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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 September 30, 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

    

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 November 13th, 2023, the registrant had 33,483,111 common shares, no par value per share, outstanding.

Table of Contents

Table of Contents

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 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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

Table of Contents

“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;
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;
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;

1

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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.sedarplus.com on March 29, 2023, 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.

2

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Milestone Pharmaceuticals Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands of US dollars, except share data)

    

September 30, 2023

    

December 31, 2022

Assets

  

 

  

Current assets

 

  

Cash and cash equivalents

$

9,879

 

$

7,636

Short-term investments

65,867

56,949

Research and development tax credits receivable

569

 

331

Prepaid expenses

6,961

 

6,005

Other receivables

1,521

 

882

Total current assets

84,797

 

71,803

Operating lease assets

2,047

2,423

Property and equipment

272

 

257

Total assets

$

87,116

 

$

74,483

Liabilities, and Shareholders' Equity

  

 

  

Current liabilities

  

 

  

Accounts payable and accrued liabilities

$

7,584

 

$

5,644

Operating lease liabilities

530

 

495

Total current liabilities

8,114

 

6,139

Operating lease liabilities, net of current portion

1,583

 

1,996

Senior secured convertible notes

48,915

Total liabilities

58,612

 

8,135

Shareholders’ Equity

 

  

Common shares, no par value, unlimited shares authorized 33,481,787 shares issued and outstanding as of September 30, 2023, 34,286,002 shares issued and outstanding as of December 31, 2022

260,502

 

273,900

Pre-funded warrants - 9,577,257 issued and outstanding as of September 30, 2023 and 8,518,257 as of December 31, 2022

48,459

34,352

Additional paid-in capital

31,958

 

24,437

Accumulated deficit

(312,415)

 

(266,341)

Total shareholders’ equity

28,504

 

66,348

Total liabilities and shareholders’ equity

$

87,116

 

$

74,483

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

3

Table of Contents

Milestone Pharmaceuticals Inc.

Condensed Consolidated Statements of Loss (Unaudited)

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

Three months ended September 30, 

Nine months ended September 30, 

    

2023

   

2022

     

2023

   

2022

Revenue

$

 

$

1,500

$

1,000

 

$

1,500

Operating expenses

 

 

 

Research and development, net of tax credits

 

6,721

 

9,826

25,600

 

29,251

General and administrative

 

4,227

 

4,034

12,561

 

11,595

Commercial

 

4,412

 

2,670

10,137

 

6,537

Loss from operations

 

(15,360)

 

(15,030)

(47,298)

 

(45,883)

Interest income

 

1,120

 

474

2,921

 

672

Interest expense

(841)

(1,697)

Net loss and comprehensive loss

 

$

(15,081)

 

$

(14,556)

$

(46,074)

 

$

(45,211)

Weighted average number of shares and pre-funded warrants outstanding, basic and diluted

42,973,160

42,491,787

42,920,620

42,339,123

Net loss per share, basic and diluted

 

$

(0.35)

 

$

(0.34)

$

(1.07)

 

$

(1.07)

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

4

Table of Contents

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

    

Accumulated
deficit

    

Total

Balance as of June 30, 2022

30,005,884

$

252,236

12,327,780

$

52,941

$

20,090

$

(238,608)

$

86,659

Transactions in three-month period ended September 30, 2022

Net loss

(14,556)

(14,556)

Exercise of stock options

20,989

57

(29)

28

Share-based compensation

2,380

2,380

Issuance of common shares, net of issuance costs

361,236

2,644

2,644

Balance as of September 30, 2022

30,388,109

$

254,937

12,327,780

$

52,941

$

22,441

$

(253,164)

$

77,155

Balance as of June 30, 2023

33,363,971

$

260,169

9,577,257

$

48,459

$

29,114

$

(297,334)

$

40,408

Transactions in three-month period ended September 30, 2023

Net loss

(15,081)

(15,081)

Exercise of stock options

18,798

68

(28)

40

Share-based compensation

2,872

2,872

Employee stock purchase plan purchases

99,018

265

265

Balance as of September 30, 2023

33,481,787

$

260,502

9,577,257

$

48,459

$

31,958

$

(312,415)

$

28,504

Balance as of December 31, 2021

29,897,559

$

251,901

12,327,780

$

52,941

$

15,711

$

(207,953)

$

112,600

Transactions in nine-month period ended September 30, 2022

Net loss

(45,211)

(45,211)

Exercise of stock options

129,314

392

(175)

217

Share-based compensation

6,905

6,905

Issuance of common shares, net of issuance costs

361,236

2,644

2,644

Balance as of September 30, 2022

30,388,109

$

254,937

12,327,780

$

52,941

$

22,441

$

(253,164)

$

77,155

Balance as of December 31, 2022

34,286,002

$

273,900

8,518,257

$

34,352

$

24,437

$

(266,341)

$

66,348

Transactions in nine-month period ended September 30, 2023

Net loss

(46,074)

(46,074)

Exercise of stock options

112,779

324

(136)

188

Pre-funded warrants - Private Placement, net of issuance costs

1,059,000

14,107

14,107

Share-based compensation

7,657

7,657

Cancellation of common shares

(1,059,000)

(14,115)

(14,115)

Employee stock purchase plan purchases

142,006

393

393

Balance as of September 30, 2023

33,481,787

$

260,502

9,577,257

$

48,459

$

31,958

$

(312,415)

$

28,504

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

5

Table of Contents

Milestone Pharmaceuticals Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands of US dollars)

Nine months ended September 30, 

2023

    

2022

Cash flows used in operating activities

Net loss

$

(46,074)

$

(45,211)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation of property and equipment

66

74

Amortization of debt costs

160

Accretion of investment discount

(79)

Non-cash interest expense related to debt

1,537

Share-based compensation expense

7,657

6,905

Changes in operating assets and liabilities:

Other receivables

(639)

(308)

Research and development tax credits receivable

(238)

161

Prepaid expenses

(956)

(759)

Operating lease assets and liabilities

(2)

47

Accounts payable and accrued liabilities

1,940

(516)

Net cash used in operating activities

(36,628)

(39,607)

Cash provided by (used in) investing activities

Acquisition of property and equipment

(81)

(162)

Acquisition of short-term investments

(95,839)

(62,947)

Redemption of short-term investments

87,000

23,000

Net cash used in investing activities

(8,920)

(40,109)

Cash provided by financing activities

Proceeds from exercise of options

188

217

Proceeds from issuance of senior secured convertible debt

50,000

Issuance of common shares, net of issuance costs

2,644

Pre-funded warrant issuance costs

(8)

Proceeds from employee stock purchase plan

393

Payment of debt issuance costs

(2,782)

Cash provided by financing activities

47,791

2,861

Net increase (decrease) in cash and cash equivalents

2,243

(76,855)

Cash and cash equivalents – Beginning of period

7,636

114,141

Cash and cash equivalents – End of period

$

9,879

$

37,286

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

6

Table of Contents

Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2023 and 2022 (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 rapid-onset 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, or “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, these 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, 2022.

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 September 30, 2023, and its statements of loss and shareholders’ equity for the three and nine months ended September 30, 2023 and 2022 and its statements of cash flows for the nine months ended September 30, 2023 and 2022.

The condensed consolidated balance sheet as of December 31, 2022, 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, or “CRO”, contracted

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)

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

manufacturing organizations, or “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 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, international armed conflicts and overall fluctuations in the financial markets in the United States and abroad.

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 September 30, 2023, the Company had cash, cash equivalents and short-term investments of $75.7 million and an accumulated deficit of $312.4 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 unaudited interim consolidated financial statements.

3     Revenues

The Company recorded no revenue for the three months ended September 30, 2023 and $1.0 million in revenue during the nine months ended September 30, 2023. This revenue is due to a milestone reached as a result of the successful initiation of a Phase 1 Clinical Trial of the product by or on behalf of Ji Xing for the treatment of paroxysmal supraventricular tachycardia, or “PSVT”, in the Territory. The Company recorded $1.5 million in revenue for the three and nine months ended September 30, 2022. This revenue was related to a milestone reached as a result of the first patient dosed in a Phase 3 Clinical Trial for the treatment of PSVT in the Territory. For details on the arrangement with Ji Xing, see Note 3 to our audited consolidated financial statements for the year ended December 31, 2022, filed on Form 10-K.

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.

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)

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

5     Debt

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 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 September 30, 2023, the estimated fair value of the Convertible Notes was approximately $51.4 million.

The net carrying amount of the Convertible Note were as follows:

    

September 30, 2023

December 31, 2022

Original principal

 

$

50,000

$

Paid in kind (PIK) interest

1,537

Unamortized debt discount

(566)

Unamortized debt issuance costs

 

(2,056)

Total

 

$

48,915

$

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)

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

The following table presents the total amount of interest cost recognized relating to the 2029 Convertible Notes (in thousands):

Three months ended September 30, 

Nine months ended September 30, 

2023

    

2022

    

2023

    

2022

Contractual interest expense

$

762

 

$

$

1,537

 

$

Amortization of debt discount

16

34

Amortization of debt issuance costs

63

 

126

 

Total interest expense

$

841

 

$

$

1,697

 

$

6    Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are comprised of the following:  

    

September 30, 2023

December 31, 2022

    

  

 

  

Trade accounts payable

 

$

1,855

$

2,263

Accrued compensation and benefits payable

 

2,426

2,573

Accrued research and development liabilities

 

2,051

404

Other accrued liabilities

 

1,252

404

Total

 

$

7,584

$

5,644

7      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 33,481,787 shares were issued and outstanding as of September 30, 2023.

As of September 30, 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 September 30, 2023.

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.

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)

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

Additional Paid-in Capital

The additional paid-in capital balances were as follows:

Three months ended September 30, 

Nine months ended September 30, 

2023

    

2022

    

2023

    

2022

Opening balance

$

29,114

 

$

20,090

$

24,437

 

$

15,711

Share-based compensation expense

2,872

 

2,380

7,657

 

6,905

Exercise of stock options

(28)

 

(29)

(136)

 

(175)

Closing balance

$

31,958

 

$

22,441

$

31,958

 

$

22,441

8     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 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 September 30, 2023, 561,000 of previously issued options had been cancelled under the 2019 Plan and were available for future grants.  As of September 30, 2023, there were 8,182,946 common shares available for issuance under the 2019 Plan, of which 1,644,623 common shares were available for future grants.

On November 10, 2021, the Company established a 2021 Inducement Plan (the “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. As of September 30, 2023, there were 1,000,000 shares available for issuance under the 2021 Inducement Plan, of which 497,000 shares were available for future grants.

On July 15, 2022, the Company offered an ESPP, in which participation is available to substantially all of our employees in the United States and Canada who meet certain service eligibility requirements. On January 1, 2023 the number of common shares reserved for issuance under the ESPP increased by 342,860 shares. As of September 30, 2023, the Company has 1,463,936 common shares available for issuance under the ESPP. As of September 30, 2023, the Company has issued 142,006 shares of common stock pursuant to the ESPP.

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Milestone Pharmaceuticals Inc.

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (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 September 30 were as follows:

2023

Weighted

Number

average

of shares

exercise

    

2019 Plan

   

Inducement Plan

2011 Plan

   

Total

   

price

Outstanding at beginning of year - 2011 Plan

 

    

1,802,672

    

1,802,672

    

$

2.05

Outstanding at beginning of year - 2019 Plan

5,314,312

5,314,312

8.35

Outstanding at beginning of year - Inducement Plan

503,000

503,000

6.41

Granted - 2019 Plan

1,867,400

1,867,400

3.62

Exercised - 2019 Plan

(7,000)

(7,000)

3.74

Exercised - 2011 Plan

(105,779)

(105,779)

1.52

Forfeited - 2019 Plan

(87,861)

(87,861)

6.28

Expired - 2019 Plan

(58,617)

(58,617)

11.52

Expired - 2011 Plan

(343)

(343)

0.92

Cancelled - 2019 Plan

(561,000)

(561,000)

21.73

Outstanding at end of period

 

6,467,234

503,000

1,696,550

8,666,784

$

5.13

Outstanding at end of period - Weighted average exercise price

$

5.83

$

6.41

$

2.08

Exercisable at end of period

2,972,614

190,396

1,696,550

4,859,560

$

5.25

Exercisable at end of period - Weighted average exercise price

 

$

6.98

$

6.42

$

2.08

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

1,748,700

1,748,700

5.78

Granted - Inducement Plan

523,000

523,000

6.37

Exercised - 2019 Plan

(15,089)

(15,089)

3.92

Exercised - 2011 Plan

(114,225)

(114,225)

1.38

Forfeited - 2019 Plan

(17,950)

(17,950)

14.31

Forfeited - 2011 Plan

(19,387)

(19,387)

9.42

Expired - 2011 Plan

(1,121)

(1,121)

0.96

Outstanding at end of period

5,475,495

523,000

1,861,238

7,859,733

$

6.70

Outstanding at end of period - Weighted average exercise price

$

8.32

$

6.37

$

2.04

Exercisable at end of period

2,219,125

1,831,482

4,050,607

$

6.28

Exercisable at end of period - Weighted average exercise price

$

9.79

$

2.01

The weighted average remaining contractual life was 7.5 and 7.8 years for outstanding options as of September 30, 2023 and 2022, respectively. The weighted average remaining contractual life was 6.4 and 6.7 years for vested options, as of September 30, 2023 and 2022, respectively.

There was $13.2 million and $18.6 million of total unrecognized compensation cost related to non-vested share options as of September 30, 2023 and 2022, respectively. The share options are expected to be recognized over a remaining weighted average vesting period of 2.4 years and 2.5 years as of September 30, 2023 and 2022, respectively. For the three and nine months ended September 30, 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 Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)

(in thousands of US dollars, except where noted and for 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 September 30 were as follows:

2023

Number

Weighted

of options

average

2019 Plan

    

Inducement Plan

    

2011 Plan

    

Total

    

fair value

Non-vested share options at beginning of year - 2011 Plan

    

 

2,126

2,126

 

$

6.64

Non-vested share options at beginning of year - 2019 Plan

2,923,763

2,923,763

 

5.30

Non-vested share options at beginning of year - Inducement Plan

503,000

503,000

4.84

Granted - 2019 Plan

 

1,867,400

1,867,400

2.87

Vested, outstanding 2011 Plan

(2,126)

(2,126)

 

6.64

Vested, outstanding 2019 Plan

(1,231,712)

(1,231,712)

6.09

Vested, outstanding Inducement Plan

(190,396)

(190,396)

4.85

Forfeited - 2019 Plan

(64,831)

(64,831)

4.08

Non-vested share options at end of period

 

3,494,620

312,604

3,807,224

 

$

3.83

Non-vested share options at end of period - Weighted average fair value

$

3.74

$

4.84

$

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