MILESTONE PHARMACEUTICALS INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

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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.

Insight

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 available in oral form are
frequently used prophylactically to control the frequency and duration of future
episodes of SVT. For treatment of episodes of SVT, approved calcium channel
blockers are administered intravenously under medical supervision, usually in
the emergency department. The combination of convenient nasal-spray delivery,
rapid-onset and short duration of action of etripamil has the potential to shift
the current treatment paradigm for episodes of SVT away from the burdensome and
costly emergency department setting. If approved, we believe that etripamil will
be the first self-administered therapy for the rapid termination of episodes of
SVT wherever and whenever they occur.

Our late-stage etripamil clinical program for the treatment of PSVT is currently
executing on two ongoing Phase 3 safety and efficacy trials, RAPID and NODE-303.
The RAPID study is our pivotal global randomized-controlled Phase 3 safety and
efficacy trial. This study enrolled its first patient in October 2020 and in
July 2022 reached its target of 180 confirmed PSVT events treated with
double-blind study medication, marking the achievement of the event data
required for the study's primary statistical efficacy analysis. The Company
expects to report topline data from RAPID in mid-second half of 2022. NODE-303
is an open-label global safety trial enrolling patients to collect safety data
that when combined with the safety data from the rest of the program will form
the safety dataset to be evaluated by the FDA and other regulatory agencies to
form the basis for marketing approval. We have also completed our first Phase 3
safety and efficacy trial of etripamil, NODE-301, and its open-label safety
extension trial, NODE-302.

In March 2020, we reported topline results of the NODE-301 pivotal trial of
etripamil for the treatment of PSVT, which is a placebo-controlled Phase 3
safety and efficacy trial. NODE-301, which enrolled a total of 431 patients
across 65 sites in the United States and Canada, did not meet its primary
endpoint of time to conversion of SVT to sinus rhythm compared to placebo over
the five hour period in which patients wore a cardiac monitor following study
drug administration.

In July 2020we announced that we had received advice from the US Food and Drug Administrationor FDA, on our proposal to change the size and design of our ongoing NODE-301 trial (later renamed RAPID) as well as the overall program based on the data and learnings from the initial part of the NODE-301 trial .

The FDA has indicated that both trials, the proposed RAPID trial and the completed NODE-301 Part 1 trial, could potentially meet the efficacy requirement of our planned NDA for etripamil in patients with PSVT.

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Under an updated analysis plan, the primary efficacy endpoint for both the RAPID
and NODE-301 trials will be defined as time to conversion over the first 30
minutes, with a target p-value of less than 0.05 for each trial. This endpoint
supports the desire of patients to rapidly address their PSVT symptoms during an
episode and ideally avoid visiting the emergency department. Later and earlier
time points will also be assessed as part of secondary analyses to fully
characterize the efficacy profile of etripamil.

When employing the updated analysis retrospectively to the NODE-301 data,
results in 54% of etripamil patients vs. 35% of placebo patients converted
within 30 minutes (HR 1.87, p=0.02). Applying the same primary endpoint to the
RAPID study, powering the study at 90% and using alpha of 0.05 to detect a 19%
difference of etripamil versus placebo in 30 minute time to conversion that was
observed in the NODE-301 study results in the size of 180 confirmed PSVT events.

The RAPID study was designed to be similar to NODE-301 however it introduced a
new treatment regimen to the program. Based on discussions with the FDA
regarding maximizing the treatment effect of etripamil, the RAPID trial allowed
for repeat administration of study drug (either 70 mg of etripamil or placebo)
for patients who had not experienced symptom relief within ten minutes of the
first study drug administration. This repeat dose regimen, which is similar to
current PSVT treatment practices in the emergency department setting, was
tailored to the pharmacokinetic profile of etripamil to deliver increased
exposure over approximately the first 30 minutes following initial
administration. We believe that the repeat administration could benefit a
broader group of patients, including those with more persistent episodes.  For
the primay efficacy analysis for RAPID, the FDA agreed that the single and
repeat administrations of etripamil could be pooled and compared to placebo. In
the NODE-301 study, 32% of etripamil patients and 14% of placebo patients
converted to sinus rhythm within 10 minutes.

NODE-302 was the Phase 3 open-label safety extension of the NODE-301 trial.
Patients who completed NODE-301 enrolled in NODE-302 and could receive up to an
additional 11 doses of etripamil. NODE-302 was a multi-center, open label study
designed to evaluate the safety of etripamil nasal spray when self-administered
by patients without medical supervision for spontaneous episodes of SVT in an
outpatient setting. Efficacy assessments were also performed. Eligibility was
contingent on satisfying all inclusion and exclusion criteria, including not
experiencing a serious adverse event related to the study drug or the study
procedure that precludes the self-administration of etripamil. We announced the
top line data from the NODE-302 study which were presented at a late-breaking
session of the Heart Rhythm Society's Heart Rhythm 2022 Annual conference. Of
198 eligible NODE-301 patients, 169 (85%) enrolled in NODE-302 and 105 (62%)
experienced a perceived episode of PSVT, self-administered etripamil and were
included in the safety population. Overall, the PSVT conversion rate at 30
minutes following etripamil administration was 60.2% with a median time to
conversion of 15.5 minutes (95% CI, 11.3-22.1 minutes). Among 40 patients who
self-treated two consecutive episodes, 21 of 26 (81%) who converted on their
first episode were also successfully converted on their second. Moreover, the
need for emergency department (ED) intervention to terminate a PSVT episode was
low (13% of patients and 8.5% of positively adjudicated PSVT episodes).
Etripamil was generally well-tolerated, with adverse events consistent with
those observed in previous trials; the majority of adverse events related to
treatment were localized to the nasopharynx administration site, and were mild
and brief.

NODE-303 is a Phase 3, multi-center, open-label safety trial, evaluating the
safety of etripamil when self-administered without medical supervision, and
evaluating the treatment safety and efficacy of etripamil on multiple SVT
episodes. The study initiated with the etripamil 70 mg single dose regimen and
the 70 mg repeat dose regimen was introduced into the trial starting in the
second half of 2021 following FDA acceptance of the protocol change.  The trial
is designed to add to the safety data from the remainder of the development
program, including both the NODE-301 and RAPID trials, in order to fulfill the
safety data set needed for NDA filing. Our plan is to ascertain the final sizing
of the trial following future discussions with the FDA and other regulatory
authorities.

We are conducting patient access programs to provide further access to etripamil
to patients who have participated in the clinical development registration
trials to treat future SVT episodes. These programs are tailored to meet the
regulatory requirements in the territories in which the clinical sites are
located.

Moreover, on July 1, 2022our partner Ji Xing Pharmaceuticals Limited
(JIXING), a clinical-stage biopharmaceutical company committed to bringing innovative medicines to underserved Chinese patients with serious and life-threatening illnesses, announced the first patient recruitment at Nanfang Hospital of Southern Medical University in its phase 3 study

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of etripamil in China for the treatment of paroxysmal supraventricular
tachycardia (PSVT).  The study is currently being carried out in more than 40
leading clinical centers across China. The study is designed to evaluate the
efficacy and safety of self-administered etripamil nasal spray as treatment of
PSVT and to provide clinical data to support a new drug application in China.

Etripamil: atrial fibrillation and rapid ventricular rate

In addition to our PSVT clinical program, we began enrollment of patients in a
Phase 2 proof-of-concept clinical trial in patients with atrial fibrillation
titled ReVeRA in the first quarter of 2021 to evaluate the potential
effectiveness of etripamil to reduce ventricular rate during AFib-RVR episodes.
As with PSVT, calcium channel blockers are also approved for use in intravenous
form for the treatment of some episodes of atrial fibrillation in which patients
experience rapid ventricular rates. The Phase 2 double blind, placebo
controlled, proof-of-concept, which is being conducted in Canada in
collaboration with the Montreal Heart Institute and other research centers, is
expected to enroll approximately 50 patients randomized 1:1 to receive either 70
mg of etripamil nasal spray or placebo. The primary endpoint will assess maximum
reduction in ventricular rate, with key secondary endpoints including the time
to achieve maximum reduction in ventricular rate and the duration of the effect.
The trial is to be conducted in the hospital or emergency department setting
under medical supervision.

Operations Overview

Since the commencement of our operations in 2003, we have devoted substantially
all of our resources to performing research and development activities in
support of our product development efforts, hiring personnel, raising capital to
support and expand such activities, providing general and administrative support
for these operations and, more recently preparing for commercialization. We
operate our business using a significant outsourcing model.  As such, our team
is composed of a relatively smaller core of employees who direct a significantly
larger number of team members who are outsourced in the forms of vendors and
consultants to enable execution of our operational plans. We do not currently
have any products approved for sale, and we continue to incur significant
research and development and general administrative expenses related to our
operations.

Since inception, we have incurred significant operating losses. For the three
months ended June 30, 2022 and 2021 we recorded net loss of $16.6 million and we
had net earnings of $0.8 million due to the receipt of a $15 million upfront
payment under our License and Collaboration Agreement, or the License Agreement,
with Ji Xing Pharmaceuticals, Limited, or Ji Xing, respectively. For the six
months ended June 30, 2022 and 2021, we recorded net losses of $30.7 million and
$11.7 million, respectively. As of June 30, 2022, we had an accumulated deficit
of $237.0 million. We expect to continue to incur significant losses for the
foreseeable future. We anticipate that a substantial portion of our capital
resources and efforts in the foreseeable future will be focused on completing
the necessary development activities required for obtaining regulatory approval
and preparing for potential commercialization of our product candidates. We had
$86.2 million of cash, cash equivalents and short-term investments at June 30,
2022.

We expect to continue to incur significant expenses and increasing operating
losses for at least the next several years. Our net losses may fluctuate
significantly from period to period, depending on the timing of our planned
clinical trials and expenditures on other research and development activities.
We expect our expenses will increase substantially over time as we:

continue the ongoing and planned development of etripamil, including our Phase

? 3 clinical trials of etripamil for the treatment of PSVT and our phase 2

clinical trial of etripamil for the treatment of AFib-RVR;

? seek marketing authorizations for etripamil for the treatment of PSVT, AFib-RVR and

   other cardiovascular indications;


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establish a sales, marketing, manufacturing and distribution capability, either

? directly or indirectly through third parties, to market etripamil or any

   future product candidate for which we may obtain marketing approval;

? build a portfolio of product candidates through the development, or acquisition

   or in-license of drugs, product candidates or technologies;


   initiate preclinical studies and clinical trials for etripamil for any

additional indications that we may pursue, including clinical trials for the

? treatment of atrial fibrillation and rapid ventricular rate as well as other

areas of unmet medical need, and for any additional product candidates that we

may continue in the future;

? maintain, protect and develop our intellectual property portfolio;

? hire additional clinical, commercial, regulatory and scientific staff;

add operational, financial and management information systems and personnel,

? including personnel to support the development of our products and the planned future

marketing efforts; and

? incur additional legal, accounting, insurance and other associated costs

with operation as a public company.

COVID-19 Business Update

The periods of reduced global economic activity and volatility, the overall
disruption of global healthcare systems and the other risks and uncertainties
associated with the pandemic could have a material adverse effect on our
business, financial condition, results of operations and growth prospectsWe
continue to monitor the pandemic as we evolve our business continuity plans
and
response strategy.

Clinical Development

With respect to clinical development, we have taken measures to maintain patient
safety and trial continuity and to preserve study integrity. While COVID-19
resurgences around the world impact different geographies and clinical sites to
varying degrees and at different times, the PSVT clinical program average
overall enrollment rate has stabilized, compared to 2020. Enrollment rates are
still slower than expected as a result of COVID-19. During 2021 and 2020, the
COVID-19 pandemic delayed the initiation of many proposed RAPID clinical trial
sites as some health care institutions prioritized their resources for pandemic
related activities with some precluding the initiation of new clinical trials or
conduct of existing trials. It also delayed the initiation of clinical trial
sites and the enrollment of patients into our ReVeRA trial of etripamil for
AFib-RVR performed in the acute care hospital setting in Canada, due to closures
of clinical sites as well as to the increased stress that COVID-19 places on
Emergency Departments logistics and staff. Given the uncertainty and differing
and evolving restrictions applicable to clinical trial sites and participants,
additional disruptions and delays are possible. We will continue to monitor the
impact of COVID-19 on our planned clinical sites and patient enrollment
activities. We could also see an impact on the ability to supply study drug,
report trial results, or interact with regulators, ethics committees or other
important agencies due to limitations in regulatory authority employee resources
or otherwise. In addition, we rely on contract research organizations or other
third parties to assist us with clinical trials, and we cannot guarantee that
they will continue to perform their contractual duties in a timely and
satisfactory manner as a result of the COVID-19 pandemic. If the COVID-19
pandemic continues and persists for an extended period of time, we could
experience further significant disruptions to our clinical development
timelines, which would adversely affect our business, financial condition,
results of operations and growth prospects.

Other financial and corporate impacts

While we expect the COVID-19 pandemic to continue to affect our business
operations and financial results, the extent of the impact on our clinical
development and regulatory efforts, our corporate development objectives and the
value of and market for our common shares, will depend on future developments
that are highly uncertain and cannot be predicted with

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confidence at this time, such as the ultimate duration of the pandemic, travel
restrictions, business closure requirements in the United States, Canada, Europe
and other countries, the timing and unpredictability of achieving widespread
vaccination rates, the effectiveness of any vaccines against new variants, and
the timing of the return of the global economy to pre-pandemic levels. In
addition, we may be impacted by general economic, political, and market
conditions, including deteriorating market conditions due to investor concerns
regarding inflation and Russian hostilities in Ukraine and overall fluctuations
in the financial markets in the United States and abroad.

Components of operating results

Revenue

We have not generated any revenues from product sales to date and we do not
expect to generate revenues from product sales in the near future. Our revenues
for the six months ended June 30, 2021 are from the license and collaboration
agreement with Ji Xing and are comprised of upfront payments.

Research and development

Research and development expenses consist primarily of salaries and fees paid to
external service providers and also include personnel costs, including
share-based compensation expense and other related compensation expenses. We
expense research and development costs in the periods in which they are
incurred. Costs for certain development activities are recognized based on an
evaluation of the progress to completion of specific tasks using information and
data provided to us by our vendors, collaborators and third-party service
providers.

To date, substantially all of our research and development expenses have been
related to the preclinical and clinical development of etripamil. As we advance
etripamil or other product candidates for other indications, we expect to
allocate our direct external research and development costs across each of the
indications or product candidates. Further, while we expect our research and
development costs for the development of etripamil in atrial fibrillation with
rapid ventricular rate to increase for the ReVeRA clinical trial as we continue
to expand this trial, we expect our research and development expenses related to
the development of etripamil for PSVT to remain a very large majority of our
total research and development expenses.

We expect our research and development expenses to increase as we continue the
development of etripamil and prepare to pursue regulatory approval. The process
of conducting the necessary clinical research to obtain regulatory approval is
costly and time-consuming and is subject to uncertainties and delays, including
as a result of the ongoing COVID-19 pandemic. COVID-19 has adversely affected
enrollment rates. As a result of the uncertainties discussed above, we are
unable to determine the duration and completion costs of our research and
development projects or when and to what extent we will generate revenue from
the commercialization and sale of our product candidates, if at all.

We recognize the benefit of Canadian research and development tax credits as a
reduction of research and development costs for fully refundable investment
tax
credits.

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General and Administrative

General and administrative expenses include personnel and related compensation
costs, expenses for outside professional services, lease expense, insurance
expense and other general administrative expenses. Personnel costs consist of
salaries, bonuses, benefits, related payroll taxes and share-based compensation.
Outside professional services consist of legal, accounting and audit services
and other consulting fees.

We expect to continue to incur expenses as a public company, including expenses
related to compliance with the rules and regulations of the Securities and
Exchange Commission, or SEC, and those of any national securities exchange on
which our securities are traded, additional insurance expenses, investor
relations activities, and other administrative and professional services.

Commercial

Commercial expenses consist primarily of personnel and related compensation
costs, market and health economic research, and market development activities
for PSVT and, to a lesser extent, AFib-RVR. The focus of these expenses is
three-fold: first, we want to leverage rigorous primary and secondary research
to fully understand our target disease states from the perspective of the
patient, healthcare provider, and payer; second, we want to understand and
document the burden of disease posed by PSVT and AFib-RVR from an epidemiology,
healthcare resource use, and cost perspective; and third, we want to engage our
target patient, physician, and payer stakeholders with evidence-based and
compliant educational materials that serve to increase the awareness and
understanding of the impact of PSVT and AFib-RVR on patients and the overall
healthcare system.

Starting approximately six months to one year before we file our new drug
application, or NDA with the FDA, we anticipate our commercial expenses will
increase substantially as we invest in the infrastructure, personnel, and
operational expenses required to launch our first product in the United States,
if approved.

Interest Income

Interest income consists primarily of interest income from our cash equivalents and short-term investments.

Results of Operations

Comparison of three and six month periods ended June 30, 2022 and 2021

The following table summarizes our operating results and their variations:

                                                          Three months ended June 30,
(in thousands)                                     2022         2021      $ Change     % Change

Revenue                                         $        -    $ 15,000   $ (15,000)       100.0%

Operating expenses
Research and development, net of tax credits        10,657       9,427     
  1,230        13.1%
General and administrative                           3,918       3,018          900        29.8%
Commercial                                           2,231       1,843          388        21.1%
Total operating expenses                            16,806      14,288        2,518        17.6%
Earnings (loss) from operations                   (16,806)         712    
(17,518)    (2460.4)%
Interest income, net                                   158          58          100       172.4%
Net earnings (loss)                             $ (16,648)    $    770   $ (17,418)    (2262.1)%


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                                                           Six months ended June 30,
(in thousands)                                     2022          2021       $ Change     % Change

Revenue                                         $        -    $   15,000   $ (15,000)      100.0%

Operating expenses
Research and development, net of tax credits        19,425        18,022        1,403        7.8%
General and administrative                           7,561         5,651   
    1,910       33.8%
Commercial                                           3,867         3,209          658       20.5%
Total operating expenses                            30,853        26,882        3,971       14.8%
Loss from operations                              (30,853)      (11,882)     (18,971)      159.7%
Interest income, net                                   198           138           60       43.5%
Net loss                                        $ (30,655)    $ (11,744)   $ (18,911)      161.0%


Revenue

We have not generated any revenue for the three months and six months ended June 30, 2022
compared to the income of $15 million initial payments under the license agreement during the three months and six months ended June 30, 2021.

Research and development costs

The following table presents our research and development expenses by type of activity for the three and six months ended June 30, 2022 and 2021, respectively.

                                       Three months ended June 30,                      Six months ended June 30,
(in thousands)                   2022       2021      $ Change     % Change      2022        2021      $ Change     % Change
Clinical                       $  9,118    $ 7,677   $    1,441       18.8%    $ 15,818    $ 14,466   $    1,352        9.4%
Drug manufacturing and
formulation                       1,123      1,237        (114)      (9.2)%       2,175       2,653        (478)     (18.0)%
Regulatory and other costs          543        600         (57)      (9.5)%       1,615       1,081          534       49.4%
Less: R&D tax credits             (127)       (87)         (40)       46.0%       (183)       (178)          (5)        2.8%
Total R&D expenses             $ 10,657    $ 9,427   $    1,230       13.1%    $ 19,425    $ 18,022   $    1,403        7.8%

Research and development expenses increased by $1.2 million, or 13.1%, for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. The increase in clinical personnel related costs, clinical consulting fees
and CRO costs due to advancing RAPID Phase 3 efficacy and safety trials in
etripamil for the treatment of PSVT. These increases were offset by lower drug
formulation and manufacturing costs.

Research and development expenses increased by $1.4 million, or 7.8% for the six
months ended June 30, 2022 compared to the six months ended June 30, 2021. The
increase in clinical personnel related costs, clinical consulting fees and CRO
costs due to advancing RAPID Phase 3 efficacy and safety trials in etripamil for
the treatment of PSVT. These increases were offset by lower drug formulation and
manufacturing costs. Regulatory costs increased due to personal related costs.

We recognize the benefit of Canadian research and development tax credits as a
reduction of research and development costs for fully refundable investment
tax
credits.

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General and Administrative
General and administrative expenses increased by $0.9 million, or 29.8% for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. The primary contributor was an increase of $0.8 million in
personnel-related costs and consulting fees for general and administrative
expenses.

General and administrative expenses increased by $1.9 million, or 33.8% for the
six months ended June 30, 2022 compared to the six months ended June 30, 2021.
The primary contributor was an increase of $1.7 million in personnel-related
costs and consulting fees for general and administrative expenses.

Commercial

For the three months ended June 30, 2022commercial expenses increased by $0.4 millionor 21.1%, compared to the three months ended June 30, 2021. The increase is due to consulting and marketing analysis.

Commercial expenses increased by $0.7 millionor 20.5%, for the six months ended June 30, 2022compared to the same period in 2021. The increase is due to personnel costs.

Starting approximately six months to one year before we file our new drug
application, or NDA with the FDA, we anticipate our commercial expenses will
increase substantially as we invest in the infrastructure, personnel and
operational expenses required to launch our first product in the United States,
if approved.

Interest Income, net

Interest income, net, was $0.2 million and $0.1 million for the three months
ended June 30, 2022 and 2021, respectively. Interest income, net of bank
charges, was $0.2 million and $0.1 million for the six-month periods ended June
30, 2021 and 2020, respectively. The increase in interest income was due to
higher interest rates earned on investments in 2022 when compared to 2021.

Cash and capital resources

Sources of liquidity

We have incurred operating losses and experienced negative operating cash flows
since our inception, and we anticipate continuing to incur losses for at least
the next several years. As of June 30, 2022, we had cash, cash equivalents and
short-term investments of $86.2 million and an accumulated deficit of $237.0
million.

We have evaluated whether material uncertainties exist relating to clinical
trials, the COVID-19 pandemic and the impact on market conditions. The COVID-19
pandemic has had an impact on our business, operations and clinical development
timelines. Government orders and restrictions in order to control the spread of
the disease have impacted patient recruitment, enrollment and follow-up visits
at clinical sites. At the date of the publication of our quarterly report on
form 10-Q, it is not possible to reliably estimate the length and severity of
these developments. We expect that our current operating plan, existing cash and
cash equivalents and access to financing sources to be sufficient to fund our
operations and determined that there are no events or conditions that may cast
substantial doubt on our ability to continue as a going concern for at least the
next 12 months from the date of this filing. Based on our cash and cash
equivalents as of June 30, 2022, we expect to be able to support our ongoing
operations into second-half of 2023.

Financing needs

We use our cash primarily to fund research and development expenditures. We
expect our total research and development expenses to increase as we continue
the development of etripamil and prepare to pursue regulatory approval. We
expect to incur an increase in general and administrative expenses, and a
continued increase in expenses related to commercial activities in 2022 as we
focus our efforts on the clinical pathway and potential commercialization of
etripamil. We expect to incur increasing operating losses for the foreseeable
future as we continue the clinical development of our product

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candidate. At this time, due to the inherently unpredictable nature of clinical
development, we cannot reasonably estimate the costs we will incur and the
timelines that will be required to complete development, obtain marketing
approval, and commercialize etripamil or any future product candidates, if at
all. For the same reasons, we are also unable to predict when, if ever, we will
generate revenue from product sales or whether, or when, if ever, we may achieve
profitability. Clinical and preclinical development timelines, the probability
of success, and development costs can differ materially from expectations.

In addition, we have exclusive development and commercialization rights for
etripamil for all indications that we may pursue and as such have the potential
to license development and or commercialization rights for etripamil to a
potential partner. We plan to establish commercialization and marketing
capabilities using a direct sales force to commercialize etripamil in the United
States. Outside of the United States, we are considering commercialization
strategies that may include collaborations with other companies.

For other new product candidates, our efforts are focused on licensing
development and/or commercialization rights from potential partners. In the case
of either in-licensing or out-licensing, we cannot forecast when such
arrangements will be secured, if at all, and to what degree such arrangements
would affect our development and commercialization plans and capital
requirements.

The timing and amount of our operating expenditures will depend largely on:

the timing, progress and results of our ongoing and planned clinical trials and

? other etripamil development activities in PSVT, AFib-RVR and other

cardiovascular indications;

the scope, progress, results and costs of preclinical development, laboratory

? etripamil clinical tests and trials for additional indications or

future product candidates we may pursue;

? our ability to enter into collaborations on favorable terms, if at all;

? the ability of third-party vendors and service providers to accurately predict

spending and meeting expectations;

? the costs, timing and results of the regulatory review of etripamil and any

product candidates;

costs and timing of future marketing activities, including products

? manufacturing, marketing, sales and distribution, for etripamil and any future

product candidates for which we receive marketing approval;

? revenue, if any, from commercial sales of etripamil and any future

product candidates for which we receive marketing approval;

the costs and delays of preparing, filing and prosecuting patent applications,

? maintain and enforce our intellectual property rights and defend all

intellectual property claims; and

? the extent to which we acquire or license other product candidates and

technologies.


Until such time, if ever, as we can generate substantial revenue from product
sales, we expect to fund our operations and capital funding needs through equity
and/or debt financing. We may also consider entering into collaboration
arrangements, similar to the collaboration agreement entered into with Ji Xing,
or selectively partnering for clinical development and commercialization. The
sale of additional equity would result in additional dilution to our
shareholders. The incurrence of debt financing would result in debt service
obligations and the instruments governing such debt could provide for operating
and financing covenants that restrict our operations or our ability to incur
additional indebtedness or pay dividends, among other items. In addition, the
COVID-19 pandemic, the Russian invasion of Ukraine and the implementation of a
tightening monetary policy has contributed to periods of reduced global economic
activity and

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volatility. If these and other events contributes to future periods of
disruption of the global financial markets, we could experience an inability to
access additional capital, which could in the future negatively affect our
operations. If we are not able to secure adequate additional funding, we may be
forced to make reductions in spending, extend payment terms with suppliers,
liquidate assets where possible, and/or suspend or curtail planned programs. Any
of these actions could materially and adversely affect our business, financial
condition and results of operations.

Cash flow discussion

The following table summarizes our cash flows for the periods indicated:

                                                           Six months ended June 30,
(in thousands)                                      2022          2021      $ Change    % Change
Net cash (used in) provided by:
Operating activities                             $ (28,034)    $ (11,455)   (16,579)      144.7%
Investing activities                               (23,059)        32,000   (55,059)    (172.1)%
Financing activities                                    189         4,939    (4,750)     (96.2)%
Net decrease in cash and cash equivalents
during the period                                $ (50,904)    $   25,484   (76,388)


Operating Activities

Net cash used in operating activities during the six months ended June 30, 2022
has been $28.0 millionwhich consisted of a net loss of $30.7 million and a net change of $2.0 million in our operating assets and liabilities offset by non-cash charges of $4.6 million related to stock-based compensation and amortization expense.

Net cash used in operating activities during the six months ended June 30, 2021
was $11.5 million, which consisted of a net loss of $11.7 million and a net
change of $3.0 million in our operating assets and liabilities offset by
non-cash charges of $3.3 million related to share-based compensation expense for
grants to employees, board directors and consultants. The change in our net
operating assets and liabilities was mainly due to a decrease of $0.8 million
for accounts payable and accrued liabilities and an increase of $2.0 million for
prepaid expenses.

Investing Activities

In the six months ended June 30, 2022 we acquired $23.0 million short-term investments as we divested ourselves of $32.0 million at the same time in 2021.

Fundraising activities

In the six months ended June 30, 2022, our financing activities provided a de
minimis amount of proceeds from the exercise of share options. In the six months
ended June 30, 2021, our financing activities provided $4.9 million, consisting
of net proceeds from the Private Placement and a de minimis amount of proceeds
from the exercise of share options.

We have not entered into any off-balance sheet arrangements.

Contractual obligations

During the six months ended June 30, 2022, there were no material changes to our
contractual obligations and commitments described under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in our Annual
Report on Form 10-K, filed with the SEC on March 24, 2022.

Critical accounting estimates

Our MD&A and discussion of our financial condition and results of operations are based on our unaudited interim consolidated financial statements as of June 30, 2022which have been prepared in accordance with
United States

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generally accepted accounting principles, or U.S. GAAP and on a basis consistent
with those accounting principles followed by us. The preparation of these
consolidated financial statements requires our management to make judgments and
estimates that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported revenue generated and expenses incurred
during the reporting periods. Our estimates are based on our historical
experience and on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Significant estimates and judgments include, but are not limited
to:

Estimates of percent work complete of total work over lifetime

? the individual test in accordance with the agreements established with the CROs,

CMOs and clinical trial sites which in turn impact research and development

expenses.

Estimated date of grant of stock options granted at fair value to employees,

? consultants and direct, and the resulting stock-based compensation expense,

using the Black-Scholes option pricing model.


Accordingly, actual results may differ from these judgments and estimates under
different assumptions or conditions and any such differences may be material. We
believe that the accounting policies discussed below are critical to
understanding our historical and future performance, as these policies relate to
the more significant areas involving management's judgments and estimates.

a) Research and development costs – Adjustment accounts

Research and development costs are charged to revenue in the expenditure period. Our research and development expenses consist primarily of salaries and fees paid to CROs and CMOs.

Clinical trial expenses include direct costs associated with CROs, direct CMO
costs for the formulation and packaging of clinical trial material, as well as
investigator and patient-related costs at sites at which our trials are being
conducted. Direct costs associated with our CROs and CMOs are generally payable
on a time-and-materials basis, or when milestones are achieved. The invoicing
from clinical trial sites can lag several months. We record expenses for our
clinical trial activities performed by third parties based upon estimates of
the percentage of work completed of the total work over the life of the
individual trial in accordance with agreements established with CROs and
clinical trial sites. We determine the estimates through discussions with
internal clinical personnel, CROs and CMOs as to the progress or stage of
completion of trials or services and the agreed-upon fee to be paid for such
services based on facts and circumstances known to us as of each consolidated
balance sheet date. The actual costs and timing of clinical trials are highly
uncertain, subject to risks and may change depending upon a number of factors,
including our clinical development plan. If the actual timing of the performance
of services of the level of effort varies from the estimate, we will adjust the
accrual accordingly. Adjustments to prior period estimates have not been
material. We recognize the benefit of Canadian research and development tax
credits as a reduction of research and development costs for fully refundable
investment tax credits and as a reduction of income taxes for investment tax
credits that can only be claimed against income taxes payable when there is
reasonable assurance that the claim will be recovered.

b) Stock-based compensation

We recognize compensation costs related to share options granted to employees,
consultants and directors based on the estimated fair value of the awards on the
date of grant. We estimate the grant date fair value, and the resulting
share-based compensation expense, using the Black-Scholes option-pricing model.
This Black-Scholes option pricing model uses various inputs to measure fair
value, including estimated fair value of our underlying common shares at the
grant date, expected term, estimated volatility, risk-free interest rate and
expected dividend yields of our common shares. The estimated volatility creates
a critical estimate because we have not been a public company long enough to
demonstrate our own historical volatility. The grant date fair value of the
share-based awards is recognized on a straight-line basis over the requisite
service periods, which are generally the vesting period of the respective
awards. Forfeitures are accounted for as they occur.

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Recent accounting pronouncements

Refer to Note 2, "Summary of Significant Accounting Policies", for a discussion
of recent accounting pronouncements and to the notes to our audited consolidated
financial statements as of December 31, 2021 appearing in our Annual Report on
Form 10-K, filed with the SEC on March 24, 2022.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth
company" such as us to take advantage of an extended transition period to comply
with new or revised accounting standards applicable to public companies until
those standards would otherwise apply to private companies. We have irrevocably
elected to "opt out" of this provision and, as a result, we comply with new or
revised accounting standards when they are required to be adopted by public
companies that are not emerging growth companies.

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