Full Press Release Details
Milestone Pharmaceuticals Inc.
Condensed Consolidated Financial Statements
Three months ended March 31, 2019 and 2018
(expressed in US dollars)
Milestone Pharmaceuticals Inc.
Condensed Consolidated Balance Sheets
(in thousands of US dollars, except share data)
| March 31, 2019 | December 31, 2018 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 71,239 | $ | 85,947 | |||
| Short-term investments | 29 | 29 | |||||
| Research and development tax credits receivable | 264 | 290 | |||||
| Prepaid expenses (note 3) | 5,482 | 1,398 | |||||
| Other receivables (note 4) | 265 | 387 | |||||
| Total current assets | 77,279 | 88,051 | |||||
| Operating lease right-of use asset (note 2) | 282 | ||||||
| Property and equipment | 27 | 30 | |||||
| Total assets | $ | 77,588 | $ | 88,081 | |||
| Liabilities | |||||||
| Current liabilities | |||||||
| Accounts payable and accrued liabilities (note 5) | $ | 3,906 | $ | 4,477 | |||
| Current portion of operating lease liabilities (note 2) | 168 | ||||||
| Income taxes payable | 78 | 56 | |||||
| Total current liabilities | 4,152 | 4,533 | |||||
| Operating lease liabilities (note 2) | 104 | ||||||
| Total liabilities | 4,256 | 4,533 | |||||
| Convertible Preferred Shares (note 10) | |||||||
| Class A-1 preferred shares, no par value, unlimited shares authorized, 372,211 shares issued | 2,027 | 2,027 | |||||
| Class A-2 preferred shares, no par value, unlimited shares authorized, 2,443,914 shares issued | 12,643 | 12,643 | |||||
| Class B preferred shares, no par value, unlimited shares authorized, 2,830,907 shares issued | 17,198 | 17,198 | |||||
| Class C preferred shares, no par value, unlimited shares authorized, 3,786,878 shares issued | 27,236 | 27,236 | |||||
| Class D1 preferred shares, no par value, unlimited shares authorized, 6,893,236 shares issued | 64,719 | 64,719 | |||||
| Class D2 preferred shares, no par value, unlimited shares authorized, 1,223,656 shares issued | 14,935 | 14,935 | |||||
| Total convertible preferred shares | 138,758 | 138,758 | |||||
| Shareholders Deficit (note 6) | |||||||
| Share capital | |||||||
| Common shares, no par value, unlimited shares authorized, 614,940 shares issued and outstanding as of March 31, 2019 596,787 shares issued and outstanding as of December 31, 2018 | 2,090 | 2,039 | |||||
| Additional paid-in capital | 2,840 | 2,655 | |||||
| Cumulative translation adjustment | (1,634 | ) | (1,634 | ) | |||
| Accumulated deficit | (68,722 | ) | (58,270 | ) | |||
| Total shareholders deficit | (65,426 | ) | (55,210 | ) | |||
| Total liabilities, convertible preferred shares and shareholders deficit | $ | 77,588 | $ | 88,081 |
Subsequent events (note 10)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Milestone Pharmaceuticals Inc.
Condensed Consolidated Statements of Loss and Comprehensive Loss
(thousands of US dollars, except share and per share data)
| Three months ended | |||||||
| March 31, 2019 | March 31, 2018 | ||||||
| Operating expenses | |||||||
| Research and development, net of tax credits (note 8) | $ | 7,765 | $ | 3,091 | |||
| General and administrative | 979 | 439 | |||||
| Commercial | 2,186 | 725 | |||||
| Loss from operations | $ | (10,930 | ) | $ | (4,255 | ) | |
| Interest income, net of bank charges | 500 | 90 | |||||
| Loss and comprehensive loss before income taxes | (10,430 | ) | (4,165 | ) | |||
| Income tax expense | 22 | 16 | |||||
| Net loss and comprehensive loss for the period | $ | (10,452 | ) | $ | (4,181 | ) | |
| Weighted average number of shares outstanding, basic and diluted | 603,040 | 268,525 | |||||
| Net loss per share, basic and diluted (note 7) | $ | (17.32 | ) | $ | (15.57 | ) |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Milestone Pharmaceuticals Inc.
Condensed Consolidated Statements of Shareholders Deficit and Convertible Preferred Shares
(thousands of US dollars, except per share data)
| Common | Convertible Preferred Shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Class A1 | Class A2 | Class B | Class C | Class D1 | Class D2 | Additional | Cumulative | ||||||||||||||||||||||||||||||||||||||||
| Number | Number | Number of | Number | Number | Number | Number | paid-in | translation | Accumulated | |||||||||||||||||||||||||||||||||||||||
| of shares | Amount | of shares | Amount | shares | Amount | of shares | Amount | of shares | Amount | of shares | Amount | of shares | Amount | capital | adjustment | deficit | Total | |||||||||||||||||||||||||||||||
| Balance at December 31, 2017 | 239,990 | $ | 1,228 | 372,211 | $ | 2,027 | 2,443,914 | $ | 12,643 | 2,830,907 | $ | 17,198 | 3,786,878 | $ | 27,236 | $ | 2,372 | $ | (1,634 | ) | $ | (35,085 | ) | $ | 25,985 | |||||||||||||||||||||||
| Transactions in three-month period ended March 31,2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss and comprehensive loss | (4,181 | ) | (4,181 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options (note 6) | 37,675 | 55 | (25 | ) | 30 | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation (note 6) | 125 | 125 | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2018 | 277,665 | $ | 1,283 | 372,211 | $ | 2,027 | 2,443,914 | $ | 12,643 | 2,830,907 | $ | 17,198 | 3,786,878 | $ | 27,236 | $ | 2,472 | $ | (1,634 | ) | $ | (39,266 | ) | $ | 21,959 | |||||||||||||||||||||||
| Balance at December 31, 2018 | 596,787 | 2,039 | 372,211 | 2,027 | 2,443,914 | 12,643 | 2,830,907 | 17,198 | 3,786,878 | 27,236 | 6,893,236 | 64,719 | 1,223,656 | 14,935 | 2,655 | (1,634 | ) | (58,270 | ) | 83,548 | ||||||||||||||||||||||||||||
| Transactions in three-month period ended March 31,2019 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss and comprehensive loss | (10,452 | ) | (10,452 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options (note 6) | 18,153 | 51 | (26 | ) | 25 | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation (note 6) | 211 | 211 | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2019 | 614,940 | $ | 2,090 | 372,211 | $ | 2,027 | 2,443,914 | $ | 12,643 | 2,830,907 | $ | 17,198 | 3,786,878 | $ | 27,236 | 6,893,236 | $ | 64,719 | 1,223,656 | $ | 14,935 | $ | 2,840 | $ | (1,634 | ) | $ | (68,722 | ) | $ | 73,332 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Milestone Pharmaceuticals Inc.
Condensed Consolidated Statements of Cash Flows
(thousands of US dollars)
| Three months ended March 31, | |||||||
| 2019 | 2018 | ||||||
| Cash flows from: | |||||||
| Operating activities | |||||||
| Net loss for the period | $ | (10,452 | ) | $ | (4,181 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Amortization of property and equipment | 3 | 2 | |||||
| Share-based compensation expense (note 6) | 211 | 125 | |||||
| Changes in operating assets and liabilities: | |||||||
| Other receivables | 122 | (25 | ) | ||||
| Research and development tax credits receivable | 26 | 119 | |||||
| Prepaid expenses | (4,100 | ) | (644 | ) | |||
| Accounts payable and accrued liabilities | (571 | ) | (135 | ) | |||
| Unrealized foreign exchange | 6 | ||||||
| Income taxes payable | 22 | 16 | |||||
| Net cash used in operating activities | (14,733 | ) | (4,723 | ) | |||
| Investing activities | |||||||
| Acquisition of property and equipment | (5 | ) | |||||
| Redemption of short-term investments | 7,001 | ||||||
| Net cash provided by investing activities | 6,996 | ||||||
| Financing activities | |||||||
| Issuance of common shares on exercise of share options (note 6) | 25 | 30 | |||||
| Net cash provided by financing activities | 25 | 30 | |||||
| Net (decrease) increase in cash and cash equivalents during the period | (14,708 | ) | 2,303 | ||||
| Cash and cash equivalents Beginning of period | 85,947 | 10,880 | |||||
| Cash and cash equivalents End of period | $ | 71,239 | $ | 13,183 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Milestone Pharmaceuticals Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands of US dollars, except where noted and for share and per share data)
1 Organization and nature of operations
Milestone Pharmaceuticals Inc. (Milestone or the Company) is a Phase 3 clinical-stage biopharmaceutical company incorporated under the Business Corporations Act of Quebec. Milestone is dedicated to developing and commercializing etripamil for the treatment of cardiovascular indications. 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 the patient to terminate episodes of paroxysmal supraventricular tachycardia as they occur.
On April 26, 2019, the Company s Board of Directors approved an amendment to the Company s articles of incorporation to effect a 1-for-5.3193 reverse stock split of the Company s common shares, convertible preferred shares and the share options of the Company. Accordingly, all common shares, convertible preferred shares, share options and per share amounts in these unaudited interim consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock split. The reverse stock split was effected on April 26, 2019.
2 Summary of significant accounting policies
a) Basis of consolidation
The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Milestone Pharmaceuticals USA, Inc. Milestone Pharmaceuticals USA, Inc. began its operations on March 3, 2017. All intercompany transactions and balances have been eliminated.
b) Basis of presentation and use of accounting estimates
These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) and on a basis consistent with those accounting principles followed by the Company and disclosed in note 2 of its most recent annual consolidated financial statements, except for the adoption of ASC 842 Leases described in c) below. Certain information, in particular the accompanying notes normally included in the annual financial statements prepared in accordance with US GAAP have been omitted or condensed. Accordingly, the unaudited interim condensed consolidated financial statements do not include all the information required for full annual financial statements, and therefore, should be read in conjunction with the annual consolidated financial statements and the notes thereto for the year ended December 31, 2018.
In the opinion of the Company, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2019, and its results of operations for the three months ended March 31, 2019 and 2018. The condensed consolidated balance sheet as of December 31, 2018, was derived from audited annual consolidated financial statements, but does not contain all of the footnote disclosures from the annual consolidated financial statements.
Milestone Pharmaceuticals Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands of US dollars, except where noted and for share and per share data)
2 Summary of significant accounting policies (Cont d)
b) Basis of presentation and use of accounting estimates (Cont d)
These unaudited interim condensed consolidated financial statements are presented in US dollars, which is the Company s functional currency.
The preparation of unaudited interim condensed consolidated financial statements in conformity with US 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 unaudited interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. 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, research and development tax credits recoverable, research and development expenses, and share-based compensation. Accordingly, actual results may differ from those estimates and such differences may be material.
c) Adoption of FASB Accounting Standards
Effective January 1, 2019, the Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases . This ASU requires substantially all leases to be recorded on the balance sheet as right-of-use asset and lease obligations. The Company elected the package of practical expedients permitted under the transition guidance and applied the modified retrospective approach which allowed the Company to carry forward the historical lease classification. Adoption of this standard resulted in the recording of an operating lease right-of-use asset and corresponding operating lease liabilities of $0.3 million. The Company s condensed consolidated balance sheets for reporting periods beginning on January 1, 2019 are presented under the new guidance, while prior period amounts were not adjusted and continue to be reported in accordance with previous guidance.
The Company does not record an operating lease right-of-use asset and corresponding lease liability for leases with an initial term of twelve months or less and recognizes lease expense for these leases as incurred over the lease term. Upon adoption date, the Company had only one operating lease with a remaining term of less than 12 months for its offices located in Charlotte, NC, which will terminate on July 31, 2019, and for which the Company is not reasonably certain of renewing the lease. The remaining operating lease payments are $22. As of March 31, 2019, the Company has not entered into any additional lease arrangements.
Operating lease right-of-use asset and operating lease liabilities are recognized upon the adoption date based on the present value of lease payments over the remaining lease term. The Company does not have a public credit rating and carries no debt. As such, several factors were considered in the determination of its incremental borrowing rate used in determining the present value of lease payments. The Company examined the Bloomberg credit ratings for similar companies; assumed equivalency between the Canadian and US markets for collateralized debt; factored in the cumulative dividend rate on convertible preferred
Milestone Pharmaceuticals Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands of US dollars, except where noted and for share and per share data)
2 Summary of significant accounting policies (Cont d)
c) Adoption of FASB Accounting Standards (Cont d)
shares; and used short-term rates for the remaining lease term of 23 months. This resulted in electing to use 8% as its incremental borrowing rate. Lease expense is recognized on a straight-line basis over the lease term. The Company s lease arrangement does not have lease and non-lease component which are accounted for separately. Upon adoption and as at March 31, 2019, the Company had one operating lease right-of-use asset and approximately $39 of the operating lease right-of-use asset had been amortized. The adoption of the accounting standard did not materially impact the Company s consolidated statement of operations or its consolidated statement of cash flows for the three months ended March 31, 2019.
The Company operating lease right-of-use asset is as follows as at March 31, 2019:
| Adoption as at January 1, 2019 | $ | 321 | ||
| Recognition of right-of-use asset in the three-month period ending March 31, 2019 | (39 | ) | ||
| $ | 282 |
Operating lease expenses of $44 are included in general and administrative operating expenses in the consolidated statement loss and comprehensive loss, and within operating activities in the statement of cash flows for the three-month period ended March 31, 2019.
The following table summarizes the future minimum lease payments of right-of-use assets operating lease as at March 31, 2019:
| April 1, 2019 to March 31, 2020 | $ | 183 | ||
| April 1, 2020 to November 30, 2020 | 107 | |||
| 290 | ||||
| Less interest | (18 | ) | ||
| $ | 272 |
Prepaid expenses consisted of the following:
| March 31, 2019 | December 31, 2018 | ||||
| Contract research | 4,066 | 1,136 | |||
| Costs related to initial public offering | 1,244 | 187 | |||
| Other prepaid expenses | 172 | 75 | |||
| 5,482 | 1,398 |
Milestone Pharmaceuticals Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands of US dollars, except where noted and for share and per share data)
Other receivables are comprised of:
| March 31, 2019 | December 31, 2018 | ||||||
| Interest receivable | $ | 162 | $ | 178 | |||
| Sales tax receivable | 103 | 209 | |||||
| $ | 265 | $ | 387 |
5 Accounts payable and accrued liabilities
Accounts payable and accrued liabilities comprised the following:
| March 31, 2019 | December 31, 2018 | ||||||
| Trade accounts payable | $ | 2,040 | $ | 2,603 | |||
| Accrued research & development liabilities | 982 | 1,012 | |||||
| Other accrued liabilities | 593 | 164 | |||||
| Accrued compensation and benefits payable | 291 | 698 | |||||
| $ | 3,906 | $ | 4,477 |
6 Shareholders deficit
Authorized share capital
An unlimited number of common shares, voting and participating, without par value
During the three-month period ended March 31, 2019, the Company issued a total of 18,153 common shares [2018 37,675] for a total cash consideration of $25 [2018 - $30] pursuant to the exercise of 18,153 stock options [2018 37,675] at an average exercise price of US$1.3225 per option [2018 US$1.06 per option]. As a result, an amount of $26 [2018 - $25] previously included in additional paid-in capital related to the exercised options has been credited to share capital and deducted from additional paid-in capital.
Additional paid-in capital
| Three months ended March 31, | |||||||
| 2019 | 2018 | ||||||
| Opening balance | $ | 2,655 | $ | 2,372 | |||
| Share-based compensation expense | 211 | 125 | |||||
| Exercise of stock options | (26 | ) | (25 | ) | |||
| Closing balance | $ | 2,840 | $ | 2,472 |
Milestone Pharmaceuticals Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands of US dollars, except where noted and for share and per share data)
6 Shareholders deficit (Cont d)
Share-based compensation
On October 15, 2018, the Company amended for a third time and restated the share option plan (the 2011 Plan) whereby options to purchase common shares of the Company s shares may be granted to directors, officers, employees, consultants and members of the scientific advisory board. The 2011 Plan is administered by the Board of Directors. The Board of Directors determines the number of options to be granted, the vesting period and the exercise price of new options. It is the Company s policy to establish the exercise price at an amount that approximates the fair value of the underlying shares on the date of grant as determined by the Board of Directors.
Under the 2011 Plan, unless otherwise decided by the Board of Directors, options vest and are exercisable as follows: 25% are exercisable from the first anniversary of grant date and 2.0833% become available at the end of each month after the first anniversary of grant date.
As of March 31, 2019, there were 3,238,943 options available for awards under the 2011 Plan, of which 2,898,351 options were granted, 49,845 were cancelled/forfeited, leaving 390,437 available for future grants.
The outstanding and exercisable options as at March 31 were as follows:
| 2019 | 2018 | ||||||||||
| Number of shares | Weighted average exercise price | Number of shares | Weighted average exercise price | ||||||||
| Outstanding at beginning of period | 2,295,045 | $ | 1.7714 | 968,782 | $ | 1.1330 | |||||
| Forfeited/expired | (12,198 | ) | 1.0958 | ||||||||
| Granted | 116,742 | 9.4152 | 820,450 | 1.5426 | |||||||
| Exercised | (18,153 | ) | 1.3225 | (37,675 | ) | 0.8458 | |||||
| Outstanding at end of period | 2,393,634 | $ | 1.9850 | 1,739,359 | $ | 1.3351 | |||||
| Exercisable at end of period | 670,168 | $ | 1.3511 | 521,926 | $ | 1.0053 |
As of March 31, 2019, the weighted average remaining contractual life was 8.5 years [2018 8.7 years]. The weighted average remaining contractual life was 6.6 years for vested options [2018 6.9 years]. There were no options forfeited for the three-month period ended March 31, 2019 (2018 12,198).
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 deficit. The weighted average fair values of options granted in the three-month period ended March 31, 2019 was $6.6493 per share [2018 - $1.5426]. Share-based compensation expense recognized for the three-month period ended March 31, 2019 was $211 [2018 - $125].
Milestone Pharmaceuticals Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands of US dollars, except where noted and for share and per share data)
6 Shareholders deficit (Cont d)
Share-based compensation (Cont d)
As of March 31, 2019, there was $3,047 [2018 - $1,333] of total unrecognized compensation cost, related to non-vested share options, which is expected to be recognized over a remaining weighted average vesting period of 3.0 years [2018 3.4 years].
The non-vested options as at March 31 were as follows:
| 2019 | 2018 | ||||||||||
| Number of options | Weighted average fair value | Number of options | Weighted average fair value | ||||||||
| Non-vested at beginning of period | 1,706,303 | $ | 1.3458 | 451,113 | $ | 1.0266 | |||||
| Forfeited/expired | (12,198 | ) | 1.0639 | ||||||||
| Granted | 116,742 | 6.6491 | 820,450 | 1.1117 | |||||||
| Vested, outstanding | (99,579 | ) | $ | 1.1809 | (41,932 | ) | $ | 1.1915 | |||
| Non-vested share options at end of period | 1,723,466 | $ | 1.7181 | 1,217,433 | $ | 1.0798 |
The fair value of share-based payment transaction 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.
The fair value of options granted was estimated using the Black-Scholes option pricing model, resulting in the following weighted average assumptions for the options granted for the three-month periods ended March 31:
| 2019 | 2018 | ||||||
| Exercise price | $ | 9.42 | $ | 1.54 | |||
| Share price | $ | 9.42 | $ | 1.54 | |||
| Volatility | 80% | 82% | |||||
| Risk-free interest rate | 2.50% | 2.78% | |||||
| Expected life | 6.25 years | 6.25 years | |||||
| Dividend | 0% | 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 US 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
Milestone Pharmaceuticals Inc.