SEC Filing | Milestone Pharmaceuticals, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	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		Not applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1111 Dr. Frederik-Philips Boulevard, Suite 420

Montréal, Québec CA H4M 2X6

(514) 336-0444

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares		MIST		The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 10^th, 2022, the registrant had 30,010,873 common shares, no par value per share, outstanding.

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		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		1

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Earnings (Loss)	4
	Condensed Consolidated Statements of Shareholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II.	OTHER INFORMATION	26

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	27
Item 6.	Exhibits	27

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“Milestone Pharmaceuticals” and the Milestone logo appearing in this Quarterly Report on Form 10-Q are unregistered trademarks of Milestone Pharmaceuticals Inc. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q, 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 with rapid ventricular rate, and of our research and development programs;

●

uncertain impacts that the COVID-19 pandemic may have on our business, strategy, clinical trial progress and research and development efforts;

●

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 develop and, if approved by regulatory authorities, commercialize etripamil in China and Taiwan through our license agreement with Ji Xing Pharmaceuticals;

●

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;

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●

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;

●

developments or disputes concerning our intellectual property or other proprietary rights;

●

our expectations regarding government and third-party payer 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

●

other factors that may impact our financial results.

The foregoing list of risks is not exhaustive. Other sections of this Quarterly Report on Form 10-Q and the section titled "Risk Factors" previously disclosed in Part I, Item 1A. in our 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 Quarterly Report on Form 10-Q, 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" previously disclosed in Part I, Item 1A. in our Annual Report on Form 10-K, filed with the SEC and under Milestone’s SEDAR profile at www.sedar.com on March 24, 2022, 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.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Milestone Pharmaceuticals Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands of US dollars, except share data)



	June 30, 2022		December 31, 2021
Assets

Current assets
Cash and cash equivalents	$	63,237	$	114,141
Short-term investments		23,000		—
Research and development tax credits receivable		539		356
Prepaid expenses		3,465		4,299
Other receivables		261		127
Total current assets		90,502		118,923
Operating lease assets		570		711
Property and equipment		227		215
Total assets	$	91,299	$	119,849

Liabilities, and Shareholders' Equity

Current liabilities
Accounts payable and accrued liabilities	$	4,087	$	6,551
Operating lease liabilities		169		224
Total current liabilities		4,256		6,775
Operating lease liabilities (net of current portion)		384		474
Total liabilities		4,640		7,249


Shareholders’ Equity
Common shares, no par value, unlimited shares authorized 30,005,884 shares issued and outstanding as of June 30, 2022, 29,897,559 shares issued and outstanding as of December 31, 2021		252,236		251,901
Pre-funded warrants - 12,327,780 issued and outstanding as of June 30, 2022 and 12,327,780 as of December 31, 2021		52,941		52,941
Additional paid-in capital		20,090		15,711
Cumulative translation adjustment		(1,634)		(1,634)
Accumulated deficit		(236,974)		(206,319)
Total shareholders’ equity		86,659		112,600
Total liabilities and shareholders’ equity	$	91,299	$	119,849

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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Milestone Pharmaceuticals Inc.

Condensed Consolidated Statements of Earnings (Loss) (Unaudited)

(in thousands of US dollars, except share and per share data)



	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021

Revenue	$	—	$	15,000	$	—	$	15,000

Operating expenses
Research and development, net of tax credits		10,657		9,427		19,425		18,022
General and administrative		3,918		3,018		7,561		5,651
Commercial		2,231		1,843		3,867		3,209

Earnings (loss) from operations		(16,806)		712		(30,853)		(11,882)

Interest income, net		158		58		198		138

Net earnings (loss)	$	(16,648)	$	770	$	(30,655)	$	(11,744)

Weighted average number of shares and pre-funded warrants outstanding, basic		42,278,563		41,673,370		42,260,682		41,465,961

Net earnings (loss) per share, basic	$	(0.39)	$	0.02	$	(0.73)	$	(0.28)

Weighted average number of shares and pre-funded warrants outstanding, diluted		42,278,563		44,530,121		42,260,682		41,465,961

Net earnings (loss) per share, diluted	$	(0.39)	$	0.02	$	(0.73)	$	(0.28)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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Milestone Pharmaceuticals Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(in thousands of US dollars, except share data)



	Common Shares			Pre-funded warrants
	Number of shares	Amount		Number of warrants	Amount		Additional paid-in capital		Cumulative translation adjustment		Accumulated deficit		Total
Balance as of March 31, 2021	29,846,000	$	251,716	11,417,034	$	48,007	$	9,883	$	(1,634)	$	(175,980)	$	131,992
Transactions in three-month period ended June 30, 2021
Net earnings	—		—	—		—		—		—		770		770
Exercise of stock options	—		—	—		—		—		—		—		—
Private Placement	—		—	910,746		4,920		—		—		—		4,920
Share-based compensation	—		—	—		—		1,912		—		—		1,912
Balance as of June 30, 2021	29,846,000	$	251,716	12,327,780	$	52,927	$	11,795	$	(1,634)	$	(175,210)	$	139,594

Balance as of March 31, 2022	29,917,326	$	251,990	12,327,780	$	52,941	$	17,785	$	(1,634)	$	(220,326)	$	100,756
Transactions in three-month period ended June 30, 2022
Net loss	—		—	—		—		—		—		(16,648)		(16,648)
Exercise of stock options	88,558		246	—		—		(106)		—		—		140
Private Placement	—		—	—		—		—		—		—		—
Share-based compensation	—		—	—		—		2,411		—		—		2,411
Balance as of June 30, 2022	30,005,884	$	252,236	12,327,780	$	52,941	$	20,090	$	(1,634)	$	(236,974)	$	86,659


Balance as of December 31, 2020	29,827,997	$	251,682	11,417,034	$	48,007	$	8,530	$	(1,634)	$	(163,466)	$	143,119
Transactions in six-month period ended June 30, 2021
Net loss	—		—	—		—		—		—		(11,744)		(11,744)
Exercise of stock options	18,003		34	—		—		(15)		—		—		19
Private Placement	—		—	910,746		4,920		—		—		—		4,920
Share-based compensation	—		—	—		—		3,280		—		—		3,280
Balance as of June 30, 2021	29,846,000	$	251,716	12,327,780	$	52,927	$	11,795	$	(1,634)	$	(175,210)	$	139,594

Balance as of December 31, 2021	29,897,559	$	251,901	12,327,780	$	52,941	$	15,711	$	(1,634)	$	(206,319)	$	112,600
Transactions in six-month period ended June 30, 2022
Net loss	—		—	—		—		—		—		(30,655)		(30,655)
Exercise of stock options	108,325		335	—		—		(146)		—		—		189
Share-based compensation	—		—	—		—		4,525		—		—		4,525
Balance as of June 30, 2022	30,005,884	$	252,236	12,327,780	$	52,941	$	20,090	$	(1,634)	$	(236,974)	$	86,659

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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Milestone Pharmaceuticals Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands of US dollars)


	Six months ended June 30,
	2022		2021
Cash flows used in operating activities
Net loss	$	(30,655)	$	(11,744)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment		47		46
Share-based compensation expense		4,525		3,280
Changes in operating assets and liabilities:
Other receivables		(134)		(19)
Research and development tax credits receivable		(183)		(178)
Prepaid expenses		834		(2,019)
Operating lease assets and liabilities		(4)		24
Accounts payable and accrued liabilities		(2,464)		(845)

Net cash used in operating activities		(28,034)		(11,455)

Cash provided by (used in) investing activities
Acquisition of property and equipment		(59)		—
Acquisition of short-term investments		(23,000)		—
Redemption of short-term investments		—		32,000

Net cash provided by (used in) investing activities		(23,059)		32,000

Cash provided by financing activities
Proceeds from exercise of options		189		19
Net Proceeds from issuance of pre-funded warrants in a private placement		—		4,920

Cash provided by financing activities		189		4,939

Net decrease in cash and cash equivalents		(50,904)		25,484

Cash and cash equivalents – Beginning of period		114,141		72,310

Cash and cash equivalents – End of period	$	63,237	$	97,794

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2022 and 2021 (Unaudited)

(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 biopharmaceutical company incorporated under the Business Corporations Act (Québec). Milestone is focused on the development and commercialization of 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 and significant accounting policies

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. 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, 2021.

In the opinion of the Company's management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its balance sheet as of June 30, 2022, and its statements of earnings (loss), shareholders’ equity for the three and six months ended June 30, 2022 and 2021 and its statement of cash flows for the six months ended June 30, 2022 and 2021.

The condensed consolidated balance sheet as of December 31, 2021, was derived from audited annual consolidated financial statements, but does not contain all the footnote disclosures required by accounting principles generally accepted in the United States of America.

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 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,

●

Estimates of the percentage of work completed of the total work over the life of an individual clinical trial in accordance with agreements established with contracted research organizations (“CRO”), contracted

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2022 and 2021 (Unaudited)

(in thousands of US dollars, except where noted and for share and per share data)

manufacturing organizations (“CMO”) 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 directors, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model.

c) Significant Risks and Uncertainties

The ongoing COVID-19 pandemic has had an impact on the Company’s business, operations and clinical development timelines. The pandemic has resulted in many state, local and foreign governments implementing, and making adjustments to, various orders and restrictions in order to control the spread of the disease, which have impacted patient recruitment, enrollment and follow-up visits at clinical sites The Company will continue to evaluate the COVID-19 pandemic impact on the development timelines of its clinical programs. 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 unaudited interim condensed consolidated financial statements.

In addition, the Company is subject to other 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.

d) Recent Accounting Pronouncements

The Company has considered recent accounting pronouncements and concluded that they are either not applicable to the business or that the effect is not expected to be material to the unaudited condensed consolidated financial statements as a result of future adoption.

e) Sources of Liquidity and Funding Requirements

The Company incurred operating losses and has experienced negative operating cash flows since its inception and anticipates to continue to incur losses for at least the next several years. As of June 30, 2022, the Company had cash, cash equivalents and short-term investments of $86.2 million and an accumulated deficit of $237.0 million. Management has evaluated the Company’s current operating plan against our existing cash and cash equivalents and access to potential financing sources and determined that we expect to be able to support our ongoing operations for at least the next twelve months from the date of issuance of this quarterly report on Form 10-Q.

3 Revenues

For the quarter ended June 30, 2022, the Company has not recognized any revenue. During the quarter ended June 30, 2021, the Company recognized revenue of $15 million, in the form of a non-refundable upfront cash payment in connection with a license agreement

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2022 and 2021 (Unaudited)

(in thousands of US dollars, except where noted and for share and per share data)

4 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.

5 Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are comprised of the following:


	June 30, 2022		December 31, 2021
Trade accounts payable	$	1,507	$	4,384
Accrued compensation and benefits payable		527		1,458
Accrued research and development liabilities		964		272
Other accrued liabilities		1,089		437
Total	$	4,087	$	6,551

6 Shareholders’ equity

Authorized Share Capital

The Company has authorized and issued common shares, voting and participating, without par value, of which unlimited shares were authorized and 30,005,884 shares were issued and outstanding as of June 30, 2022.

As of June 30, 2022, there were 1,121,076 common shares available for issuance under the Employee Stock Purchase Plans and no common shares have been issued under such plan.

Additional Paid-in Capital

The additional paid-in capital balances were as follows:


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Opening balance	$	17,785	$	9,883	$	15,711	$	8,530
Share-based compensation expense		2,411		1,912		4,525		3,280
Exercise of stock options		(106)		—		(146)		(15)
Closing balance	$	20,090	$	11,795	$	20,090	$	11,795

7 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 (1/36^th) 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 January 1, 2022, the number of the Company’s common shares reserved for issuance under the 2019 Plan increased by 1,195,902 common shares. In addition, 125,127 options have been forfeited under the 2011 Plan since the adoption of

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2022 and 2021 (Unaudited)

(in thousands of US dollars, except where noted and for share and per share data)

the 2019 Plan and have become available for issuance under the 2019 Plan. As of June 30, 2022, there were 5,811,310 shares available for issuance under the 2019 Plan, of which 660,669 shares were available for future grants.

On November 10, 2021, the Company established a 2021 Inducement Plan 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. There were 523,000 options granted and outstanding under the 2021 Inducement Plan during the six month period ended June 30, 2022. The options were granted at a weighted average exercise price of $6.37.

Beginning July 15, 2022, the Company will begin to offer an ESPP (“Employee Stock Purchase Plan”), in which participation will be available to substantially all of our employees in the United States and Canada who meet certain service eligibility requirements. As of June 30, 2022, the Company has 1,121,076 shares available under the ESPP with no shares issued under this plan.

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2022 and 2021 (Unaudited)

(in thousands of US dollars, except where noted and for share and per share data)

The total outstanding and exercisable options from the 2011 Plan, 2019 Plan and Inducement Plan as of June 30 were as follows:


	2022
							Weighted
	Number						average
	of shares						exercise
	2019 Plan		Inducement Plan	2011 Plan		Total	price
Outstanding at beginning of year - 2011 Plan	$	—	—	$	1,995,971	1,995,971	$	2.07
Outstanding at beginning of year - 2019 Plan		3,759,834	—		—	3,759,834		9.51
Granted - 2019 Plan		1,385,700	—		—	1,385,700		5.47
Granted - Inducement Plan		—	523,000		—	523,000		6.37
Expired - 2011 Plan		—	—		(1,121)	(1,121)		0.96
Exercised - 2011 Plan		—	—		(94,225)	(94,225)		1.43
Exercised - 2019 Plan		(14,100)	—		—	(14,100)		3.76
Cancelled - 2011 Plan		—	—		(19,387)	(19,387)		9.42
Cancelled - 2019 Plan		(13,893)	—		—	(13,893)		13.36
Outstanding at end of period	$	5,117,541	523,000		1,881,238	7,521,779	$	6.68
Outstanding at end of period - Weighted average exercise price	$	8.42	6.37	$	2.03
Exercisable at end of period		2,017,527	—		1,796,396	3,813,923	$	6.09
Exercisable at end of period - Weighted average exercise price	$	9.74	—	$	1.99


	2021
							Weighted
	Number						average
	of shares						exercise
	2019 Plan		Inducement Plan	2011 Plan		Total	price
Outstanding at beginning of year - 2011 Plan	$	—	—	$	2,080,097	2,080,097	$	2.15
Outstanding at beginning of year - 2019 Plan		1,706,190	—		—	1,706,190		13.55
Granted - 2019 Plan		1,863,950	—		—	1,863,950		6.31
Exercised - 2011 Plan		—	—		(16,753)	(16,753)		0.88
Exercised - 2019 Plan		(1,250)	—		—	(1,250)		3.74
Outstanding at end of period		3,568,890	—		2,063,344	5,632,234	$	6.99
Outstanding at end of period - Weighted average exercise price	$	9.77	—	$	2.16
Exercisable at end of period		591,885	—		1,613,229	2,205,114	$	4.86
Exercisable at end of period - Weighted average exercise price	$	12.55	—	$	2.05

The weighted average remaining contractual life was 8.1 and 8.3 years for outstanding options as of June 30, 2022 and 2021, respectively. The weighted average remaining contractual life was 6.9 and 7.0 years for vested options, as of June 30, 2022 and 2021, respectively.

There was $19.0 million and $19.4 million total unrecognized compensation cost related to non-vested share options as of June 30, 2022 and 2021, respectively. The share options are expected to be recognized over a remaining weighted average vesting period of 2.7 years and 2.8 years as of June 30, 2022 and 2021, respectively.

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.

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2022 and 2021 (Unaudited)

(in thousands of US dollars, except where noted and for share and per share data)

The non-vested options as of June 30 were as follows:


	2022
	Number							Weighted
	of options							average
	2019 Plan		Inducement Plan		2011 Plan		Total	fair value
Non-vested share options at beginning of year - 2011 Plan		—		—		200,639	200,639	$	1.86
Non-vested share options at beginning of year - 2019 Plan		2,665,518		—		—	2,665,518		6.39
Granted - 2019 Plan		1,385,700		—		—	1,385,700		4.13
Granted - Inducement Plan		—		523,000		—	523,000		4.81
Vested, outstanding 2011 Plan		—		—		(115,797)	(115,797)		1.75
Vested, outstanding 2019 Plan		(942,473)		—		—	(942,473)		5.63
Forfeited - 2019 Plan		(8,731)		—		—	(8,731)		6.27
Non-vested share options at end of period		3,100,014		523,000		84,842	3,707,856	$	5.42
Non-vested share options at end of period - Weighted average fair value	$	5.62	$	—	$	2.01


	2021
	Number							Weighted
	of options							average
	2019 Plan		Inducement Plan		2011 Plan		Total	fair value
Non-vested share options at beginning of year - 2011 Plan		—		—		543,192	543,192	$	1.81
Non-vested share options at beginning of year - 2019 Plan		1,438,026		—		—	1,438,026		10.28
Granted - 2019 Plan		1,863,950		—		—	1,863,950		4.79
Vested, outstanding 2011 Plan		—		—		(93,087)	(93,087)		1.61
Vested, outstanding 2019 Plan		(324,971)		—		—	(324,971)		11.38
Non-vested share options at end of period		2,977,005		—		450,105	3,427,110	$	6.08
Non-vested share options at end of period - Weighted average fair value	$	6.72	$	—	$	1.85

There were 523,000 options granted, outstanding and non-vested under the 2021 Inducement Plan during the six month period ended June 30, 2022. The options were granted at a weighted average fair value price of $4.81.

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 for the 2011 Plan, 2019 Plan and 2021 Inducement Plan were estimated using the Black-Scholes option pricing model, resulting in the following weighted average assumptions for the options granted:


	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
Exercise price	$	6.21		$	5.56		$	5.72		$	6.24
Share price	$	6.21		$	5.56		$	5.72		$	6.24
Volatility		91	%		92	%		91	%		94	%
Risk-free interest rate		2.72	%		0.86	%		2.31	%		1.04	%
Expected life		6.08			5.32			6.08			6.01
Dividend		0	%		0	%		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 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

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2022 and 2021 (Unaudited)

(in thousands of US dollars, except where noted and for share and per share data)

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:


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Administration	$	880	$	750	$	1,792	$	1,323
Research and development		1,105		825		1,953		1,405
Commercial activities		426		337		780		552
Total	$	2,411	$	1,912	$	4,525	$	3,280

8 Net Loss Per Share

Basic 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.

For the six months ended June 30, 2022 and 2021, the Company was in a net loss position. Dilutive net loss per common share is determined by dividing net loss applicable to common shareholders by the weighted average number of common shares and shares issuable upon exercise of pre-funded warrants outstanding during the period. The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as of June 30, as they would be anti-dilutive:


	2022	2021
Share options	7,521,779	5,819,524

Amounts above reflect the common share equivalents of the noted instruments.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited interim condensed consolidated statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited annual consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission, or SEC, on March 24, 2022. 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 Quarterly Report on Form 10-Q.

Overview

We are a biopharmaceutical company focused on the development and commercialization of innovative cardiovascular medicines. Our lead product candidate etripamil is a novel, potent and short-acting calcium channel blocker that we designed as a rapid-onset nasal spray to be self-administered by patients. We are developing etripamil for the treatment of specific arrhythmias with a lead indication to treat paroxysmal supraventricular tachycardia, or PSVT, with subsequent indications to treat atrial fibrillation and rapid ventricular rate, or AFib-RVR, and other indications.

Etripamil - Phase III Clinical Program in PSVT

PSVT is a rapid heart rate condition characterized by episodes of supraventricular tachycardia, or SVT, that start and stop without warning. Episodes of SVT are experienced by patients with symptoms often 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 ava