at all;
the ability of vendors who we rely on to accurately forecast expenses and deliver on expectations;
the costs, timing and outcome of regulatory review of etripamil and any future product candidates;
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales
and distribution, for etripamil and any future product candidates for which we receive marketing approval;
the revenue, if any, received from commercial sales of etripamil and any future product candidates for which
we receive marketing approval;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending any intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies; and
the costs of operating as a public company.
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Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming,
expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results
required to obtain regulatory approval and achieve product sales. For example, our NODE-301 trial of etripamil for PSVT
did not meet its primary endpoint. In addition, etripamil and any future product candidates, if approved, may not achieve
commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be
commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to
achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. We
may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. In addition, we may not be able to access a portion of our existing
cash, cash equivalents and investments due to market conditions. For example, on March 10, 2023, the Federal Deposit
Insurance Corporation took control and was appointed receiver of Silicon Valley Bank. Similarly, on March 12, 2023,
Signature Bank and Silvergate Capital Corp. were each swept into receivership. If other banks and financial institutions
enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and
financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could
have a material adverse effect on our business and financial condition. Weakness and volatility in capital markets and the
economy, in general or as a result of bank failures or macroeconomic conditions such as rising inflation, could limit our
access to capital markets and increase our costs of borrowing. If we are unable to raise capital when needed or on attractive
terms, we could be forced to delay, reduce or altogether terminate our research and development programs or future
commercialization efforts.
Economic uncertainty, including related to inflation, may adversely affect our results of operations.
Our results of operations may be materially affected by global economic conditions, including inflation, which has recently
increased at the fastest pace in nearly 40 years, sustained uncertainty regarding future economic conditions, prolonged
tightening of credit markets and changes in tax rates. In recent years, the U.S. and other significant economic markets have
experienced cyclical downturns, and worldwide economic conditions remain uncertain. While such uncertainty persists,
investor concerns over inflation, market volatility, geopolitical tensions (such as Russia’s incursion into Ukraine or the
Israel-Hamas war) and public health crises (such as the COVID-19 pandemic) may cause deteriorating market conditions
with adverse effects on our business, financial condition and operating results.
Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish
rights to our product candidates.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs 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. We do not have any
committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible
debt securities, such as the Convertible Notes (as defined herein), your ownership interest may be diluted, and the terms of
these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt and
equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take
specific actions, such as redeeming our shares, making investments, incurring additional debt, making capital expenditures,
declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights.
If we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we
may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or product
candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional capital when
needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts,
or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.
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Our ability to use our non-capital loss carryforwards to offset future taxable income may be subject to certain
limitations.
In general, where control of a corporation has been acquired by a person or group of persons, subsection 111(5) of the
Income Tax Act (Canada), or the Canadian Tax Act, and equivalent provincial income tax legislation restrict the
corporation’s ability to carry forward non-capital losses from preceding taxation years. We have not performed a detailed
analysis to determine whether an acquisition of control for the purposes of subsection 111(5) of the Canadian Tax Act has
occurred after each of our previous issuances of common shares or preferred shares. In addition, if we undergo an
acquisition of control, our ability to utilize non-capital losses could be limited by subsection 111(5) of the Canadian Tax
Act. As of December 31, 2023, we had Canadian federal and provincial non-capital loss carry forwards of $206.5 million
and $203.0 million, respectively, which expire beginning in 2026 through 2042. In addition, we also have scientific
research and experimental development expenditures of $26.5 million and $31.8 million, respectively, for Canadian federal
and provincial income tax purposes, which have not been deducted. These expenditures are available to reduce future
taxable income and have an unlimited carry-forward period. Research and development tax credits and expenditures are
subject to verification by the tax authorities, and, accordingly, these amounts may vary. Future changes in our share
ownership, some of which are outside of our control, could result in an acquisition of control for the purposes of subsection
111(5) of the Canadian Tax Act. Furthermore, our ability to utilize non-capital losses (or U.S. equivalents) of companies
that we may acquire in the future may be subject to limitations. As a result, even if we attain profitability, we may be
unable to use a material portion of our non-capital losses and other tax attributes, which could negatively impact our future
cash flows.
Our subsidiary’s ability to use its U.S. net operating loss carryforwards and certain other tax attributes for U.S. income
tax purposes may be limited.
As of December 31, 2023, we had U.S. federal net operating loss carryforwards, or NOLs, of $54.0 million as a result of
expenses incurred by Milestone Pharmaceuticals USA, Inc., our wholly owned subsidiary. Under current U.S. federal tax
law, NOLs incurred in taxable years ending beginning after December 31, 2017 may be carried forward indefinitely.
However, the deductibility of such NOLs is limited to 80% of taxable income. It is uncertain if and to what extent various
states will conform to the federal law. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as
amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally
defined as a greater than 50% change (by value) in its equity ownership over a three year period, the corporation’s ability to
use its pre change NOL carryforwards and other pre change tax attributes (such as research tax credits) to offset its post
change income may be limited. It is possible that we have experienced one or more ownership changes in the past. In
addition, we may also experience ownership changes in the future as a result of subsequent shifts in our share ownership
some of which may be outside of our control. As a result, if we earn net taxable income, our ability to use our pre
ownership change NOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could
potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the
use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Risks Related to the Development of Our Product Candidates
We have only one product candidate, etripamil, for which we are currently pursuing clinical development. Our future
success is substantially dependent on the successful clinical development and regulatory approval of etripamil. If we are
not able to obtain required regulatory approvals for etripamil or any future product candidates, we will not be able to
commercialize etripamil or any future product candidates and our ability to generate revenue will be adversely affected.
Etripamil is currently our only product candidate. We have not obtained regulatory approval for etripamil or any product
candidate, and it is possible that neither etripamil nor any product candidates we may seek to develop in the future will ever
obtain regulatory approval. Neither we nor any future collaborator is permitted to market any drug product candidates in
the United States or other countries until we receive regulatory approval from the FDA or applicable foreign regulatory
agency. The time required to obtain approval or other marketing authorizations by the FDA and comparable foreign
regulatory authorities is unpredictable but typically takes many years following the commencement of clinical trials and
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depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval
policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a
product candidate’s clinical development and may vary among jurisdictions.
Prior to obtaining approval to commercialize etripamil and any other drug product candidate in the United States or
elsewhere, we must demonstrate with substantial evidence from well controlled clinical trials, and to the satisfaction of the
FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended
uses. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the
nonclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by
the FDA and other regulatory authorities. The FDA may also require us to conduct additional nonclinical studies, including
human factor studies, or clinical trials for our product candidates either prior to or post-approval, or it may object to
elements of our clinical development program. For example, the FDA has requested additional nonclinical study data and
reformatted and restructured clinical data in connection with our NDA for self-administered etripamil nasal spray for the
treatment of PSVT and may request that we complete additional nonclinical studies, including human factor studies, or
clinical trials upon review of our resubmitted NDA for self-administered etripamil nasal spray for the treatment of PSVT.
In addition, the FDA typically refers applications for novel drugs, like etripamil and potentially any future product
candidates, to an advisory committee composed of outside experts. The FDA is not bound by the recommendation of the
advisory committee, but it considers such recommendation when making its decision.
Of the large number of products in development, only a small percentage successfully complete the FDA or comparable
foreign regulatory authorities’ approval processes and are commercialized. The lengthy approval or marketing
authorization process as well as the unpredictability of future clinical trial results may result in our failing to obtain
regulatory approval or marketing authorization to market etripamil or any future product candidates, which would
significantly harm our business, financial condition, results of operations and prospects.
We have invested a significant portion of our time and financial resources in the development of etripamil. Our business is
dependent on our ability to successfully complete development of, obtain regulatory approval for, and, if approved,
successfully commercialize etripamil and any future product candidates in a timely manner.
On October 23, 2023, we submitted an NDA to FDA for etripamil for the treatment of PSVT. On December 26, 2023, we
announced that we received an RTF letter from the FDA. Upon preliminary review, the FDA determined that the NDA was
not sufficiently complete to permit substantive review. The FDA requested clarification about the data recorded for the
time of adverse events in Phase 3 clinical trials; FDA did not express concerns about the nature or severity of adverse
events. Although we have held a Type A Meeting with the FDA to determine next steps for the filing for marketing
approval and FDA indicated that the AE hourly timing data in question had minimal impact on the overall characterization
of the etripamil safety profile, our revisions of the database to align with FDA requests may not be satisfactory and we
cannot provide any assurance that our NDA resubmission will be accepted for filing or, even if filed, will be approved by
the FDA.
Even if we eventually complete clinical testing and receive approval of an NDA, or foreign marketing application for
etripamil and any future product candidates, the FDA or the comparable foreign regulatory authorities may grant approval
or other marketing authorization contingent on the performance of costly additional clinical trials, including post-market
clinical trials. The FDA or the comparable foreign regulatory authorities also may approve or authorize for marketing a
product candidate for a more limited indication or patient population that we originally request, and the FDA or
comparable foreign regulatory authorities may not approve or authorize the labeling that we believe is necessary or
desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain,
applicable regulatory approval or other marketing authorization would delay or prevent commercialization of that product
candidate and would materially adversely impact our business and prospects.
In addition, the FDA and comparable foreign regulatory authorities may change their policies, adopt additional regulations
or revise existing regulations or take other actions, which may prevent or delay approval of our future products under
development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could
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delay our ability to obtain approvals, increase the costs of compliance or restrict our ability to maintain any marketing
authorizations we may have obtained.
We may not be successful in our efforts to expand our pipeline of product candidates beyond etripamil for PSVT.
We intend to build a pipeline of product candidates beyond etripamil for PSVT and progress these product candidates
through clinical development. For example, on November 11, 2023, we announced positive Phase 2 clinical trial data on
etripamil for the treatment of AFib-RVR and we intend to conduct Phase 3 development for this indication. We may not be
able to successfully expand the scope of cardiovascular indications for etripamil beyond PSVT, or leverage our expertise
and experience with etripamil in PSVT to other product candidates. We may not be able to in-license, acquire or develop
future product candidates that are safe and effective. Even if we are successful in continuing to expand etripamil to other
indications and further build our pipeline, the potential product candidates that we identify may not be suitable for clinical
development, including as a result of safety, tolerability, efficacy or other characteristics that indicate that they are unlikely
to be drugs that will receive marketing approval, achieve market acceptance or obtain reimbursements from third-party
payors. If we do not successfully execute on our strategy of expanding our product pipeline, it could significantly harm our
financial position and adversely affect the trading price of our common shares.
The development of additional product candidates is risky and uncertain.
Efforts to identify, acquire or in-license, and then develop product candidates require substantial technical, financial and
human resources, whether or not any product candidates are ultimately identified. Our efforts may initially show promise in
identifying potential product candidates, yet fail to yield product candidates for clinical development, approved products or
commercial revenues for many reasons, including the following:
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the methodology used may not be successful in identifying potential product candidates;
competitors may develop alternatives that render any product candidates we develop obsolete;
any product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive
rights;
a product candidate may be shown to have harmful side effects or other characteristics that indicate it is
unlikely to be effective or otherwise does not meet applicable regulatory criteria;
a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or
at all; and
a product candidate may not be accepted as safe and effective by physicians, patients, the medical community
or third-party payors.
We have limited financial and management resources and, as a result, we may forego or delay pursuit of opportunities with
other product candidates or for other indications that later prove to have greater market potential. Our resource allocation
decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. If we do not
accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish
valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in circumstances
under which it would have been more advantageous for us to retain sole development and commercialization rights to such
product candidate. If we are unsuccessful in identifying and developing additional product candidates or are unable to do
so, our business may be harmed.
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Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials and we
cannot assure you that any ongoing, planned or future clinical trials will lead to results sufficient for the necessary
regulatory approvals.
Success in preclinical testing and earlier clinical trials does not ensure that later clinical trials will generate the same results
or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Preclinical tests and
Phase 1 and Phase 2 clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics
and to understand the side effects of product candidates at various doses and schedules. Success in preclinical studies and
earlier clinical trials does not ensure that later efficacy trials will be successful, nor does it predict final results. For
example, our Phase 2 clinical trial of etripamil for PSVT was conducted in an electrophysiology lab, a controlled setting, in
which episodes of supraventricular tachycardia, or SVT, were induced and etripamil was administered by healthcare
providers. Our Phase 3 clinical trials were conducted in an at-home setting with patients self-administering etripamil and
monitoring their cardiac activity as episodes of SVT occur. Additionally, in our Phase 2 clinical trial, four sprays of study
drug were dispensed to patients using four separate FDA approved single spray devices. In our Phase 3 clinical trials,
patients self-administered two to four sprays of study drug from an FDA approved device that is capable of delivering two
separate sprays. While our RAPID Phase 3 trial did meet its primary endpoint, our NODE-301 clinical trial did not meet its
primary endpoint. Etripamil and any future product candidates may fail to show the desired safety and efficacy in clinical
development despite positive results in preclinical studies or having successfully advanced through earlier clinical trials.
In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in
the design of a clinical trial may not become apparent until the clinical trial is well advanced. Clinical trial design flaws are
more likely in therapy areas, such as PSVT, where there are limited previous trials from which to learn and model clinical
trials. As an organization, we have limited experience designing clinical trials and may be unable to design and execute a
clinical trial to support regulatory approval. Many companies in the pharmaceutical and biotechnology industries have
suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and
earlier clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may
delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of
many factors, including changes in regulatory policy during the period of our product candidate development. Any such
delays could negatively impact our business, financial condition, results of operations and prospects.
We may encounter substantial delays or difficulties in our clinical trials.
We may not commercialize, market, promote or sell any product candidate without obtaining marketing approval from the
FDA or comparable foreign regulatory authorities, and we may never receive such approvals. It is impossible to predict
when or if any of our product candidates will prove effective or safe in humans and will receive regulatory approval.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete
preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product
candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and
is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. Moreover, preclinical
and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their
product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain
marketing approval of their products.
We may experience numerous unforeseen events prior to, during, or as a result of, clinical trials that could delay or prevent
our ability to receive marketing approval or commercialize etripamil and any future product candidates, including:
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delays in reaching a consensus with regulatory authorities on design or implementation of our clinical trials;
regulators or institutional review boards, or IRBs, may not authorize us or our investigators to commence a
clinical trial or conduct a clinical trial at a prospective trial site;
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delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs,
and clinical trial sites;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate,
enrollment in these clinical trials may be slower than we anticipate, patients may drop out of these clinical
trials at a higher rate than we anticipate or fail to return for post-treatment follow-up or we may fail to recruit
suitable patients to participate in a trial;
clinical trials of our product candidates may produce negative or inconclusive results;
imposition of a clinical hold by regulatory authorities as a result of a serious adverse event, concerns with a
class of product candidates or after an inspection of our clinical trial operations, trial sites or manufacturing
facilities;
occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its
potential benefits;
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
interruptions resulting from public health emergencies, or other geopolitical tensions, such as Russia’s
incursion into Ukraine or the Israel-Hamas war; or
we may decide, or regulators may require us, to conduct additional clinical trials or abandon product
development programs.
Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair
our ability to generate revenue from future drug sales or other sources. In addition, if we make manufacturing or
formulation changes to our product candidates, we may need to conduct additional testing to bridge our modified product
candidate to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive
right to commercialize our product candidates, if approved, or allow our competitors to bring competing drugs to market
before we do, which could impair our ability to successfully commercialize our product candidates and may harm our
business, financial condition, results of operations and prospects.
Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events
associated with our product candidates, we may:
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be delayed in obtaining marketing approval, if at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
be subject to additional post-marketing testing requirements;
be required to perform additional clinical trials to support approval or be subject to additional post-marketing
testing requirements;
have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its
distribution in the form of a modified risk evaluation and mitigation strategy, or REMS;
be subject to the addition of labeling statements, such as warnings or contraindications;
be sued; or
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experience damage to our reputation.
Our product development costs will also increase if we experience delays in testing or obtaining marketing approvals. We
do not know whether any of our preclinical studies or clinical trials will begin as planned, need to be restructured or be
completed on schedule, if at all.
Further, we, the FDA or an IRB may suspend our clinical trials at any time if it appears that we or our collaborators are
failing to conduct a trial in accordance with regulatory requirements, including the FDA’s current GCP regulations, that we
are exposing participants to unacceptable health risks, or if the FDA finds deficiencies in our investigational new drug
applications, or INDs, or the conduct of these trials. Therefore, we cannot predict with any certainty the schedule for
commencement and completion of future clinical trials. If we experience delays in the commencement or completion of our
clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates
could be negatively impacted, and our ability to generate revenues from our product candidates may be delayed.
Clinical trials are very expensive, time consuming and difficult to design and implement.
Our product candidates will require clinical testing before we are prepared to submit an NDA, or comparable application to
foreign regulatory authorities, for regulatory approval. We cannot predict with any certainty if or when we might submit an
application for regulatory approval for any of our product candidates or whether any such application will be approved by
the FDA or foreign regulatory authority. Human clinical trials are very expensive and difficult to design and implement, in
part because they are subject to rigorous regulatory requirements. For instance, the FDA or foreign regulatory authority
may not agree with our proposed endpoints for any future clinical trial of our product candidates, which may delay the
commencement of our clinical trials. In addition, we may not succeed in developing and validating disease relevant clinical
endpoints based on insights regarding biological pathways for the diseases we are studying. The clinical trial process is
also time consuming. We estimate that the successful completion of clinical trials for etripamil and any future product
candidates will take several years to complete. Furthermore, failure can occur at any stage, and we could encounter
problems that cause us to abandon or repeat clinical trials.
Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be delayed,
made more difficult or rendered impossible by multiple factors outside our control.
Identifying and qualifying patients to participate in our clinical trials is critical to our success. If the actual number of
patients with PSVT, AFib-RVR or any other indications that we may pursue for etripamil or future product candidates, is
smaller than we anticipate, we may encounter difficulties in enrolling patients in our clinical trials, thereby delaying or
preventing development and approval of etripamil and any future product candidates. Even once enrolled we may be
unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical
trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the existing
body of safety and efficacy data, the number and nature of competing treatments and ongoing clinical trials of competing
therapies for the same indication, the proximity of patients to clinical sites, the experience and capabilities of the clinical
sites to recruit the correct patients, and the eligibility criteria for the trial. In our Phase 3 clinical trials, we are attempting to
enroll elderly patients and patients taking concomitant medications that impact the heart, such as other calcium channel
blockers and beta blockers. We are doing this in order to obtain efficacy and safety data on patients representing the subset
of our intended population that is most vulnerable to safety concerns with the use of etripamil. Such patients may be
difficult to enroll in this trial, and the lack of data on these patients may negatively impact the approvability or labeling of
etripamil. Patient enrollment may also be affected by public health crises, such as patients experiencing difficulty accessing
clinical trial sites and complying with clinical trial protocols.
In our Phase 2 clinical trial of etripamil for the treatment of PSVT, only 104 of 199 enrolled patients completed the trials,
with 70 patients unable to induce or sustain episodes of SVT during the trial period. The first Phase 3 trial of PSVT for
etripamil enrolled over 400 diagnosed patients with PSVT meeting inclusion and exclusion criteria in order to achieve the
required treatment of 150 confirmed PSVT episodes. PSVT is episodic and unpredictable, and all of our Phase 3 trial
designs depended on patients experiencing and recognizing an episode of SVT, self-administering etripamil and monitoring
their cardiac activity using a monitoring device. We cannot control the timing of these episodes or guarantee
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that patients will correctly recognize the episode, self-administer etripamil and use the cardiac monitor as directed. There is
limited, if any, meaningful precedent from which to inform our trial design and make assumptions about patient enrollment
and compliance. Accordingly, our Phase 3 trial design is subject to significantly more risks than if there were numerous
studies upon which we could model our protocols.
Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in
patient enrollment in our clinical trials. In addition, any negative results we may report in clinical trials of etripamil and any
future product candidate may make it difficult or impossible to recruit and retain patients in other clinical trials of that same
product candidate. For example, we reported a failed primary endpoint from our NODE-301 trial in March 2020. Delays or
failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have
a harmful effect on our ability to develop etripamil or any future product candidates or could render further development
impossible. In addition, we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future
clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to
compel their actual performance. Similarly, our formulation of etripamil is designed to be self-administered as a nasal
spray. While we expect enrolled patients to adhere to the protocol, our ability to ensure patient compliance is limited.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their
regulatory approval, limit the commercial potential or result in significant negative consequences following any
potential marketing approval.
During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to
their doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these
conditions. Regulatory authorities may draw different conclusions or require additional testing to confirm these
determinations, if they occur. For example, in our Phase 2 clinical trial for PSVT, three serious adverse events, or SAEs,
were considered possibly related to etripamil, including an episode of second-degree AV block that subsequently and
spontaneously resolved. Calcium channel blockers have known side effects, such as slowing AV conduction, slowing the
heart rate below normal levels and hypotension, or low blood pressure. While we designed etripamil to have a short
pharmacodynamic effect to lower these risks, if etripamil is not quickly metabolized as designed, these known side effects
may become more pronounced in patients who use etripamil.
In addition, it is possible that as we test etripamil or any future product candidates in larger, longer and more extensive
clinical trials, or as use of etripamil or any future product candidates becomes more widespread if they receive regulatory
approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions
that did not occur or went undetected in previous trials, will be reported by subjects or patients. Many times, side effects
are only detectable after investigational drugs are tested in large-scale pivotal trials or, in some cases, after they are made
available to patients on a commercial scale after approval. If additional clinical experience indicates that etripamil or any
future product candidates have side effects or causes serious or life-threatening side effects, the development of the product
candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be
revoked, which would harm our business, prospects, operating results and financial condition.
Interim, “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may
change as more patient data become available and are subject to audit and verification procedures that could result in
material changes in the final data.
From time to time, we may publish interim, “topline” or preliminary data from our clinical trials. Interim data from clinical
trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as
patient enrollment continues and more patient data becomes available. Preliminary or “topline” data also remain subject to
audit and verification procedures that may result in the final data being materially different from the preliminary data we
previously published. As a result, interim and preliminary data should be viewed with caution until the final data are
available. Differences between preliminary or interim data and final data could significantly harm our business prospects
and may cause the trading price of our common shares to fluctuate significantly.
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As an organization, we have completed pivotal clinical trials, but we have never successfully submitted an NDA. We
may be unable to do so for any product candidates we may develop.
After completing pivotal clinical trials, we will need to obtain the approval of the FDA and other regulatory agencies to
market etripamil or any of our other product candidates. Carrying out later-stage clinical trials and the submission of a
successful NDA is a complicated process. As an organization, we have completed two Phase 3 clinical trials, we have other
trials ongoing, and we have limited experience in preparing, submitting and prosecuting regulatory filings. Due to our
limited experience with completing later stage trials, we may be unable to successfully and efficiently execute and
complete necessary clinical trials in a way that leads to NDA submission and approval of etripamil for the treatment of
PSVT. Our NDA for etripamil for PSVT received a refuse to file letter from FDA in December 2023 and despite guidance
from FDA concerning requirements for resubmission, our resubmission of the NDA may similarly be subject to a refusal to
file or even if accepted for filing by FDA, may result in a Complete Response Letter rather than approval. We may require
more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product
candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials could prevent us
from or delay us in commercializing etripamil for the treatment of PSVT or AFIB-RVR.
Even if we resubmit the NDA for etripamil for PSVT, the FDA may refuse to accept it for review or issue a complete
response letter rather than approval for commercial marketing. We may require more time and incur greater costs than our
competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to
commence or complete, or delays in, our planned clinical trials could prevent us from or delay us in commercializing
etripamil for the treatment of PSVT or AFIB-RVR.
We may explore additional strategic collaborations that may never materialize, or we may be required to relinquish
important rights to and control over the development of our product candidates to any future collaborators.
We intend to continue to periodically explore a variety of possible strategic collaborations in an effort to gain access to
additional product candidates or resources. We are likely to face significant competition in seeking appropriate strategic
collaborators, and strategic collaborations can be complicated and time consuming to negotiate and document. We may not
be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will
enter into any strategic collaborations because of the numerous risks and uncertainties associated with establishing them.
Future collaborations could subject us to a number of risks, including:
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we may be required to undertake the expenditure of substantial operational, financial and management
resources;
we may be required to issue equity securities that would dilute our shareholders’ percentage ownership of our
Company;
we may be required to assume substantial actual or contingent liabilities;
we may not be able to control the amount and timing of resources that our strategic collaborators devote to
the development or commercialization of our product candidates;
strategic collaborators may select indications or design clinical trials in a way that may be less successful than
if we were doing so;
strategic collaborators may delay clinical trials, provide insufficient funding, terminate a clinical trial or
abandon a product candidate, repeat or conduct new clinical trials or require a new version of a product
candidate for clinical testing;
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strategic collaborators may not pursue further development of products resulting from the strategic
collaboration arrangement or may elect to discontinue research and development programs;
strategic collaborators may not commit adequate resources to the marketing and distribution of our product
candidates, limiting our potential revenues from these products;
disputes may arise between us and our strategic collaborators that result in the delay or termination of the
research or development of our product candidates or that result in costly litigation or arbitration that diverts
management’s attention and consumes resources;
strategic collaborators may experience financial difficulties;
strategic collaborators may not properly maintain or defend our intellectual property rights or may use our
proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose
us to potential litigation;
business combinations or significant changes in a strategic collaborator’s business strategy may adversely
affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement;
strategic collaborators could decide to move forward with a competing product candidate developed either
independently or in collaboration with others, including our competitors; and
strategic collaborators could terminate the arrangement or allow it to expire, which would delay the
development and may increase the cost of developing our product candidates.
Risks Related to the Commercialization of Our Product Candidates
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and
sell etripamil or any future product candidates, we may not be successful in commercializing etripamil or any future
product candidates, if and when they are approved.
To successfully commercialize etripamil or any future product candidate that may result from our development programs,
we will need to build out our sales and marketing capabilities, either on our own or with others. The establishment and
development of our own commercial team or the establishment of a contract field force to market any product candidate we
may develop will be expensive and time consuming and could delay any drug launch. Moreover, we cannot be certain that
we will be able to successfully develop this capability. We may seek to enter into collaborations with other entities to use
their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable
terms, if at all. If any current or future collaborators do not commit sufficient resources to commercialize our product
candidates, or we are unable to develop the necessary capabilities on our own, we may be unable to generate sufficient
revenue to sustain our business. We may compete with many companies that currently have extensive, experienced, and
well-funded marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. We will likely
also face competition if we seek third parties to assist us with the sales and marketing efforts of etripamil and any future
product candidates. Without an internal team or the support of a third party to perform marketing and sales functions, we
may be unable to compete successfully against these more established companies.
Even if etripamil or any future product candidates receive marketing approval, they may fail to achieve market
acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial
success.
Even if etripamil or any future product candidates receive marketing approval, they may fail to gain market acceptance by
physicians, patients, third-party payors and others in the medical community. If such product candidates do not achieve an
adequate level of acceptance, we may not generate significant drug revenue and may not become profitable. The degree
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of market acceptance of etripamil or any future product candidates, if approved for commercial sale, will depend on a
number of factors, including but not limited to:
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the convenience and ease of administration compared to alternative treatments and therapies;
the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
the efficacy and potential advantages compared to alternative treatments and therapies;
the effectiveness of sales and marketing efforts;
the prevalence and severity of any side effects;
the strength of our relationships with patient communities;
the cost of treatment in relation to alternative treatments and therapies, including any similar generic
treatments;
our ability to offer such drug for sale at competitive prices;
the strength of marketing and distribution support;
the availability of third-party coverage and adequate reimbursement; any restrictions on the use of the drug
together with other medications; and the awareness and support from key opinion leaders in cardiology.
Our efforts to educate physicians, patients, third-party payors and others in the medical community on the benefits of
etripamil or any future product candidates may require significant resources and may never be successful. Such efforts may
require more resources than are typically required due to the potential of etripamil to shift the treatment paradigm away
from acute-care settings to self-administration. Because we expect sales of etripamil or any future product candidates, if
approved, to generate substantially all of our revenues for the foreseeable future, the failure of these product candidates to
find market acceptance would harm our business.
Even if we successfully obtain approval for etripamil, its success will be dependent on its proper use.
While we have designed etripamil to be self-administered, we cannot control the successful use of the product. While we
have conducted, and intend in the future to conduct, human factors studies to determine how to optimize the instructions
for use, the results in our clinical trials may not be replicated by users in the future. If we are not successful in promoting
the proper use of etripamil, if approved, we may not be able to achieve market acceptance or effectively commercialize the
drug. In addition, even in the event of proper use of etripamil, individual devices may fail. Increasing the scale of
production inherently creates increased risk of manufacturing errors, and we may not be able to adequately inspect every
device that is produced, and it is possible that individual devices may fail to perform as designed. Manufacturing errors
could negatively impact market acceptance of any of our product candidates that receive approval, result in negative press
coverage, or increase our liability.
If the market opportunities for etripamil and any future product candidates are smaller than we estimate, our business
may suffer.
Our eligible patient population may differ significantly from the actual market addressable by our product candidates. Our
projections of both the number of people who have these conditions, as well as the subset of people with these diseases
who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These
estimates have been derived from a variety of sources, including the scientific literature, insurance claims databases or
market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of
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these diseases. The number of patients may turn out to be lower than expected. Likewise, the potentially addressable
patient population for each of our product candidates may be limited or may not be amenable to treatment with our product
candidates, and new patients may become increasingly difficult to identify or access. If the market opportunities for our
product candidates are smaller than we estimate, our business and results of operations could be adversely affected.
We may face substantial competition, which may result in others developing or commercializing drugs before or more
successfully than us.
The development and commercialization of new drugs is highly competitive. We may face competition from major
pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. Potential
competitors also include academic institutions, government agencies and other public and private research organizations
that conduct research, seek patent protection and establish collaborative arrangements for research, development,
manufacturing and commercialization.
More established companies may have a competitive advantage over us due to their greater size, resources and institutional
experience. In particular, these companies have greater experience and expertise in securing reimbursement, government
contracts and relationships with key opinion leaders, conducting testing and clinical trials, obtaining and maintaining
regulatory approvals and distribution relationships to market products and marketing approved drugs. These companies
also have significantly greater research and marketing capabilities than we do. If we are not able to compete effectively
against existing and potential competitors, our business and financial condition may be harmed.
As a result of these factors, our competitors may obtain regulatory approval of their drugs before we are able to, which may
limit our ability to develop or commercialize etripamil and any future product candidates. Our competitors may also
develop therapies that are safer, more effective, more widely accepted or less expensive than ours, and may also be more
successful than we in manufacturing and marketing their drugs. These advantages could render our product candidates
obsolete or non-competitive before we can recover the costs of such product candidates’ development and
commercialization.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being
concentrated among a smaller number of our competitors. Smaller and early-stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. These third
parties compete with us in recruiting and retaining qualified scientific, management and commercial personnel,
establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
If we commercialize etripamil or any future product candidates outside of the United States, a variety of risks associated
with international operations could harm our business.
We intend to seek approval to market etripamil outside of the United States and may do so for future product candidates. If
we market approved products outside of the United States, we expect that we will be subject to additional risks in
commercialization including:
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different regulatory requirements for approval of therapies in foreign countries;
reduced protection for intellectual property rights;
unexpected changes in tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and
other obligations incident to doing business in another country;
foreign reimbursement, pricing and insurance regimes;
workforce uncertainty in countries where labor unrest is more common than in the United States;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities
abroad; and
business interruptions resulting from pandemics and public health crisis (such as the COVID-19 pandemic),
geopolitical actions, including war (such as the Russia-Ukraine and Israel-Hamas wars) and terrorism or
natural disasters including earthquakes, typhoons, floods and fires.
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal
requirements imposed by many of the individual countries in and outside of Europe with which we will need to comply.
Many biopharmaceutical companies have found the process of marketing their own products in foreign countries to be very
challenging.
The pharmaceutical industry in China is highly regulated, and such regulations are subject to change, which may
negatively affect the commercialization of the Company’s medicines and drug candidates in that country.
On May 15, 2021, the Company entered into a license and collaboration agreement, or the License Agreement, with Ji
Xing, which is an entity affiliated with RTW Investments, LP (RTW), an existing shareholder. Under the License
Agreement, the Company 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). The pharmaceutical industry in China is subject to comprehensive government regulation and supervision,
encompassing the approval, registration, manufacturing, packaging, licensing and marketing of new medicines. In recent
years, the regulatory framework in China for pharmaceutical companies has undergone significant changes, which the
Company expects will continue. Any such change may cause delays in or prevent the successful research, development,
manufacturing or commercialization of etripamil in the greater China region and may reduce the current benefits the
Company believes are available to it from licensing such products to be developed, manufactured and sold in the greater
China region. In addition, any failure by the Company or its partners to maintain compliance with applicable laws and
regulations or obtain and maintain required licenses and permits may result in the suspension or termination of its business
activities in China or create other legal risks.
Coverage and adequate reimbursement may not be available for etripamil or any future product candidates, which
could make it difficult for us to gain market acceptance.
Market acceptance and sales of any product candidates that we commercialize, if approved, will depend in part on the
extent to which reimbursement for these drugs and related treatments will be available from third-party payors, including
government health administration authorities, managed care organizations and other private health insurers. Third-party
payors decide for which therapies and establish reimbursement levels. While no uniform policy for coverage and
reimbursement exists in the United States, third-party payors often rely upon Medicare coverage policy and payment
limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage
and amount of reimbursement to be provided for any product candidates that we develop will be made on a payor-by-payor
basis. Therefore, one payor’s determination to provide coverage for a drug does not assure that other payors will also
provide coverage, and adequate reimbursement, for the drug. Additionally, a third-party payor’s decision to provide
coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Each payor determines
whether or not it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and on what
tier of its formulary it will be placed. The position on a payor’s list of covered drugs, or formulary, generally
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determines the co-payment that a patient will need to make to obtain the therapy and can strongly influence the adoption of
such therapy by patients and physicians. Patients who are prescribed treatments for their conditions and providers
prescribing such services generally rely on third-party payors to reimburse all or part of the associated healthcare costs.
Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant
portion of the cost of our products.
Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular
medications. We cannot be sure that coverage and reimbursement will be available for any drug that we commercialize
and, if reimbursement is available, what the level of reimbursement will be. Inadequate coverage and reimbursement may
impact the demand for, or the price of, any drug for which we obtain marketing approval. If coverage and adequate
reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize
etripamil or any future product candidates that we develop.
In addition, we expect that the increased emphasis on managed care and cost containment measures in the United States by
third-party payors and government authorities will continue and will place pressure on pharmaceutical pricing and
coverage. Coverage policies and third-party reimbursement rates may change at any time. Therefore, even if favorable
coverage and reimbursement status is attained for one or more drug products for which we receive regulatory approval, less
favorable coverage policies and reimbursement rates may be implemented in the future. If we are unable to obtain and
maintain sufficient third-party coverage and adequate reimbursement for our drug products, the commercial success of our
drug products may be greatly hindered and our financial condition and results of operations may be materially and
adversely affected.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of
any product candidates that we may develop.
We face an inherent risk of product liability exposure related to the testing of etripamil or any future product candidates in
clinical trials and may face an even greater risk if we commercialize any product candidate that we may develop. If we
cannot successfully defend ourselves against claims that any such product candidates caused injuries, we could incur
substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any product candidate that we may develop;
loss of revenue;
substantial monetary awards to trial participants or patients;
significant time and costs to defend the related litigation;
withdrawal of clinical trial participants;
increased insurance costs;
the inability to commercialize any product candidate that we may develop; and injury to our reputation and
significant negative media attention.
Although we maintain clinical trial liability insurance coverage with maximum coverage of $10 million per incident and an
aggregate loss limit of $10 million such insurance may not be adequate to cover all liabilities that we may incur with a
medical product during the clinical trials. We anticipate that we will need to increase our insurance coverage each time we
commence a clinical trial and maintain a product liability insurance if we successfully commercialize any product
candidate. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a
reasonable cost or in an amount adequate to satisfy any liability that may arise.
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Risks Related to Regulatory Compliance
Even if we obtain and maintain approval for etripamil or any future product candidates from the FDA, we may never
obtain approval of etripamil or any future product candidates outside of the United States, which would limit our
market opportunities and could harm our business.
Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by
regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure
approval by regulatory authorities in other foreign countries or by the FDA. Sales of etripamil or any future product
candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and
marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable foreign regulatory
authorities also must approve the manufacturing and marketing of the product candidate in those countries. Approval
procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and
more onerous than, those in the United States, including additional preclinical studies or clinical trials. In many countries
outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in
that country. In some cases, the price that we intend to charge for any product candidates, if approved, is also subject to
approval. Obtaining approval for etripamil or any future product candidates in the European Union from the European
Commission following the opinion of the European Medicines Agency, if we choose to submit a marketing authorization
application there, would be a lengthy and expensive process. Even if a product candidate is approved, the FDA or the
European Commission, as the case may be, may limit the indications for which the drug may be marketed, require
extensive warnings on the drug labeling or require expensive and time-consuming additional clinical trials or reporting as
conditions of approval. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could
result in significant delays, difficulties and costs for us and could delay or prevent the introduction of etripamil or any
future product candidates in certain countries.
Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also,
regulatory approval for our product candidates may be withdrawn. If we fail to comply with the regulatory requirements,
our target market will be reduced and our ability to realize the full market potential of etripamil or any future product
candidates will be harmed and our business, financial condition, results of operations and prospects could be harmed.
Even if we obtain regulatory approval for etripamil or any future product candidates, they will remain subject to
ongoing regulatory oversight.
Even if we obtain regulatory approvals for etripamil or any future product candidates, such approvals will be subject to
ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-
keeping and submission of safety and other post-market information. Any regulatory approvals that we receive for
etripamil or any future product candidates may also be subject to a REMS, limitations on the approved indicated uses for
which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-
marketing testing, including Phase 4 trials, and surveillance to monitor the quality, safety and efficacy of the drug. Such
regulatory requirements may differ from country to country depending on where we have received regulatory approval.
In addition, drug manufacturers and their facilities are subject to payment of user fees and continual review and periodic
inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to
commitments made in the NDA or foreign marketing application. If we, or a regulatory authority, discover previously
unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or problems with the facility
where the drug is manufactured or if a regulatory authority disagrees with the promotion, marketing or labeling of that
drug, a regulatory authority may impose restrictions relative to that drug, the manufacturing facility or us, including
requesting a recall or requiring withdrawal of the drug from the market or suspension of manufacturing.
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If we fail to comply with applicable regulatory requirements following approval of etripamil or any future product
candidates, a regulatory authority may:
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issue an untitled letter or warning letter asserting that we are in violation of the law;
seek an injunction or impose administrative, civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve a pending NDA or comparable foreign marketing application or any supplements thereto
submitted by us or our partners;
restrict the marketing or manufacturing of the drug;
seize or detain the drug or otherwise require the withdrawal of the drug from the market;
refuse to permit the import or export of product candidates; or
refuse to allow us to enter into supply contracts, including government contracts.
Moreover, the FDA strictly regulates the promotional claims that may be made about drug products. In particular, a product
may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. Physicians,
on the other hand, may prescribe products for off-label uses. Although the FDA and other regulatory agencies do not
regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict
promotional communications from companies or their sales force with respect to off-label uses of products for which
marketing clearance has not been issued. However, biopharmaceutical companies may share truthful and not misleading
information that is otherwise consistent with the labeling. The FDA and other agencies actively enforce the laws and
regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label
uses may be subject to significant civil, criminal and administrative penalties.
Any government investigation of alleged violations of law could require us to expend significant time and resources in
response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our
ability to commercialize etripamil or any future product candidates and harm our business, financial condition, results of
operations and prospects.
The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted
that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to
changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain
profitability, which would adversely affect our business, prospects, financial condition and results of operations.
In addition, we cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative or executive action, either in the United States or abroad.
Our relationships with customers, physicians, and third-party payors are subject, directly or indirectly, to federal and
state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other
healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face
substantial penalties.
Healthcare providers, including physicians and third-party payors in the United States and elsewhere will play a primary
role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our
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current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-
party payors subject us to various federal and state fraud and abuse laws, data privacy and security laws, transparency laws
and other healthcare laws that may constrain the business or financial arrangements and relationships through which we
research, sell, market, and distribute our products, if we obtain marketing approval.
The federal Anti-Kickback Statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the
referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other
federal healthcare programs. Remuneration has been broadly defined to include anything of value, including cash,
improper discounts, and free or reduced price items and services. Additionally, the intent standard under the federal Anti-
Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act of 2010, or collectively, PPACA, to a stricter standard such that a person or entity does not
need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Further,
PPACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
The federal false claims, including the False Claims Act, and civil monetary penalties laws, which prohibit individuals or
entities from, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment
of federal funds, and knowingly making, or causing to be made, a false record or statement material to a false or fraudulent
claim to avoid, decrease or conceal an obligation to pay money to the federal government.
The federal Health Information Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other
things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program,
or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement,
in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-
Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in
order to have committed a violation.
HIPAA, as amended by HITECH, also imposes among other things, certain standards and obligations on covered entities
including certain healthcare providers, health plans and healthcare clearinghouses, and their respective business associates
that create, receive, maintain, or transmit individually identifiable health information for or on behalf of a covered entity as
well as their covered subcontractors relating to the privacy, security, transmission and breach reporting of individually
identifiable health information.
The federal Physician Payments Sunshine Act, and its implementing regulations, require certain manufacturers of drugs,
devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health
Insurance Program to report annually to Centers for Medicare & Medicaid Services information related to certain payments
and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors),
other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as
ownership and investment interests held by the physicians described above and their immediate family members.
We will also be subject to healthcare regulation and enforcement by the U.S. federal government and the states and any
other countries in which we conduct our business, including our research, and the sales, marketing and distribution of our
product candidates and products once they have obtained marketing authorization.
Analogous state and foreign anti-kickback and false claims laws that may apply to sales or marketing arrangements and
claims involving healthcare items or services reimbursed by non-governmental third party payors, including private
insurers, or that apply regardless of payor; state laws that require pharmaceutical companies to comply with the
pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the
federal government; state and local laws that require drug manufacturers to report information related to payments and
other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require the
reporting of information related to drug pricing; state and local laws requiring the registration of pharmaceutical sales
representatives; and state and foreign laws governing the privacy and security of health information in some circumstances,
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many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will
likely be costly. It is possible that governmental authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that
may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines,
disgorgement, imprisonment, exclusion from participating in government funded healthcare programs, such as Medicare
and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or
similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm and
the curtailment or restructuring of our operations.
If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with
applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from
government funded healthcare programs. Even if resolved in our favor, litigation or other legal proceedings relating to
healthcare laws and regulations may cause us to incur significant expenses and could distract our technical and
management personnel from their normal responsibilities. In addition, there could be public announcements of the results
of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results
to be negative, it could have a substantial adverse effect on the price of our common shares. Such litigation or proceedings
could substantially increase our operating losses and reduce the resources available for development, manufacturing, sales,
marketing or distribution activities. Uncertainties resulting from the initiation and continuation of litigation or other
proceedings relating to applicable healthcare laws and regulations could have a material adverse effect on our ability to
compete in the marketplace.
Healthcare legislative reform measures may have a negative impact on our business and results of operations.
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory
changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product
candidates, restrict or regulate post approval activities, and affect our ability to profitably sell any product candidates for
which we obtain marketing approval. In particular, there have been and continue to be a number of initiatives at the U.S.
federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March
2010 the PPACA, was passed, which substantially changed the way healthcare is financed by both governmental and
private payors in the United States. There have been executive, judicial and Congressional challenges to certain aspects of
the PPACA. For example, the Tax Cuts and Jobs Act of 2017, or the Tax Act, was enacted, which included a provision that
repealed, effective January 1, 2019, the tax based shared responsibility payment imposed by the PPACA on certain
individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the
“individual mandate.” In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020,
the PPACA mandated “Cadillac” tax on high cost employer sponsored health coverage and medical device tax and,
effective January 1, 2021, also eliminated the health insurer tax. On June 17, 2021, the U.S. Supreme Court dismissed a
challenge on procedural grounds that argued the PPACA is unconstitutional in its entirety because the “individual mandate”
was repealed by Congress. Moreover, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued
an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through
the PPACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their
existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration
projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining
access to health insurance coverage through Medicaid or the PPACA. Further, on August 16, 2022, President Biden signed
the Inflation Reduction Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for
individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025. The IRA also eliminates
the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum
out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the PPACA will be
subject to judicial or Congressional challenges in the future. It is unclear how any additional healthcare reform measures of
the Biden administration will impact the PPACA and our business.
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Further, in the United States there has been heightened governmental scrutiny over the manner in which manufacturers set
prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal
and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of
prescription drugs under government payor programs, and review the relationship between pricing and manufacturer
patient programs. At the federal level, in July 2021, the Biden administration released an executive order, “Promoting
Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s
executive order, on September 9, 2021, the U.S. Department of Health and Human Services, or HHS, released a
Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety
of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to
advance these principles. Further, the IRA, among other things (i) directs HHS to negotiate the price of certain high-
expenditure, single-source drugs and biologics covered under Medicare and (ii) imposes rebates under Medicare Part B and
Medicare Part D to penalize price increases that outpace inflation. These provisions take effect progressively starting in
fiscal year 2023. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price
negotiations, although they may be the Medicare drug price negotiation program is currently subject to legal challenges. It
is unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. In
response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report
outlining three new models for testing by the Centers for Medicare & Medicaid Services, or CMS, Innovation Center
which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is
unclear whether the models will be utilized in any health reform measures in the future. Further, on December 7, 2023, the
Biden administration announced an initiative to control the price of prescription drugs through the use of march-in rights
under the Bayh-Dole Act. On December 8, 2023, the National Institute of Standards and Technology published for
comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first
time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While
march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. At the
state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions
on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to
encourage importation from other countries and bulk purchasing. For example, on January 5, 2024, the FDA approved
Florida’s Section 804 Importation Program, or SIP, proposal to import certain drugs from Canada for specific state
healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and
whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals
that are pending review by the FDA. Any such approved importation plans, when implemented, may result in lower drug
prices for products covered by those programs. We expect that additional U.S. healthcare reform measures will be adopted
in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and
services, which could result in reduced demand for etripamil or any future product candidates or additional pricing
pressures.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. On August 2, 2011,
the Budget Control Act of 2011 was signed into law, which includes reductions to Medicare payments to providers of 2%
per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will
remain in effect until 2032 unless additional Congressional action is taken Additionally, on March 11, 2021, President
Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap,
currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs,
beginning January 1, 2024. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which,
among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of
limitations period for the government to recover overpayments to providers from three to five years.
We cannot predict the likelihood, nature or extent of health reform initiatives that may arise from future legislation or
administrative action in the United States or any other jurisdiction. If we or any third parties we may engage are slow or
unable to adapt to changes in existing or new requirements or policies, or if we or such third parties are not able to maintain
regulatory compliance, etripamil or any future product candidates we may develop may lose any regulatory approval that
may have been obtained and we may not achieve or sustain profitability.
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Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must
comply with environmental laws and regulations, which can be expensive and restrict how we do business.
Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the controlled
storage, use and disposal of hazardous materials owned by us, including the components of etripamil and any future
product candidates and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and
regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases,
these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities
pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our
commercialization efforts, research and development efforts and business operations, environmental damage resulting in
costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of
these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party
manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws
and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from
these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our
resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our
business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to
become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We
do not currently carry hazardous waste insurance coverage.
Risks Related to Our Dependence on Third Parties
We will rely on third parties to produce clinical and commercial supplies of etripamil and any future product
candidates.
We do not own or operate facilities for drug manufacturing, storage and distribution, or testing. We are dependent on third
parties to manufacture the clinical supplies of etripamil and any future product candidates. The facilities used by our
contract manufacturers to manufacture etripamil and any future product candidates must be approved by the FDA pursuant
to inspections that will be conducted after we resubmit our NDA to the FDA. We do not control the manufacturing process
of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements,
known as cGMPs for manufacture of active drug substances, nasal spray device, and finished product candidates. If our
contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict
regulatory requirements of the FDA or others, we will not be able to secure and/or maintain regulatory approval for our
product candidates. In addition, we have no control over the ability of our contract manufacturers to maintain adequate
quality control, quality assurance and qualified personnel. We intend to use multiple contract manufacturers for clinical and
commercial supply of our drug product and drug substance. As such, we will need to demonstrate to the FDA that the drug
product and drug substance from these contract manufacturers are comparable, which may include conducting additional
equivalence studies. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the
manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative
manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market
our product candidates, if approved. Any significant delay in the supply of a product candidate, or the raw material
components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably
delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates.
Further, we also will rely on third-party manufacturers to supply us with sufficient quantities of etripamil and any future
product candidates, if approved, for commercialization. We do not yet have a commercial supply agreement for
commercial quantities of drug substance, drug product or nasal spray device. If we are not able to meet market demand for
any approved product, it would negatively affect our ability to generate revenue, harm our reputation, and could have a
material and adverse effect on our business and financial condition. Increasing the scale of production inherently creates
increased risk of manufacturing errors, and we may not be able to adequately inspect every device that is produced, and it
is possible that individual devices may fail to perform as designed. Manufacturing errors could negatively impact market
acceptance of any of our product candidates that receive approval, result in negative press coverage, or increase our
liability.
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Further, our reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured
product candidates ourselves, including:
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inability to meet our product specifications and quality requirements consistently;
delay or inability to procure or expand sufficient manufacturing capacity;
issues related to scale-up of manufacturing;
costs and validation of new equipment and facilities required for scale-up;
our third-party manufacturers may not be able to execute our manufacturing procedures and other logistical
support requirements appropriately;
our third-party manufacturers may fail to comply with cGMP-compliance and other inspections by the FDA
or other comparable regulatory authorities;
our inability to negotiate manufacturing agreements with third parties under commercially reasonable terms,
if at all;
breach, termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time
that is costly or damaging to us;
reliance on a single source for the nasal spray device;
our third-party manufacturers may not devote sufficient resources to our product candidates;
we may not own, or may have to share, the intellectual property rights to any improvements made by our
third-party manufacturers in the manufacturing process for our product candidates;
operations of our third party manufacturers or suppliers could be disrupted by conditions unrelated to our
business or operations, including public health emergencies, natural disasters, such as earthquakes, fires or
floods, the bankruptcy of the manufacturer or supplier, carrier disruptions or increased costs that are beyond
our control, and global macro uncertainty related to Russia’s incursion into Ukraine or Israel-Hamas war.
In addition, if we enter into a strategic collaboration with a third party for the commercialization of etripamil or any future
product candidate, we will not be able to control the amount of time or resources that they devote to such efforts. If any
strategic collaborator does not commit adequate resources to the marketing and distribution of etripamil or any future
product candidate, it could limit our potential revenues.
Any of these events could lead to clinical trial delays, failure to obtain regulatory approval or affect our ability to
successfully commercialize etripamil or any future product candidates once approved. Some of these events could be the
basis for FDA action, including injunction, request for recall, seizure, or total or partial suspension of production.
We rely on third parties to conduct, supervise and monitor our preclinical studies and clinical trials, and if those third
parties perform in an unsatisfactory manner, it may harm our business.
We have engaged CROs to conduct our Phase 3 clinical trials of etripamil for the treatment of PSVT, and our Phase 2
clinical trial of etripamil for the treatment of AFib-RVR, and we expect to engage a CRO for future clinical trials of
etripamil and any future product candidates. We do not currently have the ability to independently conduct any clinical
trials. We rely on CROs and clinical trial sites to ensure the proper and timely conduct of our preclinical studies and
clinical trials, and we expect to have limited influence over their actual performance. We rely upon CROs to monitor and
manage data for our clinical programs, as well as the execution of future nonclinical studies. We expect to control only
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aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our preclinical studies and
clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our
reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are required to comply with the good laboratory practices, or GLPs, and GCPs, which are regulations
and guidelines enforced by the FDA and comparable foreign regulatory authorities in the form of International Conference
on Harmonization guidelines for any of our product candidates that are in preclinical and clinical development. The
regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial
sites. Although we rely on CROs to conduct GCP-compliant clinical trials, we remain responsible for ensuring that each of
our GLP preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol and
applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities. If we
or our CROs fail to comply with GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the
FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our
marketing applications. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number
of subjects, we may be required to repeat clinical trials, which would delay the regulatory approval process.
Our reliance on third parties to conduct clinical trials will result in less direct control over the management of data
developed through clinical trials than would be the case if we were relying entirely upon our own staff. Any failure by third
parties to prevent unauthorized access, use or disclosure of data, including personal data regarding our patients or
employees, could harm our reputation, cause us not to comply with federal and/or state breach notification laws and foreign
law equivalents and otherwise subject us to liability under laws and regulations that protect the privacy and security of
personal data.
Communicating with CROs and other third parties can be challenging, potentially leading to mistakes as well as difficulties
in coordinating activities. Such parties may:
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have staffing difficulties;
fail to comply with contractual obligations;
experience regulatory compliance issues;
experience business disruptions from public health emergencies; or
undergo changes in priorities or become financially distressed.
These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and
may subject us to unexpected cost increases that are beyond our control. If our CROs do not successfully carry out their
contractual duties or obligations, fail to meet expected deadlines, fail to comply with regulatory requirements, or if the
quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or
regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may
not be able to obtain regulatory approval for, or successfully commercialize, any product candidate that we develop. As a
result, our financial results and the commercial prospects for any product candidate that we develop would be harmed, our
costs could increase, and our ability to generate revenue could be delayed. While we will have agreements governing their
activities, our CROs will not be our employees, and we will not control whether or not they devote sufficient time and
resources to our future clinical and nonclinical programs. These CROs may also have relationships with other commercial
entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development
activities that could harm our business. We face the risk of potential unauthorized disclosure or misappropriation of our
intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access
and exploit our proprietary technology.
If our relationship with any of these CROs terminates, we may not be able to enter into arrangements with alternative
CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and
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requires management time and focus. In addition, there is a natural transition period when a new CRO commences work.
As a result, delays occur, which can negatively affect our ability to meet our desired clinical development timelines.
Though we intend to manage carefully our relationships with our CROs, there can be no assurance that we will not
encounter challenges or delays in the future or that these delays or challenges will not have a negative impact on our
business, financial condition and prospects.
In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to
time and receive compensation in connection with such services. Under certain circumstances, we may be required to
report some of these relationships to the FDA. The FDA may conclude that a financial relationship between us and a
principal investigator has created a conflict of interest or otherwise affected interpretation of the trial. The FDA may
therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial
itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA
and may ultimately lead to the denial of marketing approval of etripamil and any future product candidates.
Etripamil is intended to be used with a nasal-spray device, which may result in additional regulatory and supply risks.
Etripamil is administered through a nasal-spray device that we obtain from a single source supplier, and that supplier is
relying on multiple component suppliers, some of whom are single source suppliers. There are a limited number of device
suppliers that address our particular design requirements. While we intend to explore alternative nasal spray devices for the
delivery of etripamil that are produced by other suppliers to have backup sources for future commercial needs, we may not
identify other nasal device suppliers that meet our requirements, and such alternative devices may not be as effective at the
delivery of etripamil as our current supplier’s device. We do not currently have a formal supply agreement with our current
sole nasal spray device supplier, and obtain such devices as needed. Even if we reach an agreement for commercial supply,
if we do not have additional nasal spray device suppliers, our sole supplier may be unable to meet our demands.
Unpredictability of supply could have a material adverse effect on our commercialization plans for etripamil, if approved,
and could have a material adverse effect on our business and financial condition.
Our finished drug product in the intra-nasal delivery system will be regulated as a drug/device combination product. We
may experience delays in obtaining regulatory approval of etripamil given the increased complexity of the review process
when approval of the product and a delivery device is sought under a single marketing application. In the United States,
each component of a combination product is subject to the requirements established by the FDA for that type of
component, whether a drug, biologic, or device. The delivery system device would be subject to FDA device requirements
regarding design, performance and validation as well as human factors testing, among other things.
Delays in or failure of the studies conducted by us, or failure of our Company, our collaborators, if any, or the third-party
providers or suppliers to obtain or maintain regulatory approval could result in increased development costs, delays in or
failure to obtain regulatory approval, and associated delays in etripamil reaching the market. Further, failure to successfully
develop or supply the device, or to gain or maintain its approval, could adversely affect sales of etripamil.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for etripamil or any future product candidates, or if the scope
of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize drugs
similar or identical to ours, and our ability to commercialize successfully our product candidates may be impaired.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other
countries with respect to etripamil and any future product candidates. We seek to protect our proprietary position by filing
patent applications in the United States and abroad related to our product candidates. The patent application and
prosecution process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable
patent applications at a reasonable cost or in a timely manner. We may also fail to identify patentable aspects of our
research and development before it is too late to obtain patent protection. Therefore, these and any of our patents and
applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. It is
possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the
future,
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such as with respect to proper priority claims, inventorship, claim scope or patent term adjustments. If any future licensors
or licensees are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent
rights, such patent rights could be compromised and we might not be able to prevent third parties from making, using and
selling competing products. If there are material defects in the form or preparation of our patents or patent applications,
such patents or applications may be invalid and unenforceable. Moreover, our competitors may independently develop
equivalent knowledge, methods and know-how. Any of these outcomes could impair our ability to prevent competition
from third parties.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain. Changes in either the
patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our
patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to
the same extent as the laws of the United States. No consistent policy regarding the breadth of claims allowed in
biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. In
addition, the determination of patent rights with respect to pharmaceutical compounds and technologies commonly
involves complex legal and factual questions, which has in recent years been the subject of much litigation. As a result, the
issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Furthermore, recent
changes in patent laws in the United States, including the America Invents Act of 2011, may affect the scope, strength and
enforceability of our patent rights or the nature of proceedings that may be brought by us related to our patent rights.
We may not be aware of all third-party intellectual property rights potentially relating to etripamil or any future product
candidates. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent
applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some
cases not at all. For example, U.S. applications filed before November 28, 2000 and certain U.S. applications filed after
that date that will not be filed outside the United States remain confidential until a patent issues. Therefore, we cannot be
certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were
the first to file for patent protection of such inventions. Similarly, should we own any patents or patent applications in the
future, we may not be certain that we were the first to file for patent protection for the inventions claimed in such patents or
patent applications. As a result, the issuance, scope, validity and commercial value of our patent rights cannot be predicted
with any certainty. Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and
Trademark Office, or USPTO, or become involved in opposition, derivation, reexamination, inter parties review, post grant
review, or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of
others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate,
our patent rights, allow third parties to commercialize our technology or product candidates and compete directly with us,
without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party
patent rights.
Our pending and future patent applications may not result in patents being issued that protect our technology or product
candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and
products. Even if our patent applications are issued as patents, they may not be issued in a form that will provide us with
any meaningful protection against competing products or processes sufficient to achieve our business objectives, prevent
competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able
to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-
infringing manner. Our competitors may seek to market generic versions of any approved products by submitting
abbreviated new drug applications to the FDA in which they claim that patents owned or licensed by us are invalid,
unenforceable and/or not infringed. Alternatively, our competitors may seek approval to market their own products similar
to or otherwise competitive with our products. In these circumstances, we may need to defend and/or assert our patents,
including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with
jurisdiction may find our patents invalid and/or unenforceable.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and
licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may
result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in
whole or in part, which could limit our ability to stop others from using or commercializing similar or identical
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technology and products, or limit the duration of the patent protection of our technology and products. In addition, given
the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by government patent agencies, and our patent protection
could be reduced or eliminated for non-compliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. In addition, periodic
maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or applications will have to
be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our owned
patents and/or applications and any patent rights we may own or license in the future. We rely on our outside counsel to
pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. government patent agencies require
compliance with several procedural, documentary, fee payment and other similar provisions during the patent application
process. We employ reputable law firms and other professionals to help us comply.
Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not
limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly
legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our products or
technologies, we may not be able to stop a competitor from marketing products that are the same as or similar to etripamil
or any future product candidates, which would have a material adverse effect on our business. In many cases, an
inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There
are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors
might be able to enter the market and this circumstance could harm our business.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount
of time.
Given the amount of time required for the development, testing and regulatory review of new product candidates, such as
etripamil, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We
expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting
patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term
extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any
additional indications approved during the period of extension). However, the applicable authorities, including the FDA
and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our
assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more
limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in
development and clinical trials by referencing our clinical and preclinical data and launch their drug earlier than might
otherwise be the case.
Intellectual property rights do not necessarily address all potential threats to our business.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights
have limitations and may not adequately protect our business. The following examples are illustrative:
•
•
others may be able to make compounds or formulations that are similar to etripamil or formulations of
etripamil or our future product candidates but that are not covered by the claims of any patents, should they
issue, that we own or control;
we or any strategic partners might not have been the first to make the inventions covered by the issued
patents or pending patent applications that we own or control;
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•
•
•
•
•
•
we might not have been the first to file patent applications covering certain of our inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies
without infringing our intellectual property rights;
it is possible that our pending patent applications will not lead to issued patents;
issued patents that we own or control may not provide us with any competitive advantages, or may be held
invalid or unenforceable as a result of legal challenges;
our competitors might conduct research and development activities in the United States and other countries
that provide a safe harbor from patent infringement claims for certain research and development activities, as
well as in countries where we do not have patent rights and then use the information learned from such
activities to develop competitive drugs for sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable; and the patents of others may
have an adverse effect on our business.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of
operations and prospects.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property rights, which could
be expensive, time consuming and unsuccessful.
Competitors may infringe our issued patents, future trademarks, copyrights or other intellectual property. To counter
infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-
consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against
perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents,
trademarks, copyrights or other intellectual property. In addition, in a patent infringement proceeding, there is a risk that a
court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to
stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld,
the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from
using the invention at issue on the grounds that our patents do not cover the invention. An adverse outcome in a litigation
or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors,
and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products.
Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or
unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in
question. In this case, we could ultimately be forced to cease use of such trademarks.
In any infringement litigation, any award of monetary damages we receive may not be commercially valuable.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation,
there is a risk that some of our confidential information could be compromised by disclosure during litigation. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments and
if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price
of our common shares. Moreover, there can be no assurance that we will have sufficient financial or other resources to file
and pursue such infringement claims, which typically last for years before they are concluded. Some of our competitors
may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater
financial resources and more mature and developed intellectual property portfolios. Even if we ultimately prevail in such
claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel
could outweigh any benefit we receive as a result of the proceedings. Accordingly, despite our efforts, we may not be able
to prevent third parties from infringing, misappropriating or successfully challenging our intellectual property rights.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a negative
impact on our ability to compete in the marketplace.
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Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the
outcome of which would be uncertain and could have a negative impact on the success of our business.
Our commercial success depends, in part, upon our ability and the ability of future collaborators, if any, to develop,
manufacture, market and sell etripamil and any future product candidates and use our proprietary technologies without
infringing the proprietary rights and intellectual property of third parties. The biotechnology and pharmaceutical industries
are characterized by extensive and complex litigation regarding patents and other intellectual property rights. We may in
the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights
with respect to etripamil and any future product candidates and technology, including interference proceedings, post grant
review and inter parties review before the USPTO. Third parties may assert infringement claims against us based on
existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may
choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe
such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid,
enforceable and infringed, which could have a negative impact on our ability to commercialize our current and any future
product candidates. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need
to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence
as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would
invalidate the claims of any such U.S. patent. If we are found to infringe a third party’s valid and enforceable intellectual
property rights, we could be required to obtain a license from such third party to continue developing, manufacturing and
marketing our product candidate(s) and technology. However, we may not be able to obtain any required license on
commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving
our competitors and other third parties access to the same technologies licensed to us, and it could require us to make
substantial licensing and royalty payments. We could be forced, including by court order, to cease developing,
manufacturing and commercializing the infringing technology or product candidate. In addition, we could be found liable
for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or
other intellectual property right. A finding of infringement could prevent us from manufacturing and commercializing
etripamil or any future product candidates or force us to cease some or all of our business operations, which could
materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third
parties could have a similar negative impact on our business, financial condition, results of operations and prospects. See
the section herein titled “Legal Proceedings” for additional information.
We may need to license intellectual property from third parties, and such licenses may not be available or may not be
available on commercially reasonable terms.
A third party may hold intellectual property rights, including patent rights, that are important or necessary to the
development of etripamil or any future product candidates. It may be necessary for us to use the patented or proprietary
technology of third parties to commercialize our product candidates, in which case we would be required to obtain a license
from these third parties. Such a license may not be available on commercially reasonable terms, or at all, and we could be
forced to accept unfavorable contractual terms. If we are unable to obtain such licenses on commercially reasonable terms,
our business could be harmed.
We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed
alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own
intellectual property.
Many of our employees, consultants and advisors are currently, or were previously, employed at universities or other
biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure
that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work
for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade
secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary
to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may
lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation
could result in substantial costs and be a distraction to management.
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In addition, we may in the future be subject to claims by our former employees or consultants asserting an ownership right
in our patents or patent applications, as a result of the work they performed on our behalf. Although it is our policy to
require our employees and contractors who may be involved in the development of intellectual property to execute
agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each
party who, in fact, conceives or develops intellectual property that we regard as our own, and we cannot be certain that our
agreements with such parties will be upheld in the face of a potential challenge or that they will not be breached, for which
we may not have an adequate remedy. The assignment of intellectual property rights may not be self-executing or the
assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that
they may bring against us, to determine the ownership of what we regard as our intellectual property.
Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in
general, thereby impairing our ability to protect etripamil and any future product candidates.
The United States has recently enacted and implemented wide ranging patent reform legislation. The U.S. Supreme Court
has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with
regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the
value of patents, once obtained. Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws
and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents
or to enforce patents that we have licensed or that we might obtain in the future. Similarly, changes in patent law and
regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them or changes in how the
relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to
enforce patents that we have licensed or that we may obtain in the future. For example, the complexity and uncertainty of
European patent laws have also increased in recent years. In Europe, a new unitary patent system is scheduled to be
introduced by June 1, 2023, which would significantly impact European patents, including those granted before the
introduction of such a system. Under the unitary patent system, European applications will soon have the option, upon
grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court (UPC).
As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. Patents
granted before the implementation of the UPC will have the option of opting out of the jurisdiction of the UPC and
remaining as national patents in the UPC countries. Patents that remain under the jurisdiction of the UPC will be
potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all
countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of any potential changes.
We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our
business.
Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be
prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less
extensive than those in the United States. In some cases, we may not be able to obtain patent protection for certain
technology outside the United States. In addition, the laws of some foreign countries do not protect intellectual property
rights to the same extent as federal and state laws in the United States, even in jurisdictions where we do pursue patent
protection. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside
the United States, even in jurisdictions where we do pursue patent protection or from selling or importing products made
using our inventions in and into the United States or other jurisdictions.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement
of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our
patents, if pursued and obtained, or marketing of competing products in violation of our proprietary rights generally.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and
attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and
our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail
in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.
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Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a
significant commercial advantage from the intellectual property that we develop or license.
The ongoing conflict in Ukraine and related sanctions could significantly devalue our Russian and Ukrainian patents.
Recent Russian decrees may significantly limit our ability to enforce Russian patents. We cannot predict when or how this
situation will change.
Reliance on third parties requires us to share our proprietary information, which increases the possibility that such
information will be misappropriated or disclosed.
Because we rely on third parties to develop and manufacture etripamil and any future product candidates, or if we
collaborate with third parties for the development or commercialization of etripamil or any future product candidates, we
must, at times, share proprietary information with them. We seek to protect our proprietary technology in part by entering
into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar
agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing
proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential
information. Despite the contractual provisions employed when working with third parties, the need to share confidential
information increases the risk that such information becomes known by our competitors, is inadvertently incorporated into
the technology of others, or is disclosed or used in violation of these agreements. Given that our proprietary position is
based, in part, on our know-how, a competitor’s discovery of our know-how or other unauthorized use or disclosure could
have an adverse effect on our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and
consultants to publish data potentially relating to our know-how. Despite our efforts to protect our know-how, we may not
be able to prevent the unauthorized disclosure or use of our technical know-how by the parties to these agreements.
Moreover, we cannot guarantee that we have entered into such agreements with each party that may have or have had
access to our confidential information or proprietary technology and processes. Monitoring unauthorized uses and
disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be
effective. If any of the collaborators, scientific advisors, employees, contractors and consultants who are parties to these
agreements breaches or violates the terms of any of these agreements, we may not have adequate remedies for any such
breach or violation. Moreover, if confidential information that is licensed or disclosed to us by our partners, collaborators,
or others is inadvertently disclosed or subject to a breach or violation, we may be exposed to liability to the owner of that
confidential information. Enforcing a claim that a third-party illegally obtained and is using our proprietary information,
like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the
United States are sometimes less willing to protect proprietary information.
Any trademarks we may obtain may be infringed or successfully challenged, resulting in harm to our business.
We expect to rely on trademarks as one means to distinguish any of our product candidates that are approved for marketing
from the products of our competitors. We have not yet selected trademarks for etripamil and have not yet begun the process
of applying to register trademarks for etripamil or any other product candidate. Once we select trademarks and apply to
register them, our trademark applications may not be approved. Third parties may oppose our trademark applications or
otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be
forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to
advertising and marketing new brands. Our competitors may infringe our trademarks, and we may not have adequate
resources to enforce our trademarks.
In addition, any proprietary name we propose to use with etripamil or any future product candidate in the United States
must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The
FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with
other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend
significant additional resources in an effort to identify a suitable proprietary product name that would qualify under
applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
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If we are unable to protect the confidentiality of our proprietary information, our business and competitive position
would be harmed.
In addition to seeking patent and trademark protection for etripamil and any future product candidate, we also rely on
unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to
protect our proprietary information, in part, by entering into non-disclosure and confidentiality agreements with parties
who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract
manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent
assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the
agreements and disclose our proprietary information. Monitoring unauthorized uses and disclosures of our intellectual
property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be
effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party
illegally disclosed or misappropriated proprietary information is difficult, expensive and time consuming, and the outcome
is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade
secrets.
Moreover, our competitors may independently develop knowledge, methods and know-how equivalent to our proprietary
information. Competitors could purchase our products and replicate some or all of the competitive advantages we derive
from our development efforts for technologies on which we do not have patent protection. If any of our proprietary
information were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent
them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our
proprietary information were to be disclosed to or independently developed by a competitor, our competitive position
would be harmed.
We also seek to preserve the integrity and confidentiality of our data and other confidential information by maintaining
physical security of our premises and physical and electronic security of our information technology systems. While we
have confidence in these individuals, organizations and systems, agreements or security measures may be breached and
detecting the disclosure or misappropriation of confidential information and enforcing a claim that a party illegally
disclosed or misappropriated confidential information is difficult, expensive and time-consuming, and the outcome is
unpredictable. Further, we may not be able to obtain adequate remedies for any breach. In addition, our confidential
information may otherwise become known or be independently discovered by competitors, in which case we would have
no right to prevent them, or those to whom they communicate it, from using that technology or information to compete
with us.
Risks Related to Our Business Operations, Employee Matters and Managing Growth
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel.
We are highly dependent on our President and Chief Executive Officer, Joseph Oliveto, our Chief Medical Officer, David
Bharucha, our Chief Commercial Officer, Lorenz Muller and our Chief Financial Officer, Amit Hasija. Each of these
officers may currently terminate their employment with us at any time. The loss of the services of any of these persons
could impede the achievement of our research, development and commercialization objectives. We do not currently
maintain “key person” life insurance on the lives of our executives or any of our employees other than on our President and
Chief Executive Officer, Joseph Oliveto.
Recruiting and retaining qualified scientific and clinical personnel and, if we progress the development of any of our
product candidates, commercialization, manufacturing and sales and marketing personnel, will be critical to our success.
The loss of the services of our executive officers or other key employees could impede the achievement of our research,
development and commercialization objectives and seriously harm our ability to successfully implement our business
strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of
time because of the limited number of individuals in our industry with the breadth of skills and experience required to
successfully develop, gain regulatory approval of and commercialize our product candidates. Competition to hire from this
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limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms
given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also
experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our
research and development and commercialization strategy. Our consultants and advisors may have commitments under
consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to
attract and retain high-quality personnel, our ability to pursue our growth strategy will be limited.
We may expand our organization in the future, and we may experience difficulties in managing this growth, which
could disrupt our operations.
As the clinical development of etripamil progresses and as we expand our pipeline, we may, in the future, experience
significant growth in the number of our employees and the scope of our operations, particularly in the areas of research,
drug development, regulatory affairs and, if etripamil or any future product candidates receives marketing approval, sales,
marketing and distribution. To manage any future growth, we will be required to continue to implement and improve our
managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified
personnel. Due to our limited financial resources and the limited experience of our management team in managing a
company with growth, we may not be able to effectively manage any expansion of our operations or recruit and train
additional qualified personnel. Any expansion of our operations may lead to significant costs and may divert our
management and business development resources. Any inability to manage growth could delay the execution of our
business plans or disrupt our operations.
Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer
security breaches, which could result in a significant disruption of our product development programs and can lead to
adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties;
reputational harm; loss of revenue or profits; loss of customers or sales; disruption of our business operations.
In the ordinary course of our business, we and the third parties upon which we rely, process proprietary, confidential, and
sensitive data, including personal data (such as health-related data), intellectual property and trade secrets (collectively,
“sensitive information”). Our internal computer systems and those of our current and any future collaborators and other
contractors or consultants are vulnerable to a variety of evolving threats, including but not limited to damage from
malicious code (such as computer viruses and worms), unauthorized access, natural disasters, terrorism, war, social-
engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and
phishing attacks), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks,
credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks,
software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets,
adware, attacks enhanced or facilitated by AI, telecommunication and electrical failures, and other similar threats. In
particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our
operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion
of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or
unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Cyber-
attacks are increasing in their frequency, sophistication, and intensity, and have become increasingly difficult to detect.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities can affect service
reliability and threaten the confidentiality, integrity, and availability of information. Cyber-attacks also could include
phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.
Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state
actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and
other major conflicts, we, the third parties upon which we rely, may be vulnerable to a heightened risk of these attacks,
including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to
produce, sell and distribute our goods and services. A significant system failure, accident or security could cause
interruptions in our operations, and could result in a disruption of our development programs and our business operations,
whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the
loss of clinical trial data from completed or future clinical trials by us or our CROs could result in delays in our regulatory
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approval efforts and significantly increase our costs to recover or reproduce the data. Additionally, any such event that
leads to unauthorized access, use or disclosure of personal data, including personal data regarding our patients or
employees, could harm our reputation, cause us not to comply with federal and/or state breach notification laws and foreign
law equivalents and otherwise subject us to liability under laws and regulations that protect the privacy and security of
personal data. Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them
may lead to increased harm of the type described above. Applicable data privacy and security obligations may require us to
notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents.
Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse
consequences. While we have implemented security measures designed to protect our information technology systems and
infrastructure and detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or
software, including that of third parties upon which we rely), such measures may not detect or prevent service interruptions
or security breaches that could adversely affect our business and to the extent that any disruption or security breach were to
result in a loss of, or damage to, our data or applications, or inappropriate disclosure of sensitive information, we could
incur liability, our competitive position could be harmed and the further development and commercialization of our product
candidates could be delayed. We may expend significant resources or modify our business activities (including our clinical
trial activities) to try to protect against security incidents. Further, we may experience delays in developing and deploying
remedial measures and patches designed to address identified vulnerabilities.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks
and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’
systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such
acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment
and security program.
We rely on third-party service providers and technologies to operate critical business systems to process sensitive
information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities,
encryption and authentication technology, employee email, content delivery to customers, and other functions. Our ability
to monitor these third parties’ information security practices is limited, and these third parties may not have adequate
information security measures in place. If our third-party service providers experience a security incident or other
interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service
providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our
damages, or we may be unable to recover such an award.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security
incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations,
fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing
sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative
publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations
(including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may
prevent or cause customers to stop using our services, deter new customers from using our services, and negatively impact
our ability to grow and operate our business. Our contracts may not contain limitations of liability, and even where they do,
there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages,
or claims related to our data privacy and security obligations.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us
from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and
could be used to undermine our competitive advantage or market position. Additionally, sensitive information of the
Company could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or
vendors’ use of generative AI technologies.
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We are subject to stringent and evolving U.S. and foreign laws, regulations, and rules, contractual obligations, industry
standards, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply
with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass
arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or
profits; and other adverse business consequences.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible,
protect, secure, dispose of, transmit, and share (collectively, “process”) personal data and other sensitive information,
including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial
participants in connection with clinical trials and sensitive third-party data. Our data processing activities subject us to
numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external
and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and
security. In the United States, federal, state, and local governments have enacted numerous data privacy and security laws,
including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the
Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). In the past few years, numerous U.S.
states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that
impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording
residents with certain rights concerning their personal data. The exercise of these rights may impact our business and
ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal
data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for
statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018, as amended by the
California Privacy Rights Act of 2020 (“CPRA”), (collectively, “CCPA”) applies to personal data of consumers, business
representatives, and employees who are California residents, and requires businesses to provide specific disclosures in
privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines of
up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant
statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases
compliance costs and potential liability with respect to other personal data we maintain about California residents. Similar
laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to
pass similar laws in the future. While these states, like the CCPA, also exempt some data processed in the context of
clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for
us, the third parties upon whom we rely.
Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and
security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s
GDPR (“UK GDPR”), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for
processing personal data. Additionally, in Canada, the Personal Information Protection and Electronic Documents Act
(“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our
operations.
We anticipate seeking regulatory approval for, and commercialize, etripamil for the treatment of PSVT in Europe. We may
also elect to do so for future product candidates. We are conducting clinical trial activities in Europe, which subjects us to
European data protection laws, including the EU GDPR and the UK GDPR. The GDPR establishes requirements
applicable to the processing of personal data (i.e., data which identifies an individual or from which an individual is
identifiable). The GDPR creates significant and complex compliance burdens for companies such as: limiting permitted
processing of personal data to only that which is necessary for specified, explicit and legitimate purposes; requiring the
establishment a legal basis for processing personal data; expressly confirming that ‘pseudonymized’ or key-coded data
constitutes personal data to which the GDPR applies; creating obligations for controllers and processors to appoint data
protection officers in certain circumstances; increasing transparency obligations to data subjects for controllers (including
presentation of certain information in a concise, intelligible and easily accessible form about how their personal data is
used and their rights vis-à-vis that data and its use); introducing the obligation to carry out so-called data protection impact
assessments in certain circumstances; establishing limitations on collection and retention of personal data through ‘data
minimization’ and ‘storage limitation’ principles; establishing obligations to implement ‘privacy by design’; introducing
obligations to honor increased rights for data subjects (such as rights for individuals to be ‘forgotten,’ rights to data
portability, rights to object etc. in certain circumstances); formalizing a heightened and codified standard of data subject
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consent; establishing obligations to implement certain technical and organizational safeguards to protect the security and
confidentiality of personal data; introducing obligations to agree to certain specific contractual terms and to take certain
measures when engaging third-party processors and joint controllers; introducing the obligation to provide notice of certain
significant personal data breaches to the relevant supervisory authority(ies) and affected individuals; and mandating the
appointment of representatives in the United Kingdom and/or European Union in certain circumstances. The processing of
“special category personal data”, such as health information, may also impose heightened compliance burdens under the
GDPR. The GDPR has robust regulatory enforcement and penalties for noncompliance, including fines of up to €20
million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR, or, in each case 4% of global annual
revenue of any noncompliant company for the preceding financial year, whichever is higher or private litigation related to
processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to
represent their interests. In addition to administrative fines, a wide variety of other potential enforcement powers are
available to competent supervisory authorities in respect of potential and suspected violations of the GDPR, including
extensive audit and inspection rights, and powers to order temporary or permanent bans on all or some processing of
personal data carried out by noncompliant actors. The GDPR also confers a private right of action on data subjects and
consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation
for damages resulting from violations of the GDPR. There may be circumstances under which a failure to comply with
GDPR, or the exercise of individual rights under the GDPR, would limit our ability to utilize clinical trial data collected on
certain subjects. The GDPR will likely impose additional responsibility and liability in relation to our processing of
personal data. This may be onerous and materially adversely affect our business, financial condition, results of operations
and prospects.
A particular issue presented by the GDPR is the restriction on transfers of personal data from Europe to the United States
and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred
personal data. One of the primary safeguards allowing U.S. companies to import personal data from Europe is the
European Commission’s Standard Contractual Clauses and we have relied on Standard Contractual Clauses to comply with
the GDPR’s restrictions on transfer of personal data out of Europe. However, in July 2020 the Court of Justice of the
European Union, or CJEU, in a case known colloquially as “Schrems II” raised questions about whether the Standard
Contractual Clauses can lawfully be used for personal data transfers from Europe to the United States or other third
countries that are not the subject of an adequacy decision of the European Commission. While the CJEU upheld the
adequacy of the Standard Contractual Clauses in principle in Schrems II, it made clear that reliance on those Clauses alone
may not necessarily be sufficient in all circumstances. Use of the Standard Contractual Clauses must now be assessed on a
case-by-case basis taking into account the legal regime applicable in the destination country, in particular regarding
applicable surveillance laws and relevant rights of individuals with respect to the transferred data. In the context of any
given transfer, where the legal regime applicable in the destination country may or does conflict with the intended
operation of the Standard Contractual Clauses and/or applicable European law, the decision in Schrems II and subsequent
draft guidance from the European Data Protection Board, or EDPB, would require the parties to that transfer to implement
certain supplementary technical, organizational and/or contractual measures to rely on the Standard Contractual Clauses as
a compliant ‘transfer mechanism.’ However, the aforementioned draft guidance from the EDPB on such supplementary
technical, organizational and/or contractual measures appears to conclude that no combination of such measures could be
sufficient to allow effective reliance on the Standard Contractual Clauses in the context of transfers of personal data ‘in the
clear’ to recipients in countries where the power granted to public authorities to access the transferred data goes beyond
that which is ‘necessary and proportionate in a democratic society’ – which may, following the CJEU’s conclusions in
Schrems II on relevant powers of United States public authorities and commentary in that draft EDPB guidance, include
the United States in certain circumstances (e.g., where Section 702 of the US Foreign Intelligence Surveillance Act
applies). At present, there are few, viable alternatives to the Standard Contractual Clauses including the UK’s International
Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto (which
allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework).
These mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to
lawfully transfer personal data to the United States. As such, if we are unable to implement a valid solution for personal
data transfers from Europe, including, we will face increased exposure to regulatory actions, substantial fines and
injunctions against processing personal data from Europe. Inability to import personal data from Europe may also: restrict
our activities in Europe; limit our ability to collaborate with partners as well as other service providers, contractors and
other companies subject to European data protection laws; and require us to increase our data processing capabilities in
Europe at significant expense. Restrictions on our ability to import personal data from Europe could therefore impact our
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clinical trial activities in Europe and limit our ability to collaborate with CROs and other third parties subject to European
data protection laws. Additionally, other countries outside of Europe have enacted or are considering enacting similar
cross-border data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity
of delivering our services and operating our business. The type of challenges we face in Europe will likely also arise in
other jurisdictions that adopt laws similar in construction to the GDPR or regulatory frameworks of equivalent complexity.
In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups
and we are, or may become subject to such obligations in the future. We are also bound by contractual obligations related
to data privacy and security, and our efforts to comply with such obligations may not be successful.
We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or
self-regulatory principles, regarding data privacy and security. If these policies, materials or statements are found to be
deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to
investigation, enforcement actions by regulators or other adverse consequences.
Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing,
becoming increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing
applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying
with these obligations requires us to devote significant resources, which may necessitate changes to our services,
information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
In addition, these obligations may require us to change our business model. We may at times fail (or be perceived to have
failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel
or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business
operations. If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with
applicable data privacy and security obligations, we could face significant consequences, including but not limited to:
government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including
class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing
personal data; orders to destroy or not use personal data; and imprisonment of company officials. In particular, plaintiffs
have become increasingly more active in bringing privacy-related claims against companies, including class claims and
mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and,
if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of
violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition,
including but not limited to: loss of customers; interruptions or stoppages in our business operations including, as relevant,
clinical trials; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or
commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or
substantial changes to our business model or operations.
Our employees and personnel may use generative artificial intelligence (“AI”) technologies to perform their work, and the
disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy
obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this
technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable
to use generative AI, it could make our business less efficient and result in competitive disadvantages.
Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other
improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and
commercial partners. Misconduct by these parties could include intentional failures to comply with FDA regulations or the
regulations applicable in other jurisdictions, provide accurate information to the FDA and other regulatory authorities,
comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information
or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the
healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-
dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing,
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discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions
with the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our
reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and
prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from
government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If
any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those
actions could result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment,
exclusion from participating in government funded healthcare programs, such as Medicare and Medicaid, additional
reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to
resolve allegations of non-compliance with these laws, contractual damages, reputational harm and the curtailment or
restructuring of our operations, any of which could have a negative impact on our business, financial condition, results of
operations and prospects.
Our current or future acquisitions or strategic collaborations could increase our capital requirements, dilute our
shareholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.
We actively search for and continually evaluate various acquisition and strategic collaboration opportunities, including
licensing or acquiring complementary drugs, intellectual property rights, technologies or businesses, as deemed appropriate
to carry out our business plan. Our collaborations, including any future acquisitions or strategic partnerships, may entail
numerous risks, including:
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increased operating expenses and cash requirements;
the assumption of additional indebtedness or contingent liabilities;
assimilation of operations, intellectual property and drugs of an acquired company, including difficulties
associated with integrating new personnel;
the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such
a strategic partnership, merger or acquisition;
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key
business relationships;
risks and uncertainties associated with the other party to such a transaction, including the prospects of that
party and their existing drugs or product candidates and regulatory approvals; and
our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in
undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
In addition, in connection with our current or future acquisitions or strategic partnerships, we may issue dilutive securities,
assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant
future amortization expense. Moreover, we may not be able to locate suitable future acquisition opportunities, and this
inability could impair our ability to grow or obtain access to technology or drugs that may be important to the development
of our business.
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Risks Related to Ownership of Our Common Shares
The market price of our common shares has been and may continue to be volatile and fluctuate substantially, and you
could lose all or part of your investment.
The market price of our common shares has been and may continue to be highly volatile and could be subject to wide
fluctuations in price in response to various factors, many of which are beyond our control. Since our initial public offering
which occurred in May 2019, through March 21, 2024, the price of our common shares has ranged from $1.33 per share to
$27.15 per share. The stock market in general and the market for biopharmaceutical and pharmaceutical companies in
particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular
companies. As a result of this volatility, you may not be able to sell your common shares at or above the price paid for the
shares. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-
K, the market price for our common shares may be influenced by the following:
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the commencement, enrollment or results of our planned or future clinical trials of etripamil and any future
product candidates or those of our competitors;
the success of competitive drugs or therapies;
regulatory or legal developments in the United States and other countries;
the success of competitive products or technologies;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to etripamil and any future product candidates or clinical development programs;
the results of our efforts to discover, develop, acquire or in-license additional product candidates;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations
by securities analysts;
our inability to obtain or delays in obtaining adequate drug supply for any approved drug or inability to do so
at acceptable prices;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our
ability to obtain patent protection for our technologies;
significant lawsuits, including patent or shareholder litigation;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in the structure of healthcare payment systems, including coverage and adequate reimbursement for
any approved drug;
• market conditions in the pharmaceutical and biotechnology sectors;
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general economic, political, and market conditions , including deteriorating market conditions due to investor
concerns regarding inflation and Russian hostilities in Ukraine, the Israel-Hamas war, and overall fluctuations
in the financial markets in the United States and abroad; and
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investors’ general perception of us and our business.
These and other market and industry factors may cause the market price and demand for our common shares to fluctuate
substantially, regardless of our actual operating performance, which may limit or prevent investors from selling their shares
at or above the price paid for the shares and may otherwise negatively affect the liquidity of our common shares. In
addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.
Some companies that have experienced volatility in the trading price of their shares have been the subject of securities
class action litigation. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment.
We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of
substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending against
litigation is costly and time-consuming, and could divert our management’s attention and our resources. Furthermore,
during the course of litigation, there could be negative public announcements of the results of hearings, motions or other
interim proceedings or developments, which could have a negative effect on the market price of our common shares.
Unstable market and economic conditions, including as a result of recent bank closures, public health crises or
geopolitical tensions such as the Russia-Ukraine and/or the Israel-Hamas war, may have serious adverse consequences
on our business, financial condition and share price.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including
severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth,
increases in unemployment rates, increases in inflation rates and uncertainty about economic stability. For example, the
macroeconomic uncertainty and volatile business environment have resulted in ongoing inflation, volatility in the capital
markets, significantly reduced liquidity and credit availability, decreases in consumer demand and confidence, declines in
economic growth, increases in unemployment rates and uncertainty about economic stability. Our general business strategy
may be materially or adversely impacted if these unpredictable and unstable market conditions continue. Additionally, the
Russia-Ukraine and the Israel-Hamas wars have created extreme volatility in the global capital markets and are expected to
have further global economic consequences, including potential disruptions of the global supply chain, manufacturing and
energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we
rely. If the equity and credit markets deteriorate, including as a result of inflation expectations, recent bank closures, the
changing interest rate environment, political unrest or war, it may make any necessary debt or equity financing more
difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can
adversely affect us by increasing our costs, including labor and employee benefit costs. Any significant increases in
inflation and related increases in interest rates could have a material adverse effect on our business, results of operations
and financial condition.
Our common shares are thinly traded and our shareholders may be unable to sell their shares quickly or at market
price.
Although we have had periods of high volume daily trading in our common shares, generally our shares are thinly traded.
As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may
disproportionately influence the price of those shares in either direction. The price for our shares could, for example,
decline significantly in the event that a large number of our common shares are sold on the market without commensurate
demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.
Concentration of ownership of our common shares among our existing executive officers, directors and principal
shareholders may prevent new investors from influencing significant corporate decisions.
Based upon our common shares outstanding as of December 31, 2023, our executive officers, directors and shareholders
who owned more than 5% of our outstanding common shares, in the aggregate, beneficially owned shares representing
31.3% of our outstanding common shares. If our executive officers, directors and shareholders who owned more than 5%
of our outstanding common shares acted together, they may be able to significantly influence all matters requiring
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shareholder approval, including the election and removal of directors and approval of any merger, consolidation or sale of
all or substantially all of our assets. The concentration of voting power and transfer restrictions could delay or prevent an
acquisition of our Company on terms that other shareholders may desire or result in the management of our Company in
ways with which other shareholders disagree.
If research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our
business or our market, our share price and trading volume could decline.
The trading market for our common shares will be influenced by the research and reports that industry or financial analysts
publish about us or our business. Equity research analysts may discontinue research coverage of our common shares, and
such lack of research coverage may adversely affect the market price of our common shares. We do not have any control
over the analysts or the content and opinions included in their reports. The price of our shares could decline if one or more
equity research analysts downgrade our shares or issue other unfavorable commentary or research about us. If one or more
equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares could
decrease, which in turn could cause the trading price or trading volume of our common shares to decline.
Because we do not anticipate paying any cash dividends on our share capital in the foreseeable future, capital
appreciation, if any, will be your sole source of gain.
You should not rely on an investment in our common shares to provide dividend income. We have never declared or paid
cash dividends on our share capital. We currently intend to retain all of our future earnings, if any, to finance the growth
and development of our business. In addition, the terms of any future debt agreements or preferred equity may preclude us
from paying dividends. As a result, capital appreciation, if any, of our common shares will be your sole source of gain for
the foreseeable future. Investors seeking cash dividends should not purchase our common shares.
We have broad discretion in the use of our cash and cash equivalents and may use them in ways in which you do not
agree or in ways that do not increase the value of your investment.
Our management has broad discretion in the application of our cash and cash equivalents and could spend these funds in
ways that do not improve our results of operations or enhance the value of our common shares. The failure by our
management to apply these funds effectively could result in financial losses that could have a negative impact on our
business, causing the price of our common shares to decline and delay the development of our product candidates. Pending
their use, we may invest our cash and cash equivalents, in a manner that does not produce income or that loses value.
If we are a passive foreign investment company, there could be adverse U.S. federal income tax consequences to U.S.
Holders (as defined below).
Based on the nature and composition of our income, assets, activities and market capitalization, we believe that we were
not classified as a passive foreign investment company, or PFIC, for our taxable year ending December 31, 2023. If we are
a PFIC for the current taxable year, or any subsequent taxable years, we intend to annually furnish U.S. Holders, upon
request, a “PFIC Annual Information Statement,” with the information required to allow U.S. Holders to make a “qualified
electing fund” election, or “QEF Election” for United States federal income tax purposes. No assurances regarding our
PFIC status can be provided for any past, current or future taxable years. The determination of whether we are a PFIC is a
fact-intensive determination made on an annual basis and the applicable law is subject to varying interpretation. In
particular, the characterization of our assets as active or passive may depend in part on our current and intended future
business plans, which are subject to change. In addition, the total value of our assets for PFIC testing purposes may be
determined in part by reference to the market price of our common shares from time to time, which may fluctuate
considerably. As a result, our PFIC status may change from year to year. Further, our status as a PFIC depends on the
composition of our income which will depend on the transactions we enter into in the future and our corporate structure.
The composition of our income and assets is also affected by how, and how quickly, we spend the cash we raise in any
offering.
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If we are a PFIC, U.S. Holders (as defined below) may be subject to adverse U.S. federal income tax consequences, such as
ineligibility for preferential tax rates for individuals on capital gains or on actual or deemed dividends, interest charges on
certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations.
A “U.S. Holder” is a holder of our common shares who, for U.S. federal income tax purposes, is: (i) an individual who is a
citizen or resident of the United States; (ii) a corporation, or another entity taxable as a corporation, created or organized in
or under the laws of the United States, any state therein or the District of Columbia; (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source; or (iv) a trust if (1) a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial
decisions of the trust or (2) the trust has a valid election to be treated as a U.S. person under applicable U.S. Treasury
Regulations.
If a U.S. Holder is directly, indirectly, or constructively owns at least 10% of our common shares, such holder may be
subject to adverse U.S. federal income tax consequences.
If a U.S. Holder is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our
common shares, such U.S. Holder may be treated as a “United States shareholder” with respect to each “controlled foreign
corporation” in our group (if any). Because our group includes at least one U.S. subsidiary (Milestone Pharmaceuticals
USA Inc.), if we were to form or acquire any non-U.S. subsidiaries in the future, they may be treated as controlled foreign
corporations. A United States shareholder of a controlled foreign corporation may be required to annually report and
include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and
investments in U.S. property by that controlled foreign corporation, regardless of whether that controlled foreign
corporation, or we, make any distributions. An individual that is a United States shareholder with respect to a controlled
foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a
United States shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist investors in
determining whether any non-U.S. subsidiaries that we may form or acquire in the future will be treated as controlled
foreign corporations or whether any such investor would be treated as a United States shareholder with respect to any of
such controlled foreign corporations. Further, we cannot provide any assurances that we will furnish to any investor
information that may be necessary to comply with the reporting and tax paying obligations discussed above. Failure to
comply with these reporting obligations may subject a U.S. Holder to significant monetary penalties and may extend the
statute of limitations with respect to its U.S. federal income tax return for the year for which reporting was due. U.S.
Holders should consult their tax advisors regarding the potential application of these rules to their investment in our
common shares.
Future changes to tax laws could materially adversely affect our Company and reduce net returns to our shareholders.
Our tax treatment is subject to the enactment of, or changes in, tax laws, regulations and treaties, or the interpretation
thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in jurisdictions in which
we operate, including those related to the Organization for Economic Co-Operation and Development’s, or OECD, Base
Erosion and Profit Shifting, or BEPS, Project, the European Commission’s state aid investigations and other initiatives.
Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received
or (in the specific context of withholding tax) dividends paid. We are unable to predict what tax reform may be proposed or
enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are
brought into tax legislation, regulations, policies or practices, could affect our financial position and overall or effective tax
rates in the future in countries where we have operations, reduce post-tax returns to our shareholders, and increase the
complexity, burden and cost of tax compliance.
For example, the Tax Act enacted many significant changes to the U.S. tax laws. Future guidance from the Internal
Revenue Service, or the IRS, and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the
Tax Act could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states
will conform to federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to
our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform
legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges,
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and could increase our future U.S. tax expense. We urge you to consult with your legal and tax advisors with respect to this
legislation and the potential tax consequences of investing in or holding our common shares.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in
unanticipated costs, taxes or non-realization of expected benefits.
A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For
example, the Canadian Revenue Agency, the IRS or another tax authority could challenge our allocation of income by tax
jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and
transfer pricing policies, including amounts paid with respect to our intellectual property development. Similarly, a tax
authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable
connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if
successful, could increase our expected tax liability in one or more jurisdictions. A tax authority may take the position that
material income tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such
assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the
assessment, the result could increase our anticipated effective tax rate.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth
companies may make our common shares less attractive to investors.
We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the
JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to
other public companies that are not emerging growth companies, including:
•
•
•
•
not being required to comply with the auditor attestation requirements in the assessment of our internal
control over financial reporting;
not being required to comply with any requirement that may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation; and
not being required to hold a nonbinding advisory vote on executive compensation and shareholder approval
of any golden parachute payments not previously approved.
We currently take advantage of some or all of these reporting exemptions and may continue to until we are no longer an
EGC. We will remain an EGC until the earlier of (i) December 31, 2024, (ii) the last day of the fiscal year in which we
have total annual gross revenue of at least $1.235 billion, (iii) the last day of the first fiscal year in which we are deemed to
be a large accelerated filer, which means the market value of our common shares that is held by non-affiliates exceeds
$700 million as of the prior June 30th, and (iv) the date on which we have issued more than $1.0 billion in non-convertible
debt during the prior three-year period. We cannot predict whether investors will find our common shares less attractive
because we will rely on these exemptions. If some investors find our common shares less attractive as a result, there may
be a less active trading market for our common shares and our share price may be more volatile.
In addition, under Section 107(b) of the JOBS Act, EGCs can delay adopting new or revised accounting standards until
such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this
exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised
accounting standards as other public companies that are not EGCs.
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We are incurring, and expect to continue to incur additional costs as a result of operating as a public company, and our
management will be required to devote substantial time to new compliance initiatives.
As a public company, and particularly after we are no longer an EGC, we are incurring, and expect to continue to incur,
significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act,
and rules subsequently implemented by the SEC and The Nasdaq Stock Market LLC have imposed various requirements
on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate
governance practices. Our management and other personnel need to devote a substantial amount of time to these
compliance initiatives. Moreover, these rules and regulations have increased, and will continue to increase, our legal and
financial compliance costs and make some activities more time-consuming and costly.
While we remain an EGC, we are not required to include an attestation report on internal control over financial reporting
issued by our independent registered public accounting firm. However, pursuant to Section 404 of the Sarbanes Oxley Act,
or Section 404, in the future we will be required to furnish an attestation on internal control over financial reporting issued
by our independent registered public accounting firm. To achieve compliance with Section 404 (b), we will be engaged in
additional internal processes to document and evaluate our internal control over financial reporting, which will be both
costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside
consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial
reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning
as documented and implement a continuous reporting and improvement process for internal control over financial
reporting. Despite our efforts, our independent registered public accounting firm may determine we have a material
weakness or significant deficiency in our internal control over financial reporting once such firm begin its Section 404 (b)
reviews in the future, there is a risk that neither we nor our independent registered public accounting firm will be able to
conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by
Section 404 (b). This could result in an adverse reaction in the financial markets due to a loss of confidence in the
reliability of our consolidated financial statements.
Because we are a Canadian company, it may be difficult to serve legal process or enforce judgments against us.
We are a domestic filer in the United States; however, we are incorporated and have our corporate headquarters in Canada.
In addition, while many of our directors and officers reside in the United States, several of them reside outside of the
United States. Accordingly, service of process upon us may be difficult to obtain within the United States. Furthermore,
because substantially all of our assets are located outside the United States, any judgment obtained in the United States
against us, including one predicated on the civil liability provisions of the U.S. federal securities laws, may not be
collectible within the United States. Therefore, it may not be possible to enforce those actions against us.
In addition, it may be difficult to assert U.S. securities law claims in original actions instituted in Canada. Canadian courts
may refuse to hear a claim based on an alleged violation of U.S. securities laws against us or these persons on the grounds
that Canada is not the most appropriate forum in which to bring such a claim. Even if a Canadian court agrees to hear a
claim, it may determine that Canadian law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable,
the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain
matters of procedure will also be governed by Canadian law. Furthermore, it may not be possible to subject foreign persons
or entities to the jurisdiction of the courts in Canada. Similarly, to the extent that our assets are located in Canada, investors
may have difficulty collecting from us any judgments obtained in the U.S. courts and predicated on the civil liability
provisions of U.S. securities provisions.
We are governed by the corporate laws of Québec, which in some cases have a different effect on shareholders than the
corporate laws of Delaware.
We are governed by the Business Corporations Act (Québec), or the QBCA, and other relevant laws, which may affect the
rights of shareholders differently than those of a company governed by the laws of a U.S. jurisdiction, and may, together
with our charter documents, have the effect of delaying, deferring or discouraging another party from acquiring control of
us by means of a tender offer, a proxy contest or otherwise, or may affect the price an acquiring party would be willing to
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offer in such an instance. The material differences between the QBCA and Delaware General Corporation Law, or the
DGCL, that may have the greatest such effect include but are not limited to the following: (i) for material corporate
transactions (such as mergers and amalgamations, other extraordinary corporate transactions or amendments to our
articles), the QBCA generally requires a two-thirds majority vote by shareholders, whereas the DGCL generally only
requires a majority vote; and (ii) under the QBCA, a holder of 5% or more of our common shares can requisition a special
meeting of shareholders, whereas such right does not exist under the DGCL.
Our bylaws and certain Canadian legislation contain provisions that may have the effect of delaying or preventing
certain change in control transactions or shareholder proposals.
Certain provisions of our bylaws and certain Canadian legislation, together or separately, could discourage or delay certain
change in control transactions or shareholder proposals.
Our bylaws contain provisions that establish certain advance notice procedures for nomination of candidates for election as
directors at shareholders’ meetings. The BCA requires that any shareholder proposal that includes nominations for the
election of directors must be signed by one or more holders of shares representing in the aggregate not less than 5% of the
shares or 5% of the shares of a class or series of shares of the corporation entitled to vote at the meeting to which the
proposal is to be presented.
The Investment Canada Act requires that a non-Canadian must file an application for review with the Minister responsible
for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a “Canadian business”
within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. Furthermore,
limitations on the ability to acquire and hold our common shares may be imposed by the Competition Act (Canada). This
legislation permits the Commissioner of Competition, or Commissioner, to review any acquisition or establishment,
directly or indirectly, including through the acquisition of shares, of control over or of a significant interest in our
Company. Otherwise, there are no limitations either under the laws of Canada or Quebec, or in our articles on the rights of
non-Canadians to hold or vote our common shares.
Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have
otherwise presented a premium to our shareholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Risk management and strategy
We have implemented and maintain various information security processes designed to identify, assess and manage
material risks from cybersecurity threats to our critical computer networks, communications systems, hardware and
software, and our critical data, including intellectual property and confidential information that is proprietary, strategic or
competitive in nature (“Information Systems and Data”).
Our Vice President of Information Technology (“VP of IT”) with assistance from our third-party managed services team,
legal, quality, finance and human resources, identifies, assesses and manages the Company’s cybersecurity threats and
risks. The Company identifies and assesses risks from cybersecurity threats by monitoring and evaluating our threat
environment using various methods including, for example using manual and automated tools, analyzing reports of threat
actors, conducting scans of the threat environment, evaluating threats reported to us and coordinating with law enforcement
concerning threats.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures,
processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our
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Information Systems and Data, including, for example: an incident response plan; incident detection and response; disaster
recovery and business continuity plans; implementation of security standards; network security controls; access controls;
system monitoring; and employee training.
Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s overall risk
management processes. Cybersecurity risk is addressed as a component of the Company’s enterprise risk management
program and identified by the Company’s senior management team. Also, IT consultants work with management to follow
the National Institute of Standards and Technology framework for cybersecurity to mitigate cybersecurity threats that are
more likely to lead to a material impact on our business.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from
cybersecurity threats, including for example, professional services firms including outside legal counsel, cybersecurity
consultants, threat intelligence service providers, managed cybersecurity service providers and forensic investigators.
We use third-party service providers to perform a variety of functions throughout our business, such as application
providers and hosting companies. We have a vendor management program to manage cybersecurity risks associated with
our use of these providers. The program includes security questionnaires, reviews of vendor’s written security program
and audits. Depending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue,
and the identity of the provider, our vendor management process may involve different levels of assessment designed to
help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity on
the provider.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so,
see our risk factors under Part I. Item 1A. Risk Factors in this Annual Report on Form 10-K, including “Our internal
computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches,
which could result in a significant disruption of our product development programs and can lead to adverse consequences,
including but not limited to regulatory investigations or actions; litigation; fines and penalties; reputational harm; loss of
revenue or profits; loss of customers or sales; disruption of our business operations.”
Governance
Our board of directors and audit committee addresses the Company’s cybersecurity risk management as part of its general
oversight function. The board of directors’ audit committee is responsible for overseeing the Company’s cybersecurity risk
management processes, including oversight of mitigation of risks from cybersecurity threats.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company
management, including our Chief Financial Officer and our VP of IT who has over 40 years of experience in information
technology and cybersecurity and manages the Company’s information technology infrastructure.
The VP of IT is responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations into the
Company’s overall risk management strategy, and communicating key priorities to relevant personnel. The VP of IT is
also responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and
reviewing security assessments and other security-related reports.
Our cybersecurity incident response plan is designed to escalate certain cybersecurity incidents to members of management
depending on the circumstances. The VP of IT works with the Company’s incident response team to help the Company
mitigate and remediate cybersecurity incidents of which they are notified. In addition, the Company’s incident response
plan includes reporting to the audit committee of the board of directors for certain cybersecurity incidents.
The audit committee receives periodic reports concerning the Company’s significant cybersecurity threats and risk and the
processes the Company has implemented to address them. The audit committee also receives various reports, summaries or
presentations related to cybersecurity threats, risk and mitigation.
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ITEM 2. PROPERTIES.
Our headquarters is currently located in Montréal (Québec), Canada and consists of 7,700 square feet of leased office space
under a lease that expires in November 2025. We also have a U.S. subsidiary based in Charlotte, North Carolina. We
believe that our facilities are adequate to meet our current needs and that additional space can be obtained on commercially
reasonable terms as needed.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not
currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding
against us that we believe could have an adverse effect on our business, operating results or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET INFORMATION
Our common shares began trading on The Nasdaq Global Select Market on May 9, 2019. Our common shares trade under
the symbol “MIST”. Prior to the commencement of trading on the Nasdaq Global Select Market on May 9, 2019, there was
no public market for our common shares.
HOLDERS OF RECORD
As of December 31, 2023, there were 19 holders of record of our common shares, including Cede & Co., a nominee for
The Depository Trust Company, or DTC, which holds shares of our common shares on behalf of an indeterminate number
of beneficial owners. All of the common shares held by brokerage firms, banks and other financial institutions as nominees
for beneficial owners are deposited into participant accounts at DTC, and are considered to be held of record by Cede &
Co. as one shareholder. Because many of our shares are held by brokers and other institutions on behalf of shareholders, we
are unable to estimate the total number of shareholders represented by these record holders.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in
the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors and
will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital
requirements, business prospects and other factors our board of directors may deem relevant.
Recent Sales of Unregistered Securities
None.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
None.
Securities Authorized for Issuance Under Equity Compensation Plans
Information about securities authorized for issuance under our equity compensation plan is incorporated herein by
reference to Item 12 of Part III of this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA.
Not Applicable.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and results of operations together with our
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This
discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these forward-looking statements as a result of various
factors, including those discussed in “Risk Factors” and in other parts of this Annual Report on Form 10-K.
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 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 an indication to treat
atrial fibrillation with rapid ventricular rate, or AFib-RVR.
On October 23, 2023, we submitted the New Drug Application, or NDA, to the U.S. Food and Drug Administration, or
FDA, seeking approval to sell and market etripamil for the treatment of paroxysmal supraventricular tachycardia, or PSVT.
PSVT is a condition characterized by an abnormality in the electrical system of the heart causing patients to have
unexpected, often severely symptomatic episodes of rapid heart rate. Patients experiencing episodes of supraventricular
tachycardia, or SVT, often experience symptoms including palpitations, sweating, chest pressure or pain, shortness of
breath, sudden onset of fatigue, lightheadedness or dizziness, fainting and anxiety. Calcium channel blockers have long
been approved for the treatment of PSVT as well as other cardiac conditions. Calcium channel blockers available in oral
form are sometimes used prophylactically to attempt to control the frequency and duration of future episodes of SVT. For
treatment of episodes of SVT, approved calcium channel blockers are administered intravenously under medical
supervision, usually in the emergency department. We believe the combination of convenient nasal-spray delivery and
rapid-onset of etripamil has the potential to shift the current treatment paradigm for episodes of SVT away from the
burdensome and costly emergency department setting.
We announced that we received a refuse-to-file, or RTF, letter from the FDA on December 26, 2023. Upon preliminary
review, the FDA determined that the NDA was not sufficiently complete to permit substantive review. The FDA requested
clarification about the data recorded for the time of adverse events in Phase 3 clinical trials; FDA did not express concerns
about the nature or severity of adverse events. In February 2024, Milestone held a Type A Meeting with the FDA to
determine next steps for the filing for marketing approval. The Agency indicated that the adverse events, or AEs, hourly
timing data in question had minimal impact on the overall characterization of the etripamil safety profile. As a result, data
sets that capture timing of AEs reported in the Phase 3 pivotal studies will be revised to align with FDA requests and
resubmitted. This approach will address the requests from the FDA in their December 2023 RTF letter. The original NDA
submission will be reviewed, and no additional clinical efficacy or safety trials have been requested. The Company expects
a standard NDA review following the resubmission. The resubmission is planned for the second quarter of 2024. 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.
On October 17, 2022, we announced positive and statistically significant topline efficacy and safety data from our Phase 3
RAPID clinical trial evaluating etripamil in patients with PSVT. These results from the RAPID trial were presented on
November 7, 2022, as a Late-Breaking Clinical Trial at the American Heart Association Scientific Sessions (Chicago, IL).
These results were also published in the Lancet on July 8, 2023. 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 using a self-administered regimen consisting of a first dose of study drug, and a repeat dose
10 minutes later if symptoms persisted. Self-administration was prompted by a patient’s symptoms and performed in the at-
home setting without medical supervision. The RAPID trial achieved its primary endpoint with etripamil 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 to sinus
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rhythm within thirty minutes compared to patients that took placebo (64.3% vs. 31.2%; hazard ratio, or HR, 2.62; 95% CI
1.66, 4.15; p<0.001). By 90 minutes post-study drug administration, 80.6% of patients taking etripamil converted to sinus
rhythm compared to 60.7% of patients taking placebo (HR = 1.93; 95% CI 1.349, 2.752; p<0.001). Statistically significant
reductions in time to conversion in patients who took etripamil were evident early and persisted throughout the observation
window of the trial compared to patients that took placebo. The median time-to-conversion for patients in the RAPID trial
who self-administered etripamil was 17.2 minutes compared to 53.3 minutes for patients taking placebo. The safety and
tolerability data from the RAPID trial supports the potential self-administration of etripamil, with findings consistent with
those observed in prior trials. The most common randomized-treatment emergent adverse events, or RTEAEs, and adverse
events, or AEs, occurred within 24 hours of etripamil administration and were related to the nasal local administration site.
Overall, the majority of RTEAEs were reported as mild (68%) or moderate (31%). No serious adverse effects related to
etripamil were reported.
The use of additional medical interventions and emergency department utilization were key secondary endpoints for both
the RAPID and NODE-301 trials. In a pre-planned pooled analysis across both trials, patients who self-administered
etripamil sought additional medical interventions 43% less frequently (15% vs. 25%; p=0.013) and had 39% fewer visits to
the emergency department (14% vs. 22%; p=0.035) than patients in the placebo arm.
We believe that PSVT is a large and under-recognized market that we estimate affects approximately two million
Americans and results in over 150,000 emergency department visits and hospital admissions and up to 80,000 ablations per
year. From this diagnosed population, we define the target addressable market for etripamil as 40 to 60% of patients who
experience frequent and longer, moderate to severe episodes each year. After being exposed to the data from the RAPID
clinical study in market research, Cardiologists reported a willingness to prescribe etripamil to approximately 50% of the
patients with PSVT in their care, which suggests 500,000 to 800,000 patients can potentially be treated with etripamil in
the peak year. Additionally, we believe that these target patients will use etripamil to treat a median of five episodes per
year based on the projected number of longer or more intense episodes (self-reported) experienced by the patient. This
implies demand in the US for etripamil of 2.5 million to 4 million episodes treated in the peak year.
AFib RVR Phase 2 Trial
In mid-2023, we held a pre-IND meeting with FDA and received guidance indicating that we could follow a supplemental
NDA, or sNDA, regulatory pathway for the marketing approval for etripamil for the indication of AFib-RVR. The sNDA
pathway potentially permits a single pivotal efficacy study to be sufficient for filing for marketing approval if etripamil is
already approved for PSVT. In the first quarter of 2024, we met with the FDA in a Type A meeting. In this meeting FDA
reiterated its prior guidance regarding the availability of an sNDA pathway. FDA further concurred with respect to key
study elements including powering, inclusion criteria, patient population, and statistical analyses, and offered clarification
with respect to the endpoints to guide the design of the Phase 3 study. We anticipate progressing to an End of Phase 2
meeting in mid-2024 as an important step to finalize the registrational study protocol.
On November 11, 2023, we presented positive Phase 2 data from the ReVeRA study, as a Featured Science Presentation at
the American Heart Association Scientific Meetings (Philadelphia, PA) and as simultaneously published in Circulation:
Arrhythmia and Electrophysiology. The data reflected that patients with AFib-RVR receiving etripamil nasal spray
experienced rapid and statistically superior ventricular rate reduction and improved symptom-relief compared to placebo.
In summary, the data demonstrated that etripamil NS was effective in patients with AF-RVR in substantially reducing VR
(difference between etripamil vs. placebo in maximum reduction from baseline: -29.91 bpm; p < 0.0001). The median time
to maximum reduction in VR was 13 min, and the duration of effect (reduction in VR from baseline) was at least 150 min.
The median duration of maintaining a VR <100 bpm was 45.5 min in the first 60 min following drug in the etripamil arm.
Etripamil treatment was associated with significant improvement in symptom relief and in treatment satisfaction as
measured by the TSQM-9 patient-reported outcome instrument. Safety and tolerability reported in the 56-patient safety
population who received etripamil was generally consistent with that observed in our PSVT program. The majority of
common AEs were localized to the drug-administration site, and there was a low incidence of serious adverse events.
The randomized, placebo controlled Phase 2 ReVeRA trial enrolled 87 patients and dosed 56 patients aged 18 years and
older with AFib who experienced a ventricular rate of 110 or more beats per minute (bpm) prior to receiving etripamil
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nasal spray. The trial was designed to assess the reduction in ventricular rate (primary endpoint), the time to achieve
maximum reduction in ventricular rate, duration of effect, and patient satisfaction with treatment using the Treatment
Satisfaction Questionnaire 9 (TSQM-9) patient reported outcome (PRO) tool (key secondary endpoints).
Data from ReVeRA trial showed that delivery of etripamil nasal spray significantly and rapidly reduced ventricular rate,
consistent with the drug’s pharmacologic profile. Etripamil achieved the primary endpoint with high statistical significance
with patients experiencing a ventricular rate reduction of 29.91 bpm (95% confidence interval: -40.31, -19.52; p<0.0001) in
the etripamil arm compared to placebo. The maximum reduction in rate reported by a patient taking etripamil was 34.97
bpm. The median time to maximum reduction in ventricular rate was 13 minutes in patients taking etripamil.
A greater number of patients taking etripamil achieved a ventricular rate of less than 100 bpm (58.3%) than those taking
placebo (4%). Furthermore, 67% of patients taking etripamil achieved ventricular rate reductions of more than 20% and
96% of patients receiving etripamil achieved more than 10% in ventricular rate reductions in the first 60 minutes compared
to 0% and 20% in patients taking placebo, respectively. Using the TSQM-9, compared to placebo, patients treated with
etripamil demonstrated significant improvements in two satisfaction ratings: effectiveness (p<0.0001) and relief of
symptoms (p=0.0002).
Treatment-emergent serious adverse events, or TESAEs, were rare, with two occurring in one patient in the etripamil arm
(3.7%) and four occurring in two patients in the placebo arm (6.9%). The TESAEs in the etripamil arm (transient severe
bradycardia and syncope, assessed as due to hyper-vagotonia occurred in a patient with a history of vagal events, and fully
resolved by placing the patient supine and was without sequelae. The most common (≥ 5%) adverse events were mild or
moderate in intensity and included nasal discomfort, rhinorrhea, increased lacrimation, throat irritation and dizziness.
An estimated five million Americans suffer from AFib. The Centers for Disease Control projects the prevalence of AFib
will grow to an estimated 10 million patients by 2030. A subset of AFib patients experience episodes of abnormally high
heart rate most often accompanied by palpitations, shortness of breath, dizziness, and weakness. While these episodes,
known as AFib-RVR, may be treated by oral calcium channel blockers and/or beta blockers, patients frequently seek acute
care in the emergency department to resolve symptoms. In 2016, nearly 800,000 patients were admitted to the emergency
department due to AFib symptoms. Treatment for such symptoms typically includes medically supervised intravenous
administration of calcium channel blockers or beta blockers, or electrical cardioversion.
Planned Clinical Development for AFib-RVR
In mid-2023, we met with the FDA for a pre-IND meeting. In this meeting, we received guidance from the FDA on a
potential development path for etripamil in AFib-RVR. The FDA agreed that to gain a labelled indication via supplemental
NDA, or sNDA, a Phase 3, randomized, placebo controlled, double blind clinical trial using a dosing regimen with self-
administration of etripamil in an at-home setting could be acceptable with the support of the already existing safety
database from our PSVT trials. The primary endpoint can be the reduction of ventricular rate, and the primary analysis
would be on the intent to treat, or ITT, population. In addition, the study would have to show statistical significance
(p<0.05) on the key secondary endpoint of symptom relief as a patient benefit, also in the ITT population. The secondary
endpoint could use a patient-reported outcomes measure, or PRO, and the application of a seven-point anchored scale was
discussed with the FDA. In the first quarter of 2024, we met with the FDA in a Type A meeting. In this meeting we
confirmed prior FDA guidance on a single-study supplemental New Drug Application (sNDA) pathway. We further
confirmed key study elements including powering, inclusion criteria, patient population, and statistical analyses, and we
clarified the endpoints which will guide the design of the Phase 3 study. We anticipate progressing to an End of Phase 2
meeting in mid-2024, an important step to finalize the registrational study protocol.
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We plan to propose to the FDA a Phase 3 clinical study for AFib-RVR conducted in the at-home setting consisting of
patients with a history of symptomatic episodes and using a repeat-dose regimen of 70mg per dose similar to what was
studied in the RAPID trial in patients with PSVT. Our target population would be patients with verified AFib-RVR, and the
ITT population would be all patients self-administering the study drug for perceived AFib-RVR. The primary endpoint
being considered is the mean change from baseline ventricular rate to nadir ventricular rate for patients treated with
etripamil vs placebo, as was studied in the ReVeRA trial. Our key secondary endpoint would be based on a PRO acceptable
to the FDA and the same or similar to ones we have used in our PSVT and AFib-RVR programs. We estimate that the study
size would be approximately 150 to 200 unique patients treating an episode. This study may begin in 2024 and have an
approximate two-year duration to report top-line data.
Operations Overview
Since the commencement of our operations in 2003, we have devoted substantially all of our resources to performing
research and development activities in support of our product development efforts, hiring personnel, raising capital to
support and expand such activities, providing general and administrative support for these operations and, more recently
preparing for commercialization. We operate our business using a significant outsourcing model. As such, our team is
composed of a relatively smaller core of employees who direct a significantly larger number of team members who are
outsourced in the forms of vendors and consultants to enable execution of our operational plans. We do not currently have
any products approved for sale, and we continue to incur significant research and development and general administrative
expenses related to our operations.
Since inception, we have incurred significant operating losses. For the years ended December 31, 2023 and 2022, we
recorded net losses of $59.7 million and $58.4 million, respectively. As of December 31, 2023, we had an accumulated
deficit of $326.0 million. We expect to continue to incur significant losses for the foreseeable future. We anticipate that a
substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary
development activities required for obtaining regulatory approval and preparing for potential commercialization of our
product candidates. We had $13.8 million of cash and cash equivalents and $52.2 million of short-term investments at
December 31, 2023.
We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our
net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and
expenditures on other research and development activities. We expect our expenses will increase over time as we:
● continue our ongoing and planned development of etripamil, including and potentially future Phase 4 clinical
trials for the treatment of PSVT and future Phase 3 clinical trials for the treatment of AFib-RVR;
● seek marketing approvals for etripamil for the treatment of PSVT, AFib-RVR and other cardiovascular
indications;
● establish a sales, marketing, manufacturing and distribution capability, either directly or indirectly through third
parties, to commercialize etripamil or any future product candidate for which we may obtain marketing approval;
● build a portfolio of product candidates through development, or the acquisition or in-license of drugs, product
candidates or technologies;
● initiate preclinical studies and clinical trials for etripamil for any additional indications we may pursue, including
the clinical trials for the treatment of atrial fibrillation and rapid ventricular rate as well as other areas of unmet
medical need, and for any additional product candidates that we may pursue in the future;
● maintain, protect and expand our intellectual property portfolio;
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● hire additional clinical, regulatory and scientific personnel;
● add operational, financial and management information systems and personnel, including personnel to support
our product development and planned future commercialization efforts; and
● incur additional legal, accounting, insurance and other expenses associated with operating as a public company.
Recent Developments
New Drug Application Status
In October 2023 we submitted a New Drug Application, or NDA, for marketing approval in the United States for etripamil
for the treatment of PSVT. On December 26, 2023, we announced that we received an RTF letter from the FDA. Upon
preliminary review, the FDA determined that the NDA was not sufficiently complete to permit substantive review. The
FDA requested clarification about the time of data recorded for adverse events in our Phase 3 clinical trials; FDA did not
express concerns about the nature or severity of AEs.
In February 2024, we held a Type A Meeting with the FDA to determine next steps for the filing for marketing approval.
The FDA indicated that the timing of AEs in question had minimal impact on the overall characterization of the etripamil
safety profile, based on the FDA’s review of the affected data which was mainly related to AEs associated with local drug
administration site tolerability and, importantly, did not appear to affect the assessment of serious adverse events and/or
AEs of special interest for a calcium channel blocker. To align with the FDA’s guidance in preliminary response to our
questions presented to the FDA in our Type A Meeting request, we plan to restructure the data sets that capture timing of
reported AEs, reformat certain data files to facilitate FDA’s analyses, and resubmit the NDA. Based on the guidance
received during the Type A Meeting, we expect that this approach will address the RTF from the FDA. The FDA has not
requested that we complete additional clinical efficacy or safety trials prior to resubmitting the NDA. We expect a standard
NDA review period following resubmission of the NDA for etripamil for PSVT. The resubmission is planned for the
second quarter of 2024.
In connection with the revised timeline for NDA submission, we have undertaken certain cash conservation measures to
reduce spend through program deferrals and team restructuring and expect that our existing cash resources will fund
operations into 2026, including through the expected Prescription Drug User Fee Act date for the NDA resubmission. We
expect the implementation of these cash conservation measures to be substantially completed in the first quarter of 2024. If
FDA approval is granted, we expect to receive a $75 million payment under an existing royalty agreement, which is
intended to fund the potential commercial launch of etripamil for PSVT.
Strategic Financing Transaction
On February 28, 2024, we entered into an underwriting agreement, or the Underwriting Agreement, related to an
underwritten public offering, or the Offering, of 16,666,667 of our common shares, without par value, at a public offering
price of $1.50 per share and, in lieu of common shares to certain investors, pre-funded warrants to purchase 3,333,333
Shares at a public offering price of $1.499 per pre-funded warrant. Under the terms of the Underwriting Agreement, we
granted the Underwriters an option to purchase up to an additional 3,000,000 common shares at the same price per share as
the other common shares sold in the Offering, which was exercised by the Underwriters in full on February 29, 2024.
Each pre-funded warrant has an exercise price of $0.001 per share. The pre-funded warrants were exercisable immediately
upon issuance, subject to certain beneficial ownership limitations.
The net proceeds to the Company from the Offering, including the proceeds from the exercise by the Underwriters of their
option to purchase the additional 3,000,000 common shares in full, was approximately $32.4 million after deducting
underwriting commissions and offering expenses payable by the Company.
The Offering closed on March 4, 2024.
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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, the Russia-Ukraine war, unrest
and/or further escalation in Israel and Gaza, recent banking instabilities and other U.S. geopolitical issues affecting other
territories and employee availability and wage increases, and economic markets all of which may result in additional stress
on our working capital resources.
Components of Results of Operations
Revenues
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 of $1.0 million for the year ended December 31, 2023 compared to $5.0 million for
the year ended December 31, 2022 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.”
Research and Development Expenses
Research and development expenses consist primarily of salaries and fees paid to external service providers and also
include personnel costs, including share-based compensation expense and other related compensation expenses. We
expense research and development costs in the periods in which they are incurred. Costs for certain development activities
are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided
to us by our vendors, collaborators and third-party service providers.
To date, substantially all of our research and development expenses have been related to the preclinical and clinical
development of etripamil. 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, 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 include personnel and related
compensation costs, expenses for outside professional services, lease expense, insurance expense and other general
administrative expenses. Personnel costs consist of salaries, bonuses, benefits, related payroll taxes and share-based
compensation. Outside professional services consist of legal, accounting and audit services and other consulting fees.
We expect to continue to incur expenses as a public company, including expenses related to compliance with the rules and
regulations of the Securities and Exchange Commission, or SEC, and those of any national securities exchange on which
our securities are traded, additional insurance expenses, investor relations activities, and other administrative and
professional services.
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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 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 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.
If the FDA approves the NDA, we anticipate our commercial expenses will increase as we invest in the infrastructure,
personnel, and operational expenses required to launch our first product in the United States.
Interest Income
Interest income primarily consists of interest income from our cash equivalents and short-term investments.
Interest Expense
Interest expense primarily consists of contractual debt interest expense and the amortization of debt costs.
Results of Operations
Comparison of the Years Ended December 31, 2023 and 2022
(in thousands)
Revenue
Operating expenses
Research and development, net of tax credits
General and administrative
Commercial
Total operating expenses
Loss from operations
Interest income
Interest expense
Net loss
Revenue
Year ended December 31,
2023
2022
$ Change % Change
$
1,000
$
5,000
$ (4,000)
100.0%
31,052
15,932
15,114
62,098
(61,098)
3,967
(2,554)
(59,685)
39,829
15,718
9,095
64,642
(59,642)
1,254
—
(58,388)
(8,777)
214
6,019
(2,544)
(1,456)
2,713
(2,554)
(1,297)
(22.0)%
1.4%
66.2%
(3.9)%
2.4%
216.4%
100.0%
2.2%
We recorded revenue of $1.0 million for the year ended December 31, 2023. This revenue was the result of having reached
a milestone pursuant to our License and Collaboration Agreement, dated May 15, 2021, with Ji Xing Pharmaceuticals
Limited, such party being referred to as Ji Xing and such agreement as the Ji Xing License Agreement, due upon the
successful initiation of a Phase 1 Clinical Trial of a pharmaceutical product that uses a device to deliver etripamil by nasal
spray by or on behalf of Ji Xing for the treatment of PSVT in the People’s Republic of China, or the Territory, including
mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.
We recorded revenue of $5.0 million for the year ended December 31, 2022. This revenue was related to two milestones
reached as a result of the first patient dosed in a Phase 3 Clinical Trial for the treatment of PSVT in the Territory pursuant
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to the Ji Xing License Agreement and the successful completion of a Phase 3 clinical trial for the treatment of PSVT in the
United States.
Research and Development Expenses
The following table shows our research and development expenses by type of activity for the periods indicated.
(in thousands)
Clinical
Drug manufacturing and formulation
Regulatory and other costs
Less: R&D tax credits
Total R&D expenses
2023
$ 19,611
6,741
5,012
(312)
$ 31,052
Year ended December 31,
2022
$ 35,264
3,607
1,414
(456)
$ 39,829
$ Change % Change
(44.4)%
$ (15,653)
86.9%
3,134
254.5%
3,598
(31.6)%
144
(22.0)%
$ (8,777)
Research and development expenses decreased by $8.8 million, or 22.0% for the year ended December 31, 2023 compared
to the year ended December 31, 2022. The decrease was primarily due to lower clinical expenses. This decrease in clinical
expenses was driven by lower clinical development costs and clinical personnel-related costs as a result of the completion
of phase 3 studies. The decrease in clinical costs was partially offset by an increase in drug manufacturing consulting costs,
drug manufacturing personnel costs and regulatory consulting costs.
General and Administrative
General and administrative expenses remained consistent for the year ended December 31, 2023 compared to the year
ended December 31, 2022.
Commercial
Commercial expenses increased by $6.0 million, or 66.2%, for the year ended December 31, 2023, compared to the same
period in 2022. This increase is a result of additional personnel and professional costs required to expand capabilities and
operations in anticipation of potential commercialization.
Interest Income
Interest income was $4.0 million and $1.3 million for the year ended December 31, 2023 and 2022, respectively. The
increase in interest income was due to higher interest rates earned on investments in 2023 when compared to 2022.
Interest Expense
Interest expense was $2.6 million for the year ended December 31, 2023 compared to no interest expense for the year
ended December 31, 2022. The increase in interest expense was due to the issuance of the 2029 Convertible Notes in the
first quarter of 2023.
Liquidity and Capital Resources
Sources of Liquidity
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, 2023, we had cash, cash equivalents and
short-term investments of $66.0 million and an accumulated deficit of $326.0 million.
On February 28, 2024, we entered into an underwriting agreement, or the Underwriting Agreement, related to an
underwritten public offering, or the Offering, of 16,666,667 of our common shares, without par value, at a public offering
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price of $1.50 per share and, in lieu of common shares to certain investors, pre-funded warrants to purchase 3,333,333
Shares at a public offering price of $1.499 per pre-funded warrant. Under the terms of the Underwriting Agreement, we
granted the Underwriters an option to purchase up to an additional 3,000,000 common shares at the same price per share as
the other common shares sold in the Offering, which was exercised by the Underwriters in full on February 29, 2024.
Each pre-funded warrant has an exercise price of $0.001 per share. The pre-funded warrants were exercisable immediately
upon issuance, subject to certain beneficial ownership limitations.
The net proceeds to the Company from the Offering, including the proceeds from the exercise by the Underwriters of their
option to purchase the additional 3,000,000 common shares in full, was approximately $32.4 million after deducting
underwriting commissions and offering expenses payable by the Company.
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 Investments, LP and certain of its affiliates, or
collectively, RTW.
On March 29, 2023, the Company closed the transaction contemplated by the Note Purchase Agreement and issued and
sold the $50 million principal amount of 6.0% Convertible Senior Notes due 2029, or the 2029 Convertible Notes, to the
holders in a private placement transaction.
The 2029 Convertible Notes are senior secured obligations and are 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. The obligations under the 2029 Convertible Notes are 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 and other adjustments. Subject to specified conditions, on or after March 27,
2027, the 2029 Convertible Notes are redeemable by us subject to certain conditions, 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.
On July 29, 2020, we entered into an Open Market Sale AgreementSM, or the Sales Agreement, with respect to an at-the-
market offering program, or the ATM Program, under which the Company may issue and sell its common shares having an
aggregate offering price of up to $50 million through Jefferies as its sales agent or principal. The common shares to be sold
under the Sales Agreement, are offered and sold pursuant to our shelf registration statement on Form S-3 (File No. 333-
239318), which was declared effective by the SEC on July 6, 2020. 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 operating plan, existing cash and cash equivalents and short-term investments to be sufficient to fund
our operations for at least the next 12 months from the date of issuance of this Annual Report on Form 10-K for the year
ending December 31, 2023 and 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.
Contingent future source of funding
Pursuant to the Royalty Purchase Agreement, RTW agreed to purchase, following U.S. Food and Drug Administration
(FDA) 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 “royalty interest”, on the annual net product sales of etripamil in the United
States. This represents a contingent future source of funding, in order for the Company to receive the $75 million, the
closing conditions specified in the Royalty Purchase Agreement, which includes the Company receiving marketing
approval from the FDA on or prior to September 30, 2025, must be met.
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Funding Requirements
We use our cash primarily to fund research and development expenditures. 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 increasing operating losses for the foreseeable future as we continue the clinical development of our product
candidate. At this time, due to the inherently unpredictable nature of clinical development, we cannot reasonably estimate
the costs we will incur and the timelines that will be required to complete development, obtain marketing approval, and
commercialize etripamil or any future product candidates, if at all. For the same reasons, we are also unable to predict
when, if ever, we will generate revenue from product sales or whether, or when, if ever, we may achieve profitability.
Clinical and preclinical development timelines, the probability of success, and development costs can differ materially
from expectations.
In addition, we have exclusive development and commercialization rights for etripamil for all indications that we may
pursue and as such have the potential to license development and or commercialization rights for etripamil to a potential
partner in regions outside of Greater China. We plan to establish commercialization and marketing capabilities using a
direct sales force to commercialize etripamil in the United States. Outside of the United States, we are considering
commercialization strategies that may include collaborations with other companies.
For other new product candidates, our efforts are focused on licensing development and/or commercialization rights from
potential partners. In the case of either in-licensing or out-licensing, we cannot forecast when such arrangements will be
secured, if at all, and to what degree such arrangements would affect our development and commercialization plans and
capital requirements.
The timing and amount of our operating expenditures will depend largely on:
● the timing, progress and results of our ongoing and planned clinical trials and other development activities of
etripamil in PSVT, AFib-RVR and in other cardiovascular indications;
● the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of etripamil
for additional indications or any future product candidates that we may pursue;
● our ability to establish 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;
● the costs, timing and outcome of regulatory review of etripamil and any future product candidates;
● the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and
distribution, for etripamil and any future product candidates for which we receive marketing approval;
● the revenue, if any, received from commercial sales of etripamil and any future product candidates for which we
receive marketing approval;
● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending any intellectual property-related claims; and
● the extent to which we acquire or in-license other product candidates and technologies.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and
capital funding needs through equity and/or debt financing. We may also consider entering into collaboration arrangements
or selectively partnering for clinical development and commercialization. The sale of additional equity would result in
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additional dilution to our shareholders. The incurrence of debt financing would result in debt service obligations and the
instruments governing such debt could provide for operating and financing covenants that restrict our operations or our
ability to incur additional indebtedness or pay dividends, among other items. If we are not able to secure adequate
additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate
assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially and adversely
affect our business, financial condition and results of operations.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
(in thousands)
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash and cash equivalents during the period
Operating Activities
Year ended December 31,
2023
2022
$ Change
% Change
$ (52,469)
$ (46,424)
(57,124)
4,756
47,792
3,088
6,124 $ (106,505)
$
6,045
61,880
44,704
112,629
(11.5)%
(108.3)%
1447.7%
Net cash used in operating activities during the year ended December 31, 2023 was $46.4 million, which consisted
primarily of a net loss of $59.7 million. The net loss was partially offset by a net cash increase of $1.2 million related to the
change in assets and liabilities, non-cash charges of $9.5 million related to share based compensation and non-cash interest
charges of $2.3 million related to the convertible note.
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.
Investing Activities
During the year ended December 31, 2023, we redeemed $142.0 million of short-term investments and we acquired $137.1
million of short-term investments, in addition we acquired $0.1 million in property and equipment. These short-term
investment acquisitions resulted in a growth of $4.8 million in short term investments for the year ended December 31,
2023. 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.
Financing Activities
In the year ended December 31, 2023, our financing activities provided cash proceeds of $47.8 million. These proceeds
were primarily a result of the $50 million received from the issuance of convertible notes under the Note Purchase
Agreement, which was partially offset by $2.8 million in debt costs, and $0.6 million in cash proceeds from the exercise of
share options and issuance of common shares under the employee stock purchase plan. 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.
Contractual Obligations
We enter into contracts in the normal course of business with clinical research organizations, or CROs, contract
manufacturing organizations, or CMOs, and other third parties for clinical trials, preclinical research studies and testing
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and manufacturing services. These contracts are generally cancelable at our option with various notice requirements as
defined in the contract. Payments due upon cancellation consist of payments for services provided or expenses incurred,
including noncancelable obligations of our service providers, up to and through the date of cancellation. These payments
are not included as the amount and timing of these payments are not known.
Critical Accounting 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, 2023, 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 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:
● 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.
a) Research & Development Expenses — Accruals
Research and development costs are charged against income in the period of expenditure. Our research and development
costs consist primarily of salaries and fees paid to CROs and to CMO.
Clinical trial expenses include direct costs associated with CROs, direct CMO costs for the formulation and packaging of
clinical trial material, as well as investigator and patient-related costs at sites at which our trials are being conducted. Direct
costs associated with our CROs and CMOs are generally payable on a time-and-materials basis, or when milestones are
achieved. The invoicing from clinical trial sites can lag several months. We record expenses for our clinical trial activities
performed by third parties based upon estimates of the percentage of work completed of the total work over the life of the
individual trial in accordance with agreements established with CROs and clinical trial sites. We determine the estimates
through discussions with internal clinical personnel, CROs and CMOs as to the progress or stage of completion of trials or
services and the agreed-upon fee to be paid for such services based on facts and circumstances known to us as of each
consolidated balance sheet date. The actual costs and timing of clinical trials are highly uncertain, subject to risks and may
change depending upon a number of factors, including our clinical development plan. If the actual timing of the
performance of services of the level of effort varies from the estimate, we will adjust the accrual accordingly. Adjustments
to prior period estimates have not been material. We recognize the benefit of Canadian research and development tax
credits as a reduction of research and development costs for fully refundable investment tax credits and as a reduction of
income taxes for investment tax credits that can only be claimed against income taxes payable when there is reasonable
assurance that the claim will be recovered.
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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. We estimate the grant date fair value, and the resulting share-based
compensation expense, using the Black Scholes option pricing model. This Black Scholes option pricing model uses
various inputs to measure fair value, including estimated fair value of our underlying common shares at the grant date,
expected term, estimated volatility, risk-free interest rate and expected dividend yields of our common shares. The
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.
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, 2023 and 2022:
March 21, 2022
April 1, 2022
April 11, 2022
May 16, 2022
July 5, 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
January 16, 2023
February 16, 2023
February 27, 2023
March 14, 2023
March 21, 2023
May 1, 2023
May 22, 2023
June 7, 2023
June 19, 2023
July 24, 2023
July 25, 2023
August 1, 2023
October 2, 2023
October 16, 2023
Number of
Common Shares
Subject to
Exercise
Price Per
Estimated
Fair Value
per Common
Share at
Options Granted Common Share Grant Date
1,388,400
65,000
36,000
92,000
150,000
17,000
2,000
2,000
100,000
70,000
22,000
20,000
12,000
82,000
1,323,900
36,000
3,500
42,000
125,000
20,000
180,000
15,000
15,000
4,000
21,000
122,000
8,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5.46
6.85
6.93
5.48
6.07
6.45
7.30
6.76
7.10
8.20
8.53
5.03
4.22
3.93
3.59
3.19
3.51
3.45
3.62
4.10
3.86
3.50
3.10
3.11
3.17
2.98
2.99
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5.46
6.85
6.93
5.48
6.07
6.45
7.30
6.76
7.10
8.20
8.53
5.03
4.22
3.93
3.59
3.19
3.51
3.45
3.62
4.10
3.86
3.50
3.10
3.11
3.17
2.98
2.99
Estimated
Per-Share
Fair Value
of Options
4.12
5.17
5.25
4.18
4.49
4.98
5.61
5.20
5.49
6.35
6.61
4.69
3.94
3.10
2.87
2.54
2.79
2.75
2.88
3.27
3.01
2.80
2.48
2.49
2.54
2.30
2.31
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
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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
The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of
an extended transition period to comply with new or revised accounting standards applicable to public companies until
those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision
and, as a result, we comply with new or revised accounting standards when they are required to be adopted by public
companies that are not emerging growth companies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rate risks. For
the year ended December 31, 2023, we had cash and cash equivalents and short-term investments of $13.8 million and
$52.2 million, respectively. For the year ended December 31, 2022, we had cash and cash equivalents and short-term
investments of $7.6 million and $56.9 million, respectively. These cash and cash equivalents and short-term investments
consist primarily of bank deposits and guaranteed investment certificates. The primary objective of our investment
activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not
enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do
not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of
our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden
change in market interest rates.
We undertake certain transactions in Canadian dollars and as such are subject to risk due to fluctuations in exchange rates.
Canadian dollar denominated payables are paid at the converted rate as due. We do not use derivative instruments to hedge
exposure to foreign exchange rate risk due to the low volume of transactions denominated in foreign currencies. At
December 31, 2023 and 2022, our net monetary exposure denominated in Canadian dollars was $2.7 million and
$0.1 million, respectively.
Our operating results and financial position are reported in U.S. dollars in our financial statements. The fluctuation of the
Canadian dollar in relation to the U.S. dollar might, consequently, have an impact upon our loss and may also affect the
value of our assets and the amount of shareholders’ equity. We do not believe that inflation and changing prices had a
significant impact on our results of operations for any periods presented herein.
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ITEM 8. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID: 271)
Consolidated Balance Sheets
Consolidated Statements of Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
112
113
114
115
116
117
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Milestone Pharmaceuticals Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Milestone Pharmaceuticals Inc. and its subsidiary
(together, the Company) as of December 31, 2023 and 2022, and the related consolidated statements of loss, shareholders’
equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/PricewaterhouseCoopers LLP
Montreal, Canada
March 21, 2024
We have served as the Company's auditor since 2016
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Table of Contents
Milestone Pharmaceuticals Inc.
Consolidated Balance Sheets
(in thousands of US dollars, except share data)
Assets
Current assets
Cash and cash equivalents
Short-term investments
Research and development tax credits receivable
Prepaid expenses
Other receivables
Total current assets
Operating lease right-of-use assets
Property and equipment
Total assets
Liabilities, and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities
Operating lease liabilities
Total current liabilities
Operating lease liabilities, net of current portion
Senior secured convertible notes
Total liabilities
December 31, 2023
December 31, 2022
$
$
$
$
$
$
13,760
52,243
643
3,178
3,208
73,032
1,917
277
75,226
6,680
546
7,226
1,457
49,772
58,455
7,636
56,949
331
6,005
882
71,803
2,423
257
74,483
5,644
495
6,139
1,996
—
8,135
Shareholders’ Equity
Common shares, no par value, unlimited shares authorized 33,483,111 shares issued and
outstanding as of December 31, 2023, 34,286,002 shares issued and outstanding as of
December 31, 2022
Pre-funded warrants - 9,577,257 issued and outstanding as of December 31, 2023 and 8,518,257
as of December 31, 2022
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
260,504
273,900
48,459
33,834
(326,026)
16,771
$
75,226
$
34,352
24,437
(266,341)
66,348
74,483
The accompanying notes are an integral part of these consolidated financial statements.
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Milestone Pharmaceuticals Inc.
Consolidated Statements of Loss
(in thousands of US dollars, except share and per share data)
Revenue
Operating expenses
Research and development, net of tax credits
General and administrative
Commercial
Loss from operations
Interest income
Interest expense
Net loss and comprehensive loss
Weighted average number of shares and pre-funded warrants outstanding, basic and diluted
Net loss per share, basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
114
Years Ended
December 31,
2023
$
$
1,000
31,052
15,932
15,114
2022
5,000
39,829
15,718
9,095
(61,098)
(59,642)
3,967
(2,554)
1,254
—
(59,685)
$
(58,388)
42,955,779
42,450,316
(1.39)
$
(1.38)
$
$
$
$
Table of Contents
Milestone Pharmaceuticals Inc.
Consolidated Statements of Shareholders’ Equity
(in thousands of US dollars, except share data)
Balance as of December 31, 2021
Transactions during 2022
Net loss
Exercise of stock options
Exercise of prefunded warrants, net of issuance costs
Share-based compensation
Issuance of common shares, net of issuance costs
Balance as of December 31, 2022
Balance as of December 31, 2022
Transactions during 2023
Net loss
Exercise of stock options
Pre-funded warrants - Private Placement, net of issuance
costs
Share-based compensation
Exchange of common shares
Employee stock purchase plan purchases
Balance as of December 31, 2023
Common Shares
Pre-funded warrants
Number
of shares
29,897,559
—
217,684
3,809,523
—
361,236
34,286,002
34,286,002
—
114,103
—
—
(1,059,000)
142,006
33,483,111
$
$
$
$
Amount
251,901
—
742
18,627
—
2,630
273,900
Number
of warrants
12,327,780
—
—
(3,809,523)
—
—
8,518,257
273,900
8,518,257
—
326
—
—
(14,115)
393
260,504
—
—
1,059,000
—
—
—
9,577,257
Amount
Additional
paid-in
capital
Accumulated
deficit
Total
$
52,941
$
15,711
$
(207,953)
$
112,600
—
—
(18,589)
—
—
34,352
34,352
—
—
14,107
—
—
—
48,459
$
$
$
—
(322)
—
9,048
—
24,437
24,437
—
(137)
—
9,534
—
—
33,834
$
$
$
(58,388)
—
—
—
—
(266,341)
(266,341)
(59,685)
—
—
—
—
—
(326,026)
$
$
$
$
$
$
(58,388)
420
38
9,048
2,630
66,348
66,348
(59,685)
189
14,107
9,534
(14,115)
393
16,771
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
Milestone Pharmaceuticals Inc.
Consolidated Statements of Cash Flows
(in thousands of US dollars)
Cash flows used in operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment
Amortization of debt costs
Accretion of investment discount
Non-cash interest expense related to debt
Share-based compensation expense
Loss on disposals of property and equipment
Changes in operating assets and liabilities:
Other receivables
Research and development tax credits receivable
Prepaid expenses
Operating lease assets and liabilities
Accounts payable and accrued liabilities
Net cash used in operating activities
Cash provided by (used in) investing activities
Acquisition of property and equipment
Acquisition of short-term investments
Redemption of short-term investments
Net cash provided by (used in) investing activities
Cash provided by financing activities
Proceeds from exercise of options
Proceeds from exercise of warrants
Proceeds from issuance of senior secured convertible debt
Issuance of common shares, net of issuance costs
Pre-funded warrants issuance costs
Proceeds from employee stock purchase plan
Payment of debt issuance costs
Cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – Beginning of year
Cash and cash equivalents – End of year
The accompanying notes are an integral part of these consolidated financial statements.
116
Years ended December 31,
2022
2023
$
(59,685)
$
(58,388)
92
244
(162)
2,310
9,534
—
(2,326)
(312)
2,827
18
1,036
89
—
(97)
—
9,048
141
(755)
25
(1,706)
81
(907)
(46,424)
(52,469)
(112)
(137,132)
142,000
4,756
189
—
50,000
—
(8)
393
(2,782)
47,792
6,124
7,636
$
13,760
$
(272)
(85,852)
29,000
(57,124)
420
38
—
2,630
—
—
—
3,088
(106,505)
114,141
7,636
Table of Contents
Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
1 Organization and Nature of Operations
Milestone Pharmaceuticals Inc. (Milestone or the Company) is a biopharmaceutical company incorporated under the
Business Corporations Act of Québec. Milestone is focused on the development and commercialization of innovative
cardiovascular medicines. Milestone’s lead product candidate, etripamil, is a novel, potent short-acting calcium channel
blocker that the Company designed and is developing as a rapid-onset nasal spray to be administered by patients. The
Company is developing etripamil to treat paroxysmal supraventricular tachycardia, atrial fibrillation, and other
cardiovascular indications.
2 Summary of Significant Accounting Policies
a) Basis of consolidation
The consolidated financial statements include the accounts of the Company and Milestone Pharmaceuticals USA, Inc. All
intercompany transactions and balances have been eliminated.
b) Basis of Presentation and Use of Accounting Estimates
These consolidated financial statements of the Company have been presented in United States dollars (USD) and have been
prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP),
including the applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding financial
reporting.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make
estimates and judgments that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the
year. The Company bases its estimates and assumptions on current facts, historical experience and various other factors
that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not
readily apparent from other sources. 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 clinical research organizations, or CROs, contract
manufacturing organizations, or CMOs, and clinical trial sites which in turn impact the research &
development expenses.
● Estimate of the grant date fair value of share options granted to employees, consultants and directors,
and the resulting share-based compensation expense, using the Black Scholes option pricing model.
Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require
the exercise of judgment. As of the date of issuance of these consolidated financial statements, the Company is not aware
of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments.
These estimates may change as new events occur and additional information is obtained and are recognized in the
consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any
such differences may be material to the Company’s consolidated financial statements.
c) Segment Information
The Company manages its operations as a single operating segment for the purposes of assessing performance and making
operating decisions while focusing on the development and commercialization of innovative cardiovascular medicines.
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d) Revenue Recognition
Collaborative Arrangements
Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
The Company considers the nature and contractual terms of arrangements and assesses whether an arrangement involves a
joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and
rewards dependent on the commercial success of the activity. If the Company is an active participant and is exposed to
significant risks and rewards dependent on the commercial success of the activity, the Company accounts for such an
arrangement as a collaborative arrangement under Accounting Standards Codification (ASC) 808, Collaborative
Arrangements (ASC 808), which requires that certain transactions between the Company and collaborators be recorded in
its consolidated statements of comprehensive loss on either a gross basis or net basis, depending on the characteristics of
the collaborative relationship, and requires enhanced disclosure of collaborative relationships. The Company evaluates its
collaboration agreements for proper classification in its consolidated statements of comprehensive loss based on the nature
of the underlying activity. If payments to and from collaborative partners are not within the scope of other authoritative
accounting literature, the consolidated statements of loss classification for the payments is based on a reasonable, rational
analogy to authoritative accounting literature that is applied in a consistent manner. If the Company concludes that it has a
customer relationship with one of its collaborators, the Company follows the guidance in Accounting Standards
Codification (ASC) Topic 606, Revenue From Contracts With Customers (ASC 606).
Revenue from Contracts with Customers
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The
amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these
goods and services. To achieve this core principle, the Company applies the following five steps: 1) identify the customer
contract; 2) identify the contract’s performance obligations; 3) determine the transaction price; 4) allocate the transaction
price to the performance obligations; and 5) recognize revenue when or as a performance obligation is satisfied. The
Company evaluates all promised goods and services within a customer contract and determines which of such goods and
services are separate performance obligations. This evaluation includes an assessment of whether the good or service is
capable of being distinct and whether the good or service is separable from other promises in the contract. In assessing
whether promised goods or services in licensing arrangements are distinct, the Company considers factors such as the stage
of development of the underlying intellectual property and the capabilities of the customer to develop the intellectual
property on their own or whether the required expertise is readily available. Licensing arrangements are analyzed to
determine whether the promised goods or services, which often include licenses, research and development services and
governance committee services, are distinct or whether they must be accounted for as part of a combined performance
obligation. If the license is considered not to be distinct, the license would then be combined with other promised goods or
services as a combined performance obligation. If the Company is involved in a governance committee, it assesses whether
its involvement constitutes a separate performance obligation. When governance committee services are determined to be
separate performance obligations, the Company determines the fair value to be allocated to this promised service. Certain
contracts contain optional and additional items, which are considered marketing offers and are accounted for as separate
contracts with the customer if such option is elected by the customer, unless the option provides a material right which
would not be provided without entering into the contract. An option that is considered a material right is accounted for as a
separate performance obligation. The transaction price is determined based on the consideration to which the Company
will be entitled in exchange for transferring goods and services to the customer. A contract may contain variable
consideration, including potential payments for both milestone and research and development services. For certain
potential milestone payments, the Company estimates the amount of variable consideration by using the most likely
amount method. In making this assessment, the Company evaluates factors such as the clinical, regulatory, commercial and
other risks that must be overcome to achieve the milestone. Each reporting period the Company re-evaluates the probability
of achievement of such variable consideration and any related constraints. Milestone will include variable consideration,
without constraint, in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance
obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price among the
performance obligations on a relative standalone selling price basis unless a portion of the transaction price is variable and
meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a
single performance obligation.
The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance
obligations or in the case of certain variable consideration to one or more performance obligations. The Company must
develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation
identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may
include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete
the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance
obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance
obligation and the resulting amounts allocated to each performance obligation are consistent with the amount the Company
would expect to receive for each performance obligation.
When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price, excluding
estimates of variable consideration that are constrained, that is allocated to that performance obligation on a relative
standalone selling price basis. Significant management judgment is required in determining the level of effort required
under an arrangement and the period over which the Company is expected to complete its performance obligations under
an arrangement.
For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess the nature
of the combined performance obligation to determine whether the combined performance obligation is satisfied over time
or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue
from non- refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if
necessary, adjusts the measure of performance and related revenue recognition. If the license to the Company’s intellectual
property is determined to be distinct from the other performance obligations identified in the arrangement, the Company
will recognize revenue from non-refundable, up-front fees allocated to the license at the point in time when the license is
transferred to the customer and the customer is able to use and benefit from the license.
e) Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments that are readily convertible into cash with original
maturities of 90 days or less at acquisition date.
f) Short-Term Investments
Short-term investments are classified as held-to-maturity, are initially recognized at fair value and are subsequently
accounted for at amortized cost. They are comprised of guaranteed investment certificates with a maturity greater than
90 days but less than one year and, as such, are classified as current assets.
g) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and
cash equivalents and investment securities classified as held-to-maturity. The Company maintains deposits at major
financial institutions. Additionally, the Company has adopted an investment policy that includes guidelines relative to
credit quality, diversification of maturities and liquidity.
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h) Currency Risk
Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
The Company is exposed to currency risk due to financial instruments denominated in foreign currencies. The Company is
exposed to the Canadian dollar currency risk and does not enter into arrangements to hedge its currency risk exposure.
i) Property and Equipment
Property and equipment is stated at historical cost less accumulated amortization. Expenditures for maintenance and repairs
are recorded to expense as incurred. The Company reviews its property and equipment whenever events or changes in
circumstances indicate that the carrying value of certain assets might not be recoverable and recognizes an impairment loss
when it is probable that an asset’s realizable value is less than the carrying value. To date, no such impairment losses have
been recorded. Amortization is calculated using the straight-line method over the following estimated useful lives of the
assets:
Computer hardware and software
Office equipment
Furniture and fixtures
Leasehold improvements
j) Leases
3 years
5 years
5 years
over the lease term
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. Right-out-use assets are subsequently accounted for as long-lived
assets, including evaluating for indicators of impairment. Certain adjustments to the right-of-use asset may be required for
items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a
result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at
which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a
similar term, in a similar economic environment. Prospectively, the Company will adjust the right-of-use assets for
straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the
same incremental borrowing rate that was in effect as of the lease commencement or transition date.
The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The
Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are
not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.
k) Pre-funded Warrants
Pre-funded warrants allow the holder to pay little or no consideration to receive the shares upon exercise of the warrant.
The pre-funded warrants do not meet the definition of a derivative under ASC 815 because their fair value at issuance is
equal to the fair value of the shares underlying the warrant. As such, they have the characteristics of a prepaid forward sale
of equity. As a result, the pre-funded warrants are accounted for as equity instruments.
l) Share Issuance Costs
Share issuance costs applicable to the issuance of equity instruments are recorded as a reduction of the financing equity
proceeds.
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
m) Research and Development and Investment Tax Credits
Research and development costs are charged to expense as costs are incurred in performing research and development
activities. The Company’s research and development costs consist primarily of salaries and fees paid to contract research
organizations (CROs) and to contract manufacturing organizations (CMOs).
Clinical trial expenses include direct costs associated with CROs, direct CMO costs for the formulation and packaging of
clinical trial material, as well as investigator and patient related costs at sites at which the Company’s trials are being
conducted. Direct costs associated with the Company’s CROs and CMOs are generally payable on a time and materials
basis, or when milestones are achieved. The invoicing from clinical trial sites can lag several months. The Company
records expenses for its clinical trial activities performed by third parties based upon estimates of the percentage of work
completed of the total work over the life of the individual study in accordance with agreements established with CROs and
clinical trial sites. The Company determines the estimates through discussions with internal clinical personnel, CROs and
CMOs as to the progress or stage of completion of trials or services and the agreed upon fee to be paid for such services
based on facts and circumstances known to the Company as of each consolidated balance sheet date. The actual costs and
timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors,
including the Company’s clinical development plan. If the actual timing of the performance of services of the level of effort
varies from the estimate, the Company will adjust the accrual accordingly.
The Company recognizes 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.
n) Income Taxes
The provision for income taxes is computed using the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred
tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are
expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred income tax assets until
when it is more likely than not that these assets will be realized. Tax benefits related to tax positions not deemed to meet
the “more-likely-than-not” threshold are not permitted to be recognized in the consolidated financial statements.
o) Foreign Currency Translation and Transactions
The functional currency of the Company is the US dollar. Accordingly, transactions denominated in currencies other than
the functional currency are measured and recorded in the functional currency at the exchange rate in effect on the date of
the transactions. At each consolidated balance sheet date, monetary assets and liabilities denominated in currencies other
than the functional currency are remeasured using the exchange rate in effect at that date. Non-monetary assets and
liabilities and revenue and expense items denominated in foreign currencies are translated into the functional currency
using the exchange rate prevailing at the dates of the respective transactions. Any gains or losses arising on remeasurement
are included in the consolidated statement of loss.
p) Share Based Compensation
The Company has a share based compensation plan which is described in detail in note 8 and records all share-based
payments, including grants of employee share options, at their fair values. The fair value of share options granted to
employees and non-employees is estimated at the date of grant using the Black-Scholes option pricing model. The
Company recognizes share based compensation expense over the requisite service period of the individual grants, which
equals the vesting period, using the straight-line method. Forfeitures, if any, are recorded as they occur. Any consideration
paid by employees on exercising share options and the corresponding portion previously credited to contributed surplus are
credited to share capital. The Black-Scholes option pricing model used by the Company to calculate option values was
developed to estimate fair value.
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
The Company approved an employee share purchase plan in April 2019, which became effective on May 8, 2019 and is
described in note 9. The plan provides a means by which eligible employees of the Company may be given an opportunity
to purchase common shares. The plan permits the Company to grant a series of purchase rights to eligible employees under
an employee stock purchase plan.
q) Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which
requires public entities to disclose information about their reportable segments’ significant expenses on an interim and
annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within
fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the effect of
adopting this new accounting guidance on its financial statements, but does not intend to early adopt.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
(“ASU 2023-09”). The amendments in this update require that public business entities on an annual basis (1) disclose
specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a
quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed
by multiplying pretax income [or loss] by the applicable statutory income tax rate). The amendments also require entities
on an annual basis to disclose disaggregated amounts of income taxes paid. ASU 2023-09 is effective for annual periods
beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been
issued or made available for issuance. The Company is evaluating the effect of adopting this new accounting guidance on
its financial statements, but does not intend to early adopt.
r) Significant Risks and Uncertainties
The Company is subject to challenges and risks specific to its business and its ability to execute on its strategy, as well as
risks and uncertainties common to companies in the pharmaceutical industry, including, without limitation, risks and
uncertainties associated with: obtaining regulatory approval of its product candidate; delays or problems in the supply of its
study drug or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing product candidates;
pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and
enhancing its intellectual property rights; and complying with applicable regulatory requirements.
Further, the Company may be impacted by general economic, political, and market conditions, including deteriorating
market conditions due to investor concerns regarding inflation, armed conflicts, and overall fluctuations in the financial
markets in the U.S. and abroad.
s) Sources of Liquidity and Funding Requirements
The Company has incurred operating losses and experienced negative operating cash flows since its inception and
anticipates to continue to incur losses for at least the next several years. As of December 31, 2023, the Company had cash
and cash equivalents and short-term investments of $66.0 million and an accumulated deficit of $326.0 million.
Management has evaluated the Company’s operating plan against its existing cash and cash equivalents and determined
that the Company expects to be able to support its operations for at least the next 12 months from the date of issuance of
these consolidated financial statements. The Company has historically financed its operations primarily through the sale of
equity securities, convertible notes and, to a lesser extent from cash received pursuant to its license agreement. To date, the
Company has not generated any revenue from product sales. Management expects operating losses and negative cash flows
from operations to continue for the foreseeable future. The Company currently plans to raise additional funding as required
based on the status of its clinical trials, progress of New Drug Application, or NDA, filing, and projected cash flows. There
can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms
acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
additional capital and reduce discretionary spending should additional capital not become available could have a material
adverse effect on the Company’s ability to achieve its business objectives.
3 Revenue
The Company recorded revenue of $1.0 million for the year ended December 31, 2023. This revenue was the result of
having reached a milestone pursuant to our License and Collaboration Agreement, dated May 15, 2021, with Ji Xing
Pharmaceuticals Limited (such party “Ji Xing” and , such agreement, the “Ji Xing License Agreement”) due upon the
successful initiation of a Phase 1 Clinical Trial of a pharmaceutical product that uses a device to deliver etripamil by nasal
spray by or on behalf of Ji Xing for the treatment of PSVT in the People’s Republic of China (the “Territory”), including
mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.
The Company recorded revenue of $5.0 million for the year ended December 31, 2022. This revenue was related to two
milestones reached as a result of the first patient dosed in a Phase 3 Clinical Trial for the treatment of PSVT in the Territory
pursuant to the Ji Xing License Agreement and the successful completion of a Phase 3 clinical trial for the treatment of
PSVT in the United States.
Strategic Partnerships
Ji Xing
On May 15, 2021, the Company entered into the License Agreement with Ji Xing, which is an entity affiliated with RTW
Investments, LP, or RTW, a beneficial owner of approximately 9.7% of the Company’s common shares, as of December 31,
2023. Under the License Agreement, the Company 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 Territory. Ji Xing will be responsible for
development and regulatory activities in the Territory, and the Company will remain responsible for certain manufacturing
activities in the Territory, subject to the supply agreement subsequently entered into by the Company and Ji Xing as
contemplated by the License Agreement (the Supply Agreement). The Company 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, the Company is 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.
Management evaluated all of the promised goods or services within the contract and determined that such goods and
services were separate performance obligations. The Company determined that the license granted was a separate
performance obligation as Ji Xing can benefit from the license granted on its own after the transfer of the license, as it does
not require any significant development, regulatory or commercialization activities from Milestone. Ji Xing is responsible
for all development, regulatory and commercialization activities in the Territory, including the performance of clinical trials
necessary for regulatory approval, and is responsible for all such related costs. Supply of the product can be provided by
another entity, as the Company currently uses a CMO for the production of etripamil without subsequent significant
modification or customization by the Company, therefore the Company determined the obligation to supply product is a
separate and distinct obligation. The Company concluded that the obligation for participation on the various governance
committees was distinct as the services could be performed by an outside party, however it was determined to be
immaterial after estimating the stand-alone cost compared to the License Agreement as a whole. As a result, the Company
concluded there were two material and distinct performance obligations to account for under ASC 606 at the inception of
the License Agreement.
4 Short-term Investments
As of December 31, 2023, short-term investments of $52.2 million were comprised of term deposits issued in US
currency, earning interest between 5.53% and 5.95%, maturing between January 16, 2024 and June 19, 2024. These short-
term investments were in scope of ASC 320, Investments-Debt Securities. The short-term investments maturity is greater
than
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
90 days but less than one year, and they were classified as held to maturity, recorded as current assets and were accounted
for at amortized cost. Interest income earned on short-term investments is reported in interest income. The Company had
short-term investments of $56.9 million as of December 31, 2022.
5 Leases
On May 20, 2022, the Company entered into a new lease arrangement for a 62-month term for new office space located in
Charlotte, NC. The Company recognized the operating lease right-of-use asset and operating lease liabilities at the lease
commencement date on August 1, 2022. The interest rate implicit in lease contracts is not readily determinable and the
Company does not have a public credit rating and carries no debt. As such, several factors were considered in the
determination of the Company’s incremental borrowing rate used in determining the present value of lease payments. The
Company’s examined credit ratings for similar companies, assumed equivalency between the Canadian and U.S. markets
for collateralized debt and used rates near the 62-month period. This resulted in an incremental borrowing rate of 7.55%.
Lease expenses are recognized on a straight-line basis over the lease term, which is accomplished by increasing the
amortization of the right-of-use asset as interest expense on the lease liability declines over the lease term.
On July 1, 2020, the Company entered into an arrangement for the lease renewal for its headquarters located in Ville Saint-
Laurent, Quebec. The 5-year lease term is from December 1, 2020 expiring on November 30, 2025. The Company
recorded the operating lease right-of-use asset and operating lease liabilities at the effective lease arrangement date of July
1, 2020. The Company’s examined credit ratings for similar companies, assumed equivalency between the Canadian and
U.S. markets for collateralized debt and used rates for the remaining lease term of 65 months. This resulted in an
incremental borrowing rate of 5.26%. Lease expenses are recognized on a straight-line basis over the lease term, which is
accomplished by increasing the amortization of the right-of-use asset as interest expense on the lease liability declines over
the lease term. The Company is not reasonably certain of renewing the lease following the current renewal option and
recognized the right-of-use asset and operating lease liabilities to November 30, 2025.
The Company's operating office leases right-of-use assets as at December 31 were as follows:
Opening balance
New operating lease right-of-use asset
Amortization of right-of-use asset
Closing balance
$
$
2023
2022
2,423
—
(506)
1,917
$
$
711
2,103
(391)
2,423
Operating lease expenses of $681 and $490 are included in general and administrative operating expenses in the
consolidated statement of loss, and within operating activities in the statement of cash flows for the years ended December
31, 2023 and 2022, respectively and are comprised of two operating lease right-of-use assets and one operating lease of
less than 12 months.
The following table summarizes the future minimum lease payments of right-of-use assets operating leases as at December
31, 2023:
January 1, 2024 to December 31, 2024
January 1, 2025 to December 31, 2025
January 1, 2026 to December 31, 2026
January 1, 2027 to September 30, 2027
Less interest
673
670
530
406
2,279
(276)
2,003
$
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
6 Property and equipment
Property and equipment consist of the following at December 31:
Computer hardware and software
Office equipment
Leasehold improvements
Total
Less accumulated depreciation
Property and equipment, net
2023
2022
$
$
$
226
157
85
468
(191)
277
$
$
$
120
155
102
377
(120)
257
No disposal was recorded for the year ended December 31, 2023. During the year ended December 31, 2022, the Company
recorded a disposal of $348, which resulted in a loss of $141. For the years ended December 31, 2023 and 2022,
depreciation expense was $92 and $89, respectively.
7 Accounts payable and accrued liabilities
Accounts payable and accrued liabilities comprised the following as of December 31:
Trade accounts payable
Accrued compensation and benefits payable
Accrued research and development liabilities
Accrued commercial liabilities
Other accrued liabilities
Total
8 Shareholders’ Equity
Authorized Share Capital
2023
2022
$
$
3,981
712
894
710
383
6,680
$
$
2,263
2,573
404
149
255
5,644
The Company has authorized and issued common shares, voting and participating, without par value, of which unlimited
shares were authorized and 33,483,111 shares were issued and outstanding as of December 31, 2023.
As of December 31, 2023, there were 1,463,936 common shares available for issuance under the Employee Stock Purchase
Plan, or the “ESPP”. The Company has issued 142,006 shares of common stock pursuant to the ESPP as of December 31,
2023.
In August 2022, the Company issued and sold 361,236 common shares under the Open Market Sale AgreementSM , or the
Sales Agreement, with Jefferies LLC with respect to an at-the-market offering program, or the ATM Program, for proceeds
of $2.6 million (net of issuance costs of $0.1 million).
Shelf Registration
On November 12, 2021, the Company entered into an agreement and the Company may sell any combination of the
securities described in this prospectus in one or more offerings up to a total aggregate offering price of $250,000,000.
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
Pre-funded Warrants – Exchange Agreement
On March 22, 2023, the Company 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 and no additional cash consideration was
rendered in exchange for the warrants. 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, together with its affiliates, 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.
Open Market Sale Agreement
On July 29, 2020, the Company entered into an Open Market Sale Agreement℠ with respect to an at-the-market offering
program (ATM Program) under which the Company may issue and sell its common shares having an aggregate offering
price of up to $50 million. The Company has sold 361,236 shares under the ATM program as of the date of this filing.
9 Share Based Compensation
Under the Company’s 2019 Equity Incentive Plan (the 2019 Plan) and the Company’s Stock Option Plan (the 2011 Plan),
unless otherwise decided by the Board of Directors, options vest and are exercisable as follows: 25% vest and are
exercisable on the one year anniversary of the grant date and one thirty-sixth (1/36th) of the remaining options vest and are
exercisable each month thereafter, such that options are vested in full on four-year anniversary of the grant date.
On November 10, 2021, the Company established a 2021 Inducement Plan under Nasdaq Marketplace Rules through the
granting of awards. This 2021 Inducement Plan is intended to help the Company provide an inducement material for
certain individuals to enter into employment with the Company, incentives for such persons to exert maximum efforts for
the success of the Company and provide a means by which employees may benefit from increases in value of the common
shares. As of December 31, 2023, there were 1,000,000 shares available for issuance under the 2021 Inducement Plan, of
which 375,000 shares were available for future grants.
On January 1, 2023 and on January 1, 2022, the number of the Company’s common shares reserved for issuance under the
2019 Plan increased by 1,371,440 and 1,195,902 common shares, respectively. Further, on July 5, 2022, the number of the
Company’s common shares reserved for issuance under the 2019 Plan increased by 1,000,000 common shares. In addition,
125,323 options have been forfeited under the 2011 Plan since the adoption of the 2019 Plan and have become available for
issuance under the 2019 Plan. As of December 31, 2023, 561,000 of previously issued options had been cancelled under
the 2019 Plan and were available for future grants. As of December 31, 2023, there were 8,182,946 common shares
available for issuance under the 2019 Plan, of which 1,704,960 common shares were available for future grants.
On July 15, 2022, the Company offered an Employee Share Purchase Plan, or ESPP, in which participation is available to
substantially all of our employees in the United States and Canada who meet certain service eligibility requirements. As of
December 31, 2023, the Company has 1,463,936 common shares available under the ESPP. As of December 31, 2023, the
Company has issued 142,006 shares of common stock pursuant to the ESPP.
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
The total outstanding and exercisable options from the 2011 Plan, 2019 Plan and Inducement Plan as of December 31 were
as follows:
Outstanding at beginning of year - 2011 Plan
Outstanding at beginning of year - 2019 Plan
Outstanding at beginning of year - Inducement Plan
Granted - 2019 Plan
Granted - Inducement Plan
Exercised - 2019 Plan
Exercised - 2011 Plan
Forfeited - 2019 Plan
Expired - 2019 Plan
Expired - 2011 Plan
Cancelled - 2019 Plan
Outstanding at end of period
Outstanding at end of period - Weighted average
exercise price
Exercisable at end of period
Exercisable at end of period - Weighted average
exercise price
Outstanding at beginning of year - 2011 Plan
Outstanding at beginning of year - 2019 Plan
Granted - 2019 Plan
Granted - Inducement Plan
Exercised - 2019 Plan
Exercised - 2011 Plan
Forfeited - Inducement Plan
Forfeited - 2019 Plan
Forfeited - 2011 Plan
Expired - 2011 Plan
Outstanding at end of period
Outstanding at end of period - Weighted average
exercise price
Exercisable at end of period
Exercisable at end of period - Weighted average
exercise price
$
$
$
$
2023
Number
of shares
Inducement Plan
2011 Plan
Total
Weighted
average
exercise
price
1,802,672 1,802,672 $
2019 Plan
—
5,314,312
—
1,875,400
—
(7,000)
—
(156,198)
(58,617)
—
(561,000)
6,406,897
—
—
503,000
—
122,000
—
—
—
—
—
—
625,000
5.74
221,833
6.42
$
$
2022
5,314,312
503,000
1,875,400
122,000
(7,000)
(107,103)
(156,198)
(58,617)
(1,336)
(561,000)
8,726,130
5,144,488
—
—
—
—
—
(107,103)
—
—
(1,336)
—
1,694,233
2.09
1,694,233
2.09
2011 Plan
1,995,971
—
—
—
(172,595)
—
—
(19,583)
(1,121)
1,802,672
Total
1,995,971
3,749,834
1,790,700
523,000
(45,089)
(172,595)
(20,000)
(181,133)
(19,583)
(1,121)
7,619,984
2.05
8.35
6.41
3.61
2.98
3.74
1.52
6.13
11.52
0.91
21.73
5.09
5.32
$
$
$
$
$
Weighted
average
exercise
price
2.07
9.52
5.76
6.37
3.83
1.43
5.48
8.00
9.35
0.96
6.73
6.52
5.82 $
3,228,422
6.93 $
Number
of shares
2019 Plan
—
3,749,834
1,790,700
—
(45,089)
—
—
(181,133)
—
—
5,314,312
Inducement Plan
—
—
—
523,000
—
—
(20,000)
—
—
—
503,000
8.35
2,390,549
$
6.41
—
$
2.05
1,800,546
4,191,095
9.90
— $
2.04
The weighted average remaining contractual life was 6.55 and 7.47 years for outstanding options as of December 31, 2023
and 2022, respectively. The weighted average remaining contractual life was 5.93 and 6.37 years for vested options, as of
December 31, 2023 and 2022, respectively.
There was $11.4 million and $15.7 million total unrecognized compensation cost related to non-vested share options as of
December 31, 2023 and 2022, respectively. The share options are expected to be recognized over a remaining weighted
average vesting period of 2.27 years and 2.36 years as of December 31, 2023 and 2022, respectively. For the year ending
December 31, 2023, there were 561,000 shares cancelled under the 2019 plan, which resulted in additional share-based
compensation expense of $0.6 million.
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
Options granted are valued using the Black-Scholes option pricing model. Amortization of the fair value of the options
over vesting years has been expensed and credited to additional paid-in capital in shareholders’ equity. The non-vested
options as of December 31 were as follows:
Non-vested share options at beginning of year - 2011 Plan
Non-vested share options at beginning of year - 2019 Plan
Non-vested share options at beginning of year - Inducement
Plan
Granted - 2019 Plan
Granted - Inducement Plan
Vested, outstanding 2011 Plan
Vested, outstanding 2019 Plan
Vested, outstanding Inducement Plan
Forfeited - 2019 Plan
Non-vested share options at end of period
Non-vested share options at end of period - Weighted average
fair value
Non-vested share options at beginning of year - 2011 Plan
Non-vested share options at beginning of year - 2019 Plan
Granted - 2019 Plan
Granted - Inducement Plan
Vested, outstanding 2011 Plan
Forfeited - 2011 Plan
Forfeited - Inducement Plan
Forfeited - 2019 Plan
Vested, outstanding 2019 Plan
Non-vested share options at end of period
Non-vested share options at end of period - Weighted average
fair value
2023
Number
of options
2019 Plan Inducement Plan 2011 Plan
Total
—
2,923,763
—
1,875,400
—
—
(1,504,329)
—
(116,359)
3,178,475
—
—
503,000
—
122,000
—
—
(221,833)
—
403,167
2,126
—
—
—
—
(2,126)
—
—
—
—
2,126 $
2,923,763
503,000
1,875,400
122,000
(2,126)
(1,504,329)
(221,833)
(116,359)
3,581,642 $
Weighted
average
fair value
6.64
5.30
4.84
2.87
2.30
6.64
5.88
4.85
3.96
3.69
$
3.64
$
4.07
$
—
Number
of options
2019 Plan Inducement Plan 2011 Plan
2022
—
2,655,518
1,790,700
—
—
—
—
(145,664)
(1,376,791)
2,923,763
—
—
—
523,000
—
—
(20,000)
—
—
503,000
200,639
—
—
—
(198,317)
(196)
—
—
—
2,126
$
5.30
$
4.84
$
6.64
Total
200,639 $
2,655,518
1,790,700
523,000
(198,317)
(196)
(20,000)
(145,664)
(1,376,791)
3,428,889 $
Weighted
average
fair value
1.86
6.40
4.37
4.81
1.81
1.91
4.18
5.49
6.19
5.24
The following table summarizes information with respect to share options outstanding as of December 31, 2023:
Exercise price
$0.84-$1.73
$1.74-$3.2
$3.21-$5.25
$5.26-$6.36
$6.37-$8.5
$8.51-$15.5
$15.51-$20.5
$20.51-$22.45
Total
Options outstanding
Weighted
average
remaining
contractual
life (years)
3.11
4.77
7.62
7.37
6.43
6.27
5.84
5.21
6.55
$
$
$
$
$
$
$
$
$
Number
of options
949,136
915,192
2,351,850
3,473,464
667,833
57,905
65,100
245,650
8,726,130
Weighted
average
exercise
price
1.43
2.69
3.67
5.90
6.85
9.08
17.21
21.48
5.09
Options exercisable
Weighted
average
remaining
contractual
life (years)
3.11
4.76
6.63
7.34
6.58
5.42
5.84
5.21
5.93
$
$
$
$
$
$
$
$
$
Number
of options
949,136
709,192
688,000
2,133,496
316,521
42,780
64,829
240,534
5,144,488
Weighted
average
exercise
price
1.43
2.59
3.76
5.96
6.84
9.27
17.21
21.48
5.32
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
The fair value of options is measured using Black-Scholes valuation model. This model also requires assumptions,
including expected option life, volatility, risk-free interest rate and dividend yield, which greatly affect the calculated
values:
Exercise price
Share price
Volatility
Risk-free interest rate
Expected life
Dividend
$
$
Year ended December 31,
2023
2022
$
$
3.58
3.58
97 %
3.97 %
5.90
5.90
92 %
2.43 %
6.01 years
0 %
6.03 years
0 %
Expected volatility is determined using comparable companies for which the information is publicly available. The risk-
free interest rate is determined based on the U.S. sovereign rates benchmark in effect at the time of grant with a remaining
term equal to the expected life of the option. Expected option life is determined based on the simplified method as the
Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected
term. The simplified method is an average of the contractual term of the options and its ordinary vesting period. Dividend
yield is based on the share option’s exercise price and expected annual dividend rate at the time of grant.
The Company recognized share-based compensation expense as follows for the years ended December 31:
Administration
Research and development
Commercial activities
Total
10 Debt
2023
2022
$
$
4,849 $
3,281
1,404
9,534 $
4,229
3,483
1,336
9,048
On March 27, 2023, we entered into a note purchase agreement, or the “Note Purchase Agreement”, with RTW
Investments LP and certain of its affiliates, or collectively, RTW.
On March 29, 2023, we closed the transactions contemplated by the Note Purchase Agreement, and issued and sold $50.0
million principal amount of 6.0% Convertible Senior Notes due 2029, or the “2029 Convertible Notes”, to the holders.
The 2029 Convertible Notes are senior secured obligations and are 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 is March 31, 2029,
the “Maturity Date”. The obligations under the 2029 Convertible Notes are 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 and other 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.
On or after March 27, 2027, the 2029 Convertible Notes are redeemable by us, subject to certain conditions, 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
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Table of Contents
Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
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.
In accounting for the issuance of the Convertible Notes, the Company determined there were no embedded features, which
require bifurcation between debt and equity components. As a result, the Convertible Notes are accounted for as a liability.
As of December 31, 2023, the estimated fair value of the Convertible Notes was approximately $44.3 million based on
level 2 inputs.
The net carrying amount of the Convertible Note were as follows:
Original principal
Paid in kind (PIK) interest
Unamortized debt discount
Unamortized debt issuance costs
Total
As of December 31,
2023
2022
$
$
50,000
2,310
(547)
(1,991)
49,772
$
$
The following table presents the total amount of interest cost recognized relating to the 2029 Convertible Notes:
Contractual interest expense
Amortization of debt discount
Amortization of debt issuance costs
Total interest expense
11 Net loss per share
Year ended December 31,
2023
2022
$
$
2,310
53
191
2,554
$
$
—
—
—
—
—
—
—
—
—
Basic and diluted net loss per common share is determined by dividing net loss applicable to common shareholders by the
weighted average number of common shares and pre-funded warrants outstanding during the period. In addition to the
conversion feature on the 2029 Convertible Notes described above, which the Company reviewed and concluded that if-
converted would be anti-dilutive due to the facts surrounding the feature, the following potentially dilutive securities have
also been excluded from the computation of diluted weighted average shares outstanding as of December 31, as they would
be anti-dilutive:
Share options
2023
8,726,130
2022
7,619,984
Amounts in the table above reflect the common share equivalents of the noted instruments.
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Table of Contents
12 Income taxes
Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
A reconciliation between tax expense and the product of accounting income multiplied by the basic income tax rate for
the years ended December 31, 2023 and 2022 is as follows:
Loss before income taxes
Basic income tax rate
Computed income tax recovery
Effect on income tax rate resulting from
Accounting charges not deductible for tax purposes
Non‑deductible share‑based compensation
Share issue costs
Accretion of investments
Tax benefits of current period losses and other tax assets
Valuation allowance for prior year adjustment
Other
Income tax expense (recovery) reported in the consolidated statements of loss
2023
(59,685)
$
26.50 %
2022
(58,388)
26.50 %
(15,817)
(15,473)
4
4,663
—
—
10,945
—
205
— $
13
2,704
32
(26)
12,387
112
251
—
$
$
The Company has incurred Canadian federal and provincial net operating losses (NOLs) from inception. As of
December 31, 2023, the Company has NOL carry-forwards of approximately $206.5 million and $203.4 million,
respectively, for Canadian federal and Québec purposes, available to reduce future taxable income, which expire beginning
in 2026 through 2043. The Company also has scientific research and experimental development expenditures of
approximately $26.5 million and $31.8 million, respectively, for Canadian federal and Québec income tax purposes, which
have not been deducted. These expenditures are available to reduce future taxable income and have an unlimited carry-
forward period. Research and development tax credits and expenditures are subject to verification by the tax authorities,
and, accordingly, these amounts may vary.
The Company has incurred NOLs for U.S. tax purposes. As of December 31, 2023, the Company has carry-forwards of
approximately $54.0 million related to U.S. NOLs that may be carried forward indefinitely and are available to reduce
future taxable income.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax assets have
not been recognized in these financial statements because the criteria for recognition of these assets were not met.
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
The Company’s deferred tax assets consist of the following for the years ended December 31, 2023 and 2022:
Net operating loss carry‑forwards
Tax basis of property and equipment in excess of carrying values
Tax basis of right of use assets
Tax basis of lease liability
Tax basis of reserves
Federal SR&ED investment tax credits
Taxation of federal SR&ED investment tax credits
Research and development expenditures
Financing costs
Stock based compensation
Change in tax rates
Others
Total Net deferred tax assets
Less Valuation allowance
Net deferred tax assets
2023
2022
$
$
66,656 $
67
(421)
438
6
3,735
(990)
7,643
186
2,850
—
45
80,215
(80,215)
— $
57,952
97
—
—
—
545
(82)
6,323
1,008
—
51
15
65,909
(65,909)
—
The Company files income tax returns in Canada and in the United States. The Company is subject to Canada Revenue
Agency and Revenu Québec examination for fiscal years 2018 to 2023 due to unexpired statute of limitation periods and is
subject to US Federal and state income tax examination for fiscal years 2020 to 2023.
13 Government assistance
The Company incurs research and development expenditures that are eligible for investment tax credits. The investment
tax credits recorded are based on management’s estimates of amounts expected to be recovered and are subject to audit by
the taxation authorities. These amounts have been recorded as a reduction of research and development expenditures
the years ended December 31, 2023 and 2022 for an amount of $312 and $456, respectively.
14 Commitments
In the normal course of business, the Company enters into contracts with clinical research organizations, drug
manufacturers and other vendors for preclinical and clinical research studies, research and development supplies and other
services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are
cancellable contracts. Therefore, as at December 31, 2023 there are no contractual commitments, except for office leases
(see note 5).
15 Currency risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates and the degree of
volatility of those rates. The foreign currency risk is limited to the portion of the Company’s business transactions
denominated in currency other than US dollars. The following table provides an indication of the Company’s exposure to
the Canadian dollar, which is expressed in US dollars as of December 31:
Cash
Other receivables
Operating lease assets
Accounts payable and accrued liabilities
Operating lease liabilities
Net financial position exposure
The Company does not enter into arrangements to hedge its currency risk exposure.
132
2023
2022
$
$
2,441
263
311
(52)
(306)
2,657
$
$
262
262
462
(484)
(444)
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Table of Contents
Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
16 Fair value of financial instruments
Pursuant to the accounting guidance for fair value measurement and its subsequent updates, fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability (i.e. the exit price) in an orderly transaction
between market participants at the measurement date. The accounting guidance establishes a hierarchy for inputs used in
measuring fair value that minimizes the use of unobservable inputs by requiring the use of observable market data when
available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on active
market data. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset
or liability based on the best information available in the circumstances.
The fair value hierarchy is broken down into the three input levels summarized below:
Level 1— Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by
the Company at the reporting date.
Level 2— Valuations based on inputs other than the quoted prices in active markets that are observable either directly or
indirectly in active markets.
Level 3— Valuations based on unobservable inputs in which there is little or no market data, which requires the Company
to develop its own assumptions.
For the years ending December 31, 2023 and December 31, 2022, there were no financial instruments measured at fair
value on a recurring or non-recurring basis.
17 Royalty Purchase Agreement
On March 27, 2023, we entered into a purchase and sale agreement, or the “Royalty 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 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%.
Based on the Company’s assessment of the terms and conditions under the Royalty Purchase Agreement, there is no
accounting recognition required in these financial statements.
18 Other receivables
Other receivables comprised the following as of December 31:
Interest receivable
Sales tax receivable
Clinical receivable
Other current receivable
133
2023
2022
$
$
528
264
2,400
16
3,208
$
$
615
261
—
6
882
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Milestone Pharmaceuticals Inc.
Notes to Consolidated Financial Statements
(in thousands of US dollars, except share and per share data)
For the year ended December 31, 2023, the Company recognized a clinical receivable of $2.4 million for clinical upfront
payments made to the CRO that completed the NODE-303 trial. The Company recognized no clinical receivables for the
year ended December 31, 2022.
19 Subsequent Events
Financing Transaction
On February 28, 2024, we entered into an underwriting agreement, or the Underwriting Agreement, related to an
underwritten public offering, or the Offering, of 16,666,667 of our common shares, without par value, at a public offering
price of $1.50 per share and, in lieu of common shares to certain investors, pre-funded warrants to purchase 3,333,333
Shares at a public offering price of $1.499 per pre-funded warrant. Under the terms of the Underwriting Agreement, we
granted the Underwriters an option to purchase up to an additional 3,000,000 common shares at the same price per share as
the other common shares sold in the Offering, which was exercised by the Underwriters in full on February 29, 2024.
Each pre-funded warrant has an exercise price of $0.001 per share. The pre-funded warrants were exercisable immediately
upon issuance, subject to certain beneficial ownership limitations.
The net proceeds to the Company from the Offering, including the proceeds from the exercise by the Underwriters of their
option to purchase the additional 3,000,000 common shares in full, was approximately $32.4 million after deducting
underwriting commissions and offering expenses payable by the Company.
The Offering closed on March 4, 2024.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the Exchange Act) that are designed to ensure that information required to be disclosed in our
periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our
management, including our principal executive officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and
not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management
necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance
with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
We carried out an evaluation, under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our
principal executive officer and principal financial officer concluded that our disclosure controls and procedures were
effective at the reasonable assurance level as of December 31, 2023.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such
term is defined in Rules 13a-15(f) and 15-d-15(f) of the Exchange Act. Internal control over financial reporting is a process
designed under the supervision and with the participation of our management, including our principal executive officer and
principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the
United States of America.
As of December 31, 2023, management assessed and management concluded the effectiveness of internal control over
financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
in Internal Control – 2013 Integrated Framework (2013 Framework). Based on this assessment, management concluded
that our internal control over financial reporting was effective as of December 31, 2023.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting
firm due to a transition period established by the JOBS Act for smaller reporting companies.
Inherent Limitations of Internal Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our
disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent
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Table of Contents
limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of
a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion
of two or more people, or by management override of the control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of
changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
During the year ended December 31, 2023, there have been no changes in our internal control over financial reporting, as
such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Rule 10b5-1 Trading Arrangements
During our last fiscal quarter, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or
terminated the contracts, instructions or written plans for the purchase or sale of our securities set forth in the table below.
Type of Trading
Arrangement
Non-
Rule 10b5-
1**
Rule
10b5-1*
Total Shares
to be Sold
Expiration
Date
Action
Date
Termination1
January 10, 2024
X
100,000
1/30/2026
Name and Position
Lorenz Muller, Chief
Commercial Officer
* Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the
Exchange Act.
** “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.
1 Represents the termination of a written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)
adopted on October 12, 2023.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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PART III
Certain information required by Part III is omitted from this report because we will file with the SEC a definitive proxy
statement pursuant to Regulation 14A, or the 2024 Proxy Statement, no later than 120 days after the end of our fiscal year,
and certain information included therein is incorporated herein by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to the information set forth in the sections titled
“Proposal No. 1: Election of Directors,” “Proposal No. 1: Election of Directors─Information Regarding the Board and
Corporate Governance,” “Executive Officers,” and “Delinquent Section 16(a) Reports,” if applicable, in our 2024 Proxy
Statement.
Information regarding our Code of Business Conduct and Ethics, or the Code of Conduct, required by this item will be
contained in our 2024 Proxy Statement under the caption “Proposal No. 1: Election of Directors─Information Regarding
the Board of Directors and Corporate Governance─Code of Business Conduct and Ethics,” and is hereby incorporated by
reference. If we make any substantive amendments to the Code of Conduct or grants any waiver from a provision of the
Code of Conduct to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on
its website. The full text of our Code of Conduct is available at the investors section of our website at
www.milestonepharma.com. The reference to our website address does not constitute incorporation by reference of the
information contained at or available through our website, and you should not consider it to be a part of this Annual
Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference to the information set forth in the section titled
“Executive Compensation” in our 2024 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required by this item is incorporated by reference to the information set forth in the section titled “Security
Ownership of Certain Beneficial Owners and Management” in our 2024 Proxy Statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required by this item is incorporated by reference to the information set forth in the sections titled “Certain
Relationships and Related Transactions” and “Proposal No. 1: Election of Directors─Information Regarding the Board of
Directors and Corporate Governance─Director Independence” in our 2024 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this item is incorporated by reference to the information set forth in the section titled
“Proposal No. 2: Appointment of Auditor─Auditor Fees” in our 2024 Proxy Statement.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial Statements
See Index to Consolidated Financial Statements on page 103 of this Annual Report on Form 10-K, which is
incorporated into this item by reference.
(a)(2) Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable or the required information is shown
in the financial statements or notes thereto.
(b) Exhibits
The following list of exhibits includes exhibits submitted with this Annual Report on Form 10-K as filed with the
SEC and others incorporated by reference to other filings.
EXHIBIT
NUMBER DESCRIPTION
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1+
10.2+
10.3+
10.4+
10.5+
Amended Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Registrant’s
Current Report on Form 8-K (File No. 001-38899), filed with the SEC on May 15, 2019).
Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current
Report on Form 8-K (File No. 001-38899), filed with the SEC on May 15, 2019).
Form of Common Share Certificate (incorporated herein by reference to Exhibit 4.1 to Amendment No. 1 to
the Registrant’s Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29,
2019).
Form of Pre-Funded Warrant to Purchase Common Shares (incorporated herein by reference to Exhibit 4.1
to the Registrant’s Current Report on Form 8-K (File No. 001-38899), filed with the SEC on July 23, 2020.
Form of Pre-Funded Warrant (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K (File No. 001-38899), filed with the SEC on October 26, 2020.
Third Amended and Restated Registration Rights Agreement, by and among the Company and certain of its
shareholders, dated October 15, 2018 (incorporated herein by reference to Exhibit 4.2 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 12, 2019).
Description of Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (incorporated herein by reference to Exhibit 4.5 to the Registrant’s Annual Report on Form 10-K
(File No. 001-38899), filed with the SEC on March 29, 2023).
2021 Inducement Plan, approved by the Board of the Company on November 10, 2021 (incorporated herein
by reference to Exhibit 4.10 to the Registrant’s Registration Statement on Form S-8 (File No. 333-263807),
filed with the SEC on March 24, 2022).
Form of Exchange Warrant (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K (File No. 001-38899), filed with the SEC on March 27, 2023).
Third Amended and Restated Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 12,
2019).
Form of Award and Grant Notices under the Third Amended and Restated Stock Option Plan (incorporated
herein by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-
230846), filed with the SEC on April 12, 2019).
Amended 2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-38899), filed with the SEC on November 10, 2022).
Form of U.S. Stock Option Grant Notice and Stock Option Agreement under the 2019 Equity Incentive Plan
(incorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29, 2019).
Form of U.S. Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the
2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.5 to Amendment No. 1 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29,
2019).
138
Table of Contents
10.6+
10.7+
10.8+
10.9+
10.10+
10.11+
10.12+
10.13+
10.14+
10.15+
10.16+
10.17*
10.18
10.19+
10.20*
Form of Canadian Stock Option Grant Notice and Option Agreement under the 2019 Equity Incentive Plan
(incorporated herein by reference to Exhibit 10.6 to Amendment No. 1 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29, 2019).
Form of Canadian Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under
the 2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 to Amendment No. 1 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29,
2019).
2019 Employee Share Purchase Plan (incorporated herein by reference to Exhibit 4.13 to the Registrant’s
Registration Statement on Form S-8 (File No. 333-231347), filed with the SEC on May 9, 2019).
Amended and Restated Employment Agreement between Joseph Oliveto and Milestone Pharmaceuticals
USA, Inc. (incorporated herein by reference to Exhibit 10.9 to Amendment No. 1 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29, 2019), as
amended by First Amendment to Amended and Restated Employment Agreement between Joseph Oliveto
and Milestone Pharmaceuticals USA, Inc. (incorporated herein by reference to Exhibit 10.1 to Registrant’s
Current Report on Form 8-K (File No. 001-38899), filed with the SEC on June 8, 2020).
Employment Agreement between Amit Hasija and Milestone Pharmaceuticals USA, Inc. (incorporated
herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38899),
filed with the SEC on September 9, 2019), as amended by First Amendment to Employment Agreement
between Amit Hasija and Milestone Pharmaceuticals USA, Inc. (incorporated herein by reference to
Exhibit 10.2 to Registrant’s Current Report on Form 8-K (File No. 001-38899), filed with the SEC on June
8, 2020).
Amended and Restated Employment Agreement between Francis Plat and Milestone Pharmaceuticals Inc.
(incorporated herein by reference to Exhibit 10.11 to Amendment No. 1 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29, 2019), as amended by
Amending Agreement between Francis Plat and Milestone Pharmaceuticals Inc. (incorporated herein by
reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No. 001-38899), filed with
the SEC on June 8, 2020).
Employment Agreement, dated February 15, 2022 between David Bharucha, M.D., Ph.D. and Milestone
Pharmaceuticals USA, Inc. (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K (File No. 001-38899), filed with the SEC on February 16, 2022).
Securities Purchase Agreement dated July 22, 2020 (incorporated herein by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-38899), filed with the SEC on July 23, 2020).
Open Market Sale AgreementSM, dated July 29, 2020, by and between Milestone Pharmaceuticals Inc. and
Jefferies LLC 2020 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K (File No. 001-38899), filed with the SEC on July 29, 2020).
Form of Indemnity Agreement (incorporated herein by reference to Exhibit 10.14 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 12, 2019).
Amended and Restated Employment Agreement between Lorenz Muller and Milestone Pharmaceuticals
USA, Inc. (incorporated herein by reference to Exhibit 10.12 to Amendment No. 1 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-230846), filed with the SEC on April 29, 2019).
License and Collaboration Agreement by and among the Company and Ji Xing Pharmaceuticals, Limited,
dated May 15, 2021 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report
on Form 10-Q (File No. 001-38899), filed with the SEC on August 11, 2021.
Consulting Agreement, between the Company and Francis Plat (incorporated herein by reference to
Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K (File No. 001-38899), filed with the SEC
on March 29, 2023).
Non-Employee Director Compensation Policy, as amended (incorporated herein by reference to Exhibit 10.2
to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-38899), filed with the SEC on November
13, 2023).
Exchange Agreement, dated as of March 22, 2023, by and among the Company and certain investors party
thereto (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
(File No. 001-38899), filed with the SEC on March 27, 2023).
139
Table of Contents
10.21*♦
10.22*♦
10.23
23.1
24.1
31.1
31.2
32.1˄
97.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Royalty Purchase Agreement, dated as of March 27, 2023, by and among the Company and RTW
(incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-38899), filed with the SEC on March 31, 2023).
Note Purchase Agreement, dated as of March 27, 2023, by and among the Company and RTW (incorporated
herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38899),
filed with the SEC on March 31, 2023).
First Amendment to Note Purchase Agreement, dated as of August 4, 2023 (incorporated herein by
reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-38899), filed
with the SEC on November 13, 2023).
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
Power of Attorney (included on the signature page to this registration statement).
Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under
the Securities Exchange Act of 1934, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) and
15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of The Sarbanes-Oxley Act of 2002
Incentive Compensation Recoupment Policy.
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension
information contained in Exhibit 101)
*
♦
+
Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The Registrant
hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
In accordance with Item 601(b)(10)(iv) of Regulation S-K, certain information (indicated by “[***]”) has been
excluded from this exhibit.
Indicates a management contract or compensatory plan
˄
These certifications are being furnished solely to accompany this Annual Report pursuant to 18 U.S.C. Section
1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to
be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of
any general incorporation language in such filing.
ITEM 16. FORM 10-K SUMMARY
Not applicable
140
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 21, 2024
POWER OF ATTORNEY
Milestone Pharmaceuticals Inc.
/s/ Joseph Oliveto
Joseph Oliveto
Chief Executive Officer
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Joseph
Oliveto and Amit Hasija, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full
power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all
amendments to this report, with exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their, his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities indicated on the 21st of March 2024.
/s/ Joseph Oliveto
Joseph Oliveto
/s/ Amit Hasija
Amit Hasija
/s/ Robert J. Wills
Robert Wills
/s/ Seth Fischer
Seth Fischer
/s/ Lisa Giles
Lisa M. Giles
/s/ Debra K. Liebert
Debra K. Liebert
/s/ Richard Pasternak
Richard Pasternak
/s/ Michael Tomsicek
Michael Tomsicek
Chief Executive Officer and Director
(principal executive officer)
Chief Financial Officer
(principal financial officer and principal accounting officer)
Chairman of the Board
Director
Director
Director
Director
Director
141
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-231347, 333-236971, 333-
254838, 333-271522 and 333-263807) and on Form S-3 (Nos. 333-261049, 333-257404, 333-248198 and 333-271949) of Milestone
Pharmaceuticals Inc. of our report dated March 21, 2024 relating to the consolidated financial statements, which appears in Milestone
Pharmaceuticals Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023.
/s/PricewaterhouseCoopers LLP
Montréal, Canada
March 21, 2024
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph Oliveto, certify that:
1. I have reviewed this Annual Report on Form 10-K of Milestone Pharmaceuticals Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 21, 2024
/s/ Joseph Oliveto
Joseph Oliveto
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Amit Hasija, certify that:
1. I have reviewed this Annual Report on Form 10-K of Milestone Pharmaceuticals Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 21, 2024
/s/ Amit Hasija
Amit Hasija
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Joseph Oliveto,
Chief Executive Officer of Milestone Pharmaceuticals Inc. (the “Company”), and Amit Hasija, Chief Financial Officer of
the Company, each hereby certifies that, to the best of his or her knowledge:
1. The Company’s Annual Report on Form 10-K for the period ended December 31, 2023, to which this
Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of
Section 13(a) or Section 15(d) of the Exchange Act; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: March 21, 2024
/s/ Joseph Oliveto
Joseph Oliveto
Chief Executive Officer
(Principal Executive Officer)
/s/ Amit Hasija
Amit Hasija
Chief Financial Officer
(Principal Financial and Accounting Officer)
“This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange
Commission and is not to be incorporated by reference into any filing of Milestone Pharmaceuticals Inc under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the
date of the Form 10-K), irrespective of any general incorporation language contained in such filing.”
MILESTONE PHARMACEUTICALS INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
Exhibit 97.1
1.
INTRODUCTION
The Board of Directors (the “Board”) of Milestone Pharmaceuticals Inc., a corporation existing under the
Business Corporations Act (Québec) (the “Company”), has determined that it is in the best interests of the Company and its
shareholders to adopt this Incentive Compensation Recoupment Policy (this “Policy”) providing for the Company’s
recoupment of Recoverable Incentive Compensation that is received by Covered Officers of the Company under certain
circumstances. Certain capitalized terms used in this Policy have the meanings given to such terms in Section 3 below.
This Policy is designed to comply with, and shall be interpreted to be consistent with, Section 10D of the
Exchange Act, Rule 10D-1 promulgated thereunder (“Rule 10D-1”) and Nasdaq Listing Rule 5608 (the “Listing
Standards”).
2.
EFFECTIVE DATE
This Policy shall apply to all Incentive Compensation that is received by a Covered Officer on or after October 2,
2023 (the “Effective Date”). Incentive Compensation is deemed “received” in the Company’s fiscal period in which the
Financial Reporting Measure specified in the Incentive Compensation award is attained, even if the payment or grant of
such Incentive Compensation occurs after the end of that period.
3.
DEFINITIONS
“Accounting Restatement” means an accounting restatement that the Company is required to prepare due to the
material noncompliance of the Company with any financial reporting requirement under the securities laws, including any
required accounting restatement to correct an error in previously issued financial statements that is material to the
previously issued financial statements, or that would result in a material misstatement if the error were corrected in the
current period or left uncorrected in the current period.
“Accounting Restatement Date” means the earlier to occur of (a) the date that the Board, a committee of the
Board authorized to take such action, or the officer or officers of the Company authorized to take such action if Board
action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an
Accounting Restatement, or (b) the date that a court, regulator or other legally authorized body directs the Company to
prepare an Accounting Restatement.
“Administrator” means the Compensation Committee or, in the absence of such committee, the Board.
“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
“Compensation Committee” means the Compensation Committee of the Board.
“Covered Officer” means each current and former Executive Officer.
“Exchange” means the Nasdaq Stock Market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if
there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business
unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for the Company. Executive officers of the
Company’s parent(s) or subsidiaries are deemed executive officers of the Company if they perform such policy-making
functions for the Company. Policy-making function is not intended to include policy-making functions that are not
significant. Identification of an executive officer for purposes of this Policy would include at a minimum executive officers
identified pursuant to Item 401(b) of Regulation S-K promulgated under the Exchange Act.
“Financial Reporting Measures” means measures that are determined and presented in accordance with the
accounting principles used in preparing the Company’s financial statements, and any measures derived wholly or in part
from such measures, including Company stock price and total shareholder return (“TSR”). A measure need not be
presented in the Company’s financial statements or included in a filing with the SEC in order to be a Financial Reporting
Measure.
“Incentive Compensation” means any compensation that is granted, earned or vested based wholly or in part
upon the attainment of a Financial Reporting Measure.
“Lookback Period” means the three completed fiscal years immediately preceding the Accounting Restatement
Date, as well as any transition period (resulting from a change in the Company’s fiscal year) within or immediately
following those three completed fiscal years (except that a transition period of at least nine months shall count as a
completed fiscal year). Notwithstanding the foregoing, the Lookback Period shall not include fiscal years completed prior
to the Effective Date.
“Recoverable Incentive Compensation” means Incentive Compensation received by a Covered Officer during the
Lookback Period that exceeds the amount of Incentive Compensation that would have been received had such amount been
determined based on the Accounting Restatement, computed without regard to any taxes paid (i.e., on a gross basis without
regarding to tax withholdings and other deductions). For any compensation plans or programs that take into account
Incentive Compensation, the amount of Recoverable Incentive Compensation for purposes of this Policy shall include,
without limitation, the amount contributed to any notional account based on Recoverable Incentive Compensation and any
earnings to date on that notional amount. For any Incentive Compensation that is based on stock price or TSR, where the
Recoverable Incentive Compensation is not subject to mathematical recalculation directly from the information in an
Accounting Restatement, the Administrator will determine the amount of Recoverable Incentive Compensation based on a
reasonable estimate of the effect of the Accounting Restatement on the stock price or TSR upon which the Incentive
Compensation was received. The Company shall maintain documentation of the determination of that reasonable estimate
and provide such documentation to the Exchange in accordance with the Listing Standards.
“SEC” means the U.S. Securities and Exchange Commission.
4.
RECOUPMENT
(a)
Applicability of Policy. This Policy applies to Incentive Compensation received by a Covered Officer (i)
after beginning services as an Executive Officer, (ii) who served as an Executive Officer at any time during the
performance period for such Incentive Compensation, (iii) while the Company had a class of securities listed on a national
securities exchange or a national securities association, and (iv) during the Lookback Period.
(b)
Recoupment Generally. Pursuant to the provisions of this Policy, if there is an
2
Accounting Restatement, the Company must reasonably promptly recoup the full amount of the Recoverable Incentive
Compensation, unless the conditions of one or more subsections of Section 4(c) of this Policy are met and the
Compensation Committee, or, if such committee does not consist solely of independent directors, a majority of the
independent directors serving on the Board, has made a determination that recoupment would be impracticable.
Recoupment is required regardless of whether the Covered Officer engaged in any misconduct and regardless of fault, and
the Company’s obligation to recoup Recoverable Incentive Compensation is not dependent on whether or when any
restated financial statements are filed.
(c)
Impracticability of Recovery. Recoupment may be determined to be impracticable if, and only if:
(i)
the direct expense paid to a third party to assist in enforcing this Policy would exceed the
amount of the applicable Recoverable Incentive Compensation; provided that, before concluding that it would be
impracticable to recover any amount of Recoverable Incentive Compensation based on expense of enforcement,
the Company shall make a reasonable attempt to recover such Recoverable Incentive Compensation, document
such reasonable attempt(s) to recover, and provide that documentation to the Exchange in accordance with the
Listing Standards;
(ii)
recoupment of the applicable Recoverable Incentive Compensation would violate home country
law where that law was adopted prior to November 28, 2022; provided that, before concluding that it would be
impracticable to recover any amount of Recoverable Incentive Compensation based on violation of home country
law, the Company shall obtain an opinion of home country counsel, acceptable to the Exchange, that recoupment
would result in such a violation, and shall provide such opinion to the Exchange in accordance with the Listing
Standards; or
(iii)
recoupment of the applicable Recoverable Incentive Compensation would likely cause an
otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company,
to fail to meet the requirements of Code Section 401(a)(13) or Code Section 411(a) and regulations thereunder.
(d)
Sources of Recoupment. To the extent permitted by applicable law, the Administrator shall, in its sole
discretion, determine the timing and method for recouping Recoverable Incentive Compensation hereunder, provided that
such recoupment is undertaken reasonably promptly. The Administrator may, in its discretion, seek recoupment from a
Covered Officer from any of the following sources or a combination thereof, whether the applicable compensation was
approved, awarded, granted, payable or paid to the Covered Officer prior to, on or after the Effective Date: (i) direct
repayment of Recoverable Incentive Compensation previously paid to the Covered Officer; (ii) cancelling prior cash or
equity-based awards (whether vested or unvested and whether paid or unpaid); (iii) cancelling or offsetting against any
planned future cash or equity-based awards; (iv) forfeiture of deferred compensation, subject to compliance with Code
Section 409A; and (v) any other method authorized by applicable law or contract. Subject to compliance with any
applicable law, the Administrator may effectuate recoupment under this Policy from any amount otherwise payable to the
Covered Officer, including amounts payable to such individual under any otherwise applicable Company plan or program,
e.g., base salary, bonuses or commissions and compensation previously deferred by the Covered Officer (and for such
purpose, each Covered Officer subject to this Policy agrees to the deduction of any Recoverable Incentive Compensation
from any compensation payable to them pursuant to an applicable Company plan or program). The Administrator need not
utilize the same method of recovery for all Covered Officers or with respect to all types of Recoverable Incentive
Compensation.
(e)
No Indemnification of Covered Officers. Notwithstanding any indemnification
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agreement, applicable insurance policy or any other agreement or provision of the Company’s certificate of incorporation
or bylaws to the contrary, no Covered Officer shall be entitled to indemnification or advancement of expenses in
connection with any enforcement of this Policy by the Company, including paying or reimbursing such Covered Officer for
insurance premiums to cover potential obligations to the Company under this Policy. No Covered Officer shall be entitled
to compensation or damages in respect of any Recoverable Incentive Compensation which is recouped in accordance with
this Policy.
(f)
Indemnification of Administrator. Any members of the Administrator, and any other members of the
Board who assist in the administration of this Policy, shall not be personally liable for any action, determination or
interpretation made with respect to this Policy and shall be indemnified by the Company to the fullest extent under
applicable law and Company policy with respect to any such action, determination or interpretation. The foregoing
sentence shall not limit any other rights to indemnification of the members of the Board under applicable law or Company
policy.
(g)
No “Good Reason” for Covered Officers. Any action by the Company to recoup or any recoupment of
Recoverable Incentive Compensation under this Policy from a Covered Officer shall not be deemed (i) “good reason” for
resignation or to serve as a basis for a claim of constructive termination under any benefits or compensation arrangement
applicable to such Covered Officer, or (ii) to constitute a breach of a contract or other arrangement to which such Covered
Officer is party.
5.
ADMINISTRATION
Except as specifically set forth herein, this Policy shall be administered by the Administrator. The Administrator
shall have full and final authority to make any and all determinations required under this Policy. Any determination by the
Administrator with respect to this Policy shall be final, conclusive and binding on all interested parties and need not be
uniform with respect to each individual covered by this Policy. In carrying out the administration of this Policy, the
Administrator is authorized and directed to consult with the full Board or such other committees of the Board as may be
necessary or appropriate as to matters within the scope of such other committee’s responsibility and authority. Subject to
applicable law, the Administrator may authorize and empower any officer or employee of the Company to take any and all
actions that the Administrator, in its sole discretion, deems necessary or appropriate to carry out the purpose and intent of
this Policy (other than with respect to any recovery under this Policy involving such officer or employee).
6.
SEVERABILITY
If any provision of this Policy or the application of any such provision to a Covered Officer shall be adjudicated to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other
provisions of this Policy, and the invalid, illegal or unenforceable provisions shall be deemed amended to the minimum
extent necessary to render any such provision or application enforceable.
7.
NO IMPAIRMENT OF OTHER REMEDIES
Nothing contained in this Policy, and no recoupment or recovery as contemplated herein, shall limit any claims,
damages or other legal remedies the Company or any of its affiliates may have against a Covered Officer arising out of or
resulting from any actions or omissions by the Covered Officer. This Policy does not preclude the Company from taking
any other action to enforce a Covered Officer’s obligations to the Company, including, without limitation, termination of
employment and/or institution of civil proceedings. This Policy is in addition to the requirements of Section 304 of the
Sarbanes-Oxley Act of 2002 (“SOX 304”) that are applicable to the Company’s Chief Executive Officer and Chief
Financial Officer and to any other compensation recoupment policy and/or similar provisions in any employment,
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equity plan, equity award, or other individual agreement, to which the Company is a party or which the Company has
adopted or may adopt and maintain from time to time; provided, however, that compensation recouped pursuant to this
policy shall not be duplicative of compensation recouped pursuant to SOX 304 or any such compensation recoupment
policy and/or similar provisions in any such employment, equity plan, equity award, or other individual agreement except
as may be required by law.
8.
AMENDMENT; TERMINATION
The Administrator may amend, terminate or replace this Policy or any portion of this Policy at any time and from
time to time in its sole discretion. The Administrator shall amend this Policy as it deems necessary to comply with
applicable law or any Listing Standard.
9.
SUCCESSORS
This Policy shall be binding and enforceable against all Covered Officers and, to the extent required by Rule 10D-
1 and/or the applicable Listing Standards, their beneficiaries, heirs, executors, administrators or other legal representatives.
10.
REQUIRED FILINGS
The Company shall make any disclosures and filings with respect to this Policy that are required by law, including
as required by the SEC.
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MILESTONE PHARMACEUTICALS INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
FORM OF EXECUTIVE ACKNOWLEDGMENT
I, the undersigned, agree and acknowledge that I am bound by, and subject to, the Milestone Pharmaceuticals Inc. Incentive
Compensation Recoupment Policy, as may be amended, restated, supplemented or otherwise modified from time to time
(the “Policy”). In the event of any inconsistency between the Policy and the terms of any employment agreement, offer
letter or other individual agreement with Milestone Pharmaceuticals Inc. (the “Company”) to which I am a party, or the
terms of any compensation plan, program or agreement, whether or not written, under which any compensation has been
granted, awarded, earned or paid to me, the terms of the Policy shall govern.
In the event that the Administrator (as defined in the Policy) determines that any compensation granted, awarded, earned or
paid to me must be forfeited or reimbursed to the Company pursuant to the Policy, I will promptly take any action
necessary to effectuate such forfeiture and/or reimbursement, and for such purposes consent to the deduction of any
amounts from any compensation payable to me as described in the Policy. I further agree and acknowledge that I am not
entitled to indemnification, and hereby waive any right to advancement of expenses, in connection with any enforcement of
the Policy by the Company.
Agreed and Acknowledged:
Name:
Title:
Date: