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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 96 added, 122 removed, 215 unchanged (50% of the section changed)

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and its subsidiary.

We are a neuroscience-focused biopharmaceutical company committed to discovering, developing, and commercializing innovative therapeutics to improve the lives of people living with neurological and psychiatric disorders.

We are advancing a novel product pipeline to address areas of high unmet medical need, including epilepsy and depression.

XEN1101 is a novel, potent Kv7 potassium channel opener being developed for the treatment of epilepsy, major depressive disorder, or MDD, and potentially other neurological disorders.

XEN1101 for Epilepsy (Focal Onset Seizures)

Our XEN1101 Phase 3 epilepsy program includes two identical Phase 3 clinical trials, called X-TOLE2 and X-TOLE3, which are designed closely after the Phase 2b X-TOLE clinical trial.

These multicenter, randomized, double-blind, placebo-controlled trials are evaluating the clinical efficacy, safety, and tolerability of 15 mg or 25 mg of XEN1101 administered once-daily with food as adjunctive treatment in approximately 360 patients per study with focal onset seizures, or FOS.

The primary efficacy endpoint is the median percent change, or MPC, in monthly seizure frequency from baseline through the double-blind period, or DBP, of XEN1101 compared to placebo.

We anticipate patient enrollment in X-TOLE2 will be completed in late 2024 to early 2025.

XEN1101 for Epilepsy (Primary Generalized Tonic-Clonic Seizures)

Our Phase 3 X-ACKT clinical trial is intended to support potential regulatory submissions in an additional epilepsy indication of primary generalized tonic-clonic seizures, or PGTCS.

This multicenter, randomized, double-blind, placebo-controlled study is evaluating the clinical efficacy, safety, and tolerability of 25 mg of XEN1101 administered once-daily with food as adjunctive treatment in approximately 160 patients with PGTCS.

The primary efficacy endpoint is the MPC in monthly PGTCS frequency from baseline through the DBP of XEN1101 compared to placebo.

XEN1101 for Epilepsy (Open-Label Extension)

Upon completion of the DBP in X-TOLE2, X-TOLE3, or X-ACKT, eligible patients may enter an open-label extension, or OLE, study for up to three years.

In addition, the ongoing X-TOLE Phase 2b OLE has been extended from five to seven years and continues to generate important long-term data for XEN1101.

XEN1101 for Major Depressive Disorder

In November 2023, we reported promising topline results from the Phase 2 proof-of-concept X-NOVA clinical trial, which evaluated the clinical efficacy, safety, and tolerability of 10 mg and 20 mg of XEN1101 administered once-daily with food in 168 patients with moderate to severe MDD.

The primary endpoint of the study was a change in the Montgomery-Åsberg Depression Rating Scale, or MADRS, at week 6.

A clear dose response and a clinically meaningful, but not statistically significant, 3.04 difference between placebo and the XEN1101 20 mg group (p=0.135) was observed.

Statistical significance was achieved on other secondary efficacy endpoints, including the Hamilton Depression Rating Scale, or HAM-D17;

the Snaith-Hamilton Pleasure Scale, or SHAPS, measuring anhedonia;

and MADRS at week 1, demonstrating early onset of efficacy.

XEN1101 was generally well tolerated with similar rates of overall adverse events, as well as similar rates of discontinuation, reported across all treatment arms.

No serious adverse events were reported in the two XEN1101 treatment groups, XEN1101 was not associated with notable weight gain and participants did not report any notable sexual dysfunction.

We are actively planning for late-stage clinical development of XEN1101 in MDD and expect to initiate the Phase 3 clinical program in 2024.

We are also evaluating other potential indications for the future development of XEN1101.

In addition, we are collaborating with the Icahn School of Medicine at Mount Sinai to support an ongoing investigator-sponsored Phase 2 proof-of-concept, randomized, parallel-arm, placebo-controlled multi-site study of XEN1101 for the treatment of MDD in approximately 60 subjects.

See “Recent Developments” for additional information about topline X-NOVA results.

Other Pipeline Opportunities

We continue to leverage our extensive ion channel expertise and drug discovery capabilities to identify validated drug targets and develop new product candidates.

The near-term focus is on internal development candidates targeting Kv7, Nav1.1 and Nav1.7.

We are a neuroscience-focused biopharmaceutical company dedicated to discovering, developing, and delivering life-changing therapeutics.

We are advancing an ion channel product portfolio to address areas of high unmet medical need, including epilepsy and depression.

Azetukalner Clinical Development

Azetukalner, a novel, highly potent, selective Kv7 potassium channel opener, represents the most advanced, clinically validated potassium channel modulator in late-stage clinical development for the treatment of multiple indications that include epilepsy, including focal onset seizures, or FOS, and primary generalized tonic-clonic seizures, or PGTCS, as well as neuropsychiatric disorders including major depressive disorder, or MDD and bipolar depression, or BPD .

Epilepsy Programs

• Phase 3 X-TOLE2/3 azetukalner clinical studies in FOS continue to advance, with the first topline data readout anticipated in the second half of 2025.

• Phase 3 X-ACKT clinical study continues to enroll patients and is intended to support potential regulatory submissions in an additional epilepsy indication of PGTCS.

• Building upon more than 700+ patient-years of data to date from the ongoing X-TOLE open-label extension, or OLE, study, we continue to generate long-term scientific evidence supporting azetukalner’s compelling efficacy and safety profile, with approximately one in three patients on drug for at least 36 months achieving seizure freedom for a period of one year or longer.

Neuropsychiatric Program

• X-NOVA2, the first of three planned Phase 3 clinical trials evaluating azetukalner in patients with MDD is currently enrolling patients, and X-NOVA3 is expected to initiate mid-year.

• We recently announced plans for a Phase 3 BPD program with initiation of the first of two azetukalner clinical studies in bipolar I and bipolar II depression expected by mid-year.

Initiation of this program is based on a strong scientific rationale – supported by promising clinical data with azetukalner and the Kv7 mechanism in MDD and preclinical research examining the genetic links between BPD and Kv7 and evidence of Kv7 downregulation in BPD – as well as a large unmet medical need.

• Patient enrollment in the investigator-sponsored Phase 2 proof-of-concept study of azetukalner in MDD led by Icahn School of Medicine at Mount Sinai is complete, and topline results are anticipated in the first half of 2025.

Early-Stage Pipeline:

Next Generation Ion Channel Modulators

We continue to expand our portfolio by leveraging our extensive expertise to discover and develop potassium and sodium channel therapeutics, with the goal of filing multiple INDs, or equivalent, in 2025.

• IND-enabling work is underway with multiple Kv7 development candidates.

Kv7 may have utility in a broad range of therapeutic indications including seizures, pain, and neuropsychiatric disorders, such as MDD and BPD.

• IND-enabling work is underway with a lead Nav1.7 development candidate.

Nav1.7 is an important pain-related target, based on strong human genetic validation, that may represent a new class of medicines without the limitations of opioids.

• We expect a lead candidate within our Nav1.1 program will enter IND-enabling studies in 2025.

Pre-clinical data suggests that targeting Nav1.1 could potentially address the underlying cause and symptoms of Dravet Syndrome

Partnered Program

We have an ongoing collaboration with Neurocrine Biosciences to develop treatments for epilepsy.

Neurocrine Biosciences has an exclusive license to XEN901, now known as NBI-921352, a selective Nav1.6 sodium channel inhibitor.

In November 2023, Neurocrine Biosciences reported that the Phase 2 clinical trial evaluating NBI-921352 in adult patients with FOS failed to demonstrate meaningful reduction in seizure frequency.

Neurocrine Biosciences guided that no further development with NBI-921352 in FOS is planned at this time.

A Phase 2 clinical trial is currently underway evaluating NBI-921352 in patients aged between 2 and 21 years with SCN8A developmental and epileptic encephalopathy.

We have funded our operations primarily through the sale of equity securities, including receiving net proceeds of approximately $324.0 million from the sale of common shares and pre-funded warrants in a public offering in November 2023, funding received from our licensees and collaborators, and debt financing.

We did not recognize any revenue in the year ended December 31, 2023, as compared to revenue from collaboration agreements of $9.4 million and $18.4 million for the years ended December 31, 2022 and 2021, respectively.

• As part of our ongoing collaboration with Neurocrine Biosciences to develop treatments for epilepsy, NBI-921355, a Nav1.2 and Nav1.6 sodium channel inhibitor in development for the potential treatment for certain types of epilepsy, has progressed into a Phase 1 clinical study in healthy adult participants, triggering an anticipated $7.5 million milestone payment to Xenon.

We have funded our operations primarily through the sale of equity securities, funding received from our licensees and collaborators, and debt financing.

We did not recognize any revenue in the years ended December 31, 2024 and 2023, as compared to revenue from collaboration agreements of $9.4 million for the year ended December 31, 2022.

To date, we have not had any products approved for sale and have not generated any revenue from product sales.

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We anticipate that our operating expenses will increase substantially, particularly as we:

• continue our research and pre-clinical and clinical development of our product candidates;

• prepare for the potential commercial launch of azetukalner;

• invest significantly to further develop azetukalner for our current and future indications;

• advance additional product candidates into pre-clinical and clinical development;

• seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials;

• require the manufacture of larger quantities of our product candidates for clinical development and potential commercialization;

• attract, hire and retain skilled personnel;

• hire additional commercial, clinical, scientific, management and administrative personnel;

• acquire or in-license other assets and technologies;

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Year Ended December 31,

Neurocrine Biosciences:

Recognition of the transaction price

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Milestone payments

Pacira BioSciences:

Milestone payments

Total revenue

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The overall transaction price of the arrangement was measured and allocated to certain performance obligations and revenue was recognized as those performance obligations were completed.

In September 2021, based on the regulatory approval of a clinical trial application in Europe for NBI-921352 for focal-onset seizures in adults, we received an aggregate milestone payment of $10.0 million in the form of $4.5 million cash and a $5.5 million equity investment in our common shares.

Further, in January 2022, based on the U.S.

In January 2022, based on the U.S.

Food and Drug Administration’s (“FDA”) approval to expand the SCN8A-DEE study population to include subjects aged between 2 and 11 years, we received an aggregate milestone payment of $15.0 million in the form of $6.75 million cash and $8.25 million equity investment in our common shares.

In each instance, the equity investment was measured at fair value on the date of issuance and the resulting premium with the cash payment, was recognized as revenue.

The equity investment was measured at fair value on the date of issuance and the resulting premium with the cash payment, was recognized as revenue.

Research and development services were recognized as revenue at fair market value as the services were rendered.

The research collaboration was completed in June 2022.

In the year ended December 31, 2021, we recognized revenue of $3.0 million in connection with our agreement with Pacira BioSciences, Inc., or the Pacira Agreement, for the global rights to develop and commercialize PCRX301 which included a $1.0 million milestone for the clearance of an investigational new drug application by the FDA and a $2.0 million milestone for the initiation of a Phase 1b clinical trial.

No revenue was recognized in the years ended December 31, 2023 and December 31, 2022 in connection with the Pacira Agreement.

In November 2022, Pacira BioSciences made the strategic decision to no longer pursue the clinical development of PCRX-301.

Operating Expenses

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Research and Development Expenses

Research and development expenses represent costs incurred to conduct development of our proprietary product candidates and our drug discovery efforts, including any acquired or in-licensed product candidates or technology, and costs to support our partnered product candidates.

Research and development expenses consist of costs incurred in performing research and development activities, including:

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• third-party expenses incurred in connection with the pre-clinical and clinical development of our product candidates, including under agreements with CROs;

• third-party expenses relating to formulation, process development and manufacture of drug substance and drug product for use in our pre-clinical testing and clinical trials;

• third-party expenses relating to formulation, process development and manufacture of drug substance and drug product for use in our pre-clinical testing, clinical trials and potential commercial supply;

• third-party acquisition, license and collaboration fees;

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Trading securities are recorded at fair value.

Unrealized fair value gain (loss) on trading securities is related to changes in market pricing on the investments during the period.

We anticipate that unrealized fair value gain (loss) on trading securities will continue to fluctuate depending on our investment balance and market yields.

Unrealized fair value gain (loss) on trading securities is related to changes in market pricing on the investments classified as trading securities during the period.

Foreign exchange gain (loss).

Net foreign exchange gains and losses consisted of gains and losses from the impact of foreign exchange fluctuations on our monetary assets and liabilities that are denominated in currencies other than the U.S.

Net foreign exchange gain (loss) consists of gains and losses from the impact of foreign exchange fluctuations on our monetary assets and liabilities that are denominated in currencies other than the U.S.

dollar (principally the Canadian dollar).

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Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the U.S., or U.S.

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the revenue and expenses incurred during the reported periods.

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Actual results may differ from these estimates under different assumptions or conditions.

The significant accounting policies that we believe to be most critical in fully understanding and evaluating our historical and future performance are revenue recognition, research and development costs and stock-based compensation.

For additional information, see “Note 3” of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The items in our financial statements requiring significant estimates and judgments are as follows:

Revenue recognition:

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The estimated standalone selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold on a standalone basis and is determined by reference to market rates for the good or service when sold to others or by using an adjusted market assessment approach if selling price on a standalone basis is not available.

We generally recognize revenue from non-refundable upfront payments over the estimated term of the performance obligation or period in which the underlying benefit is transferred to the customer.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred to our customer for the related goods or services.

We generally recognize revenue from non-refundable upfront payments over the estimated term of the performance obligation or period in which the underlying benefit is transferred to our customer.

If non-refundable license fees have value to the customer on a standalone basis, separate from the undelivered performance obligations, they are recognized upon delivery.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Consideration in exchange for research and development services performed by us on behalf of the licensee is recognized upon performance of such activities at rates consistent with prevailing market rates.

Consideration associated with at-risk substantive performance milestones, including sales-based milestones, is recognized as revenue when we determine it is probable that a significant reversal of the cumulative revenue recognized will not occur.

At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such milestones, and if necessary, adjust our estimate of the overall transaction price.

Consideration associated with at-risk substantive performance milestones, including sales-based milestones, is recognized as revenue using the most likely amount method when it is probable that a significant reversal of the cumulative revenue recognized will not occur.

At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such milestones, and if necessary, adjust the estimate of the overall transaction price.

Sales-based royalties received in connection with licenses of intellectual property are subject to a specific exception in the revenue standards, whereby the consideration is not included in the transaction price and recognized in revenue until the customer’s subsequent sales or usages occur.

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Stock-based compensation is a critical accounting estimate due to the magnitude of and the many assumptions that are required to calculate stock-based compensation expense.

We grant stock options to employees, consultants, directors and officers pursuant to our stock option plans.

We grant stock options to employees, consultants, directors and officers pursuant to our equity incentive plans.

Compensation expense is recorded using the fair value method.

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We amortize the fair value of stock options using the straight-line method over the vesting period of the options.

We also grant performance share unit awards (“PSUs”) to certain employees and officers pursuant to our equity incentive plans.

The grant date fair value of PSUs is determined based on the closing market price of our common shares.

Compensation expense is recognized if the performance condition is considered probable of achievement using our best estimates and is amortized on a straight-line basis over the requisite service period of each separately vesting tranche of the award.

Forfeitures are accounted for in the period they occur.

Changes in any of these assumptions may materially affect the fair value of awards granted and the amount of stock-based compensation expense recognized.

Results of Operations

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Loss before income taxes

Revenue decreased by $9.4 million in the year ended December 31, 2023 as compared to the same period in 2022.

The decrease was primarily due to the Neurocrine Collaboration;

all performance obligations associated with the upfront payment were completed in March 2022, resulting in a decrease in revenue of $0.4 million and the research component of our collaboration was completed in June 2022, resulting in a decrease in research and development services revenue of $1.9 million.

In addition, we recognized a $7.1 million milestone under the Neurocrine Collaboration in 2022, whereas no milestones were recognized under this collaboration in 2023.

Revenue decreased by $9.0 million in the year ended December 31, 2022 as compared to the same period in 2021.

The decrease was primarily due to the Neurocrine Collaboration;

all performance obligations associated with the upfront payment were completed in March 2022, resulting in a decrease in revenue of $3.3 million and the research component of our collaboration was completed in June 2022, resulting in a decrease in research and development services revenue of $4.5 million.

In addition, we recognized a $3.0 million milestone under our Pacira Agreement in 2021, whereas no milestones were recognized under this agreement in 2022.

We did not recognize any revenue in the years ended December 31, 2024 and 2023, as compared to revenue of $9.4 million for 2022.

Revenue recognized in 2022 was related to the Neurocrine Collaboration, including $0.4 million of the overall transaction price, $1.9 million in research and development services, and a $7.1 million milestone.

Research and Development Expenses

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Direct external costs:

Pre-clinical, discovery and other programs

Pre-clinical and discovery programs

Indirect costs:

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compensation)

Facilities and other unallocated research and

development expenses

Other unallocated expenses

Research and development expenses

Research and development expenses increased by $61.7 million in the year ended December 31, 2023 as compared to the same period in 2022.

The increase was primarily attributable to our XEN1101 program as well as personnel-related costs due to increased headcount to support late-stage development and stock-based compensation expense due to an increase in the number of options granted at a higher fair value, partially offset by a decrease in spend on XEN496.

The increase for XEN1101 is driven by ongoing site initiation and patient enrollment in our Phase 3 epilepsy clinical trials, increase in manufacturing activities to support current and future clinical trials and a potential NDA submission, as well as the completion of our X-NOVA Phase 2 MDD clinical trial.

The decrease in XEN496 was attributed to decreased external costs to support the EPIK clinical trial and open label extension as a result of our decision to no longer pursue the clinical development of XEN496.

Research and development expenses increased by $30.3 million in the year ended December 31, 2022 as compared to the same period in 2021.

The increase was primarily attributable to our XEN1101 program and personnel-related costs due to increased headcount to support late-stage development and stock-based compensation expense due to an increase in the number of options granted at a higher fair value.

The increase for XEN1101 includes expenses related to the initiation of our Phase 3 epilepsy clinical trials, ongoing costs to support the X-TOLE open label extension, and our X-NOVA Phase 2 MDD clinical trial.

Research and development expenses increased by $42.9 million for the year ended December 31, 2024 as compared to 2023.

Direct external costs related to azetukalner increased by $17.5 million primarily due to our ongoing Phase 3 epilepsy clinical trials and the initiation of our first Phase 3 MDD clinical trial, manufacturing activities to support current and future clinical trials as well as our potential NDA submission, partially offset by a decrease in costs for our Phase 2 MDD clinical trial which completed in late 2023.

The decrease in direct external costs related to XEN496 of $5.2 million is due to our decision in May 2023 to no longer pursue the clinical development of XEN496.

Pre-clinical and discovery program costs increased by $6.0 million due to the advancement of multiple potential drug candidates targeting Kv7, Nav1.7 and Nav1.1.

Personnel-related costs increased by $22.9 million driven by an increase in headcount to support late-stage development and an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value.

Research and development expenses increased by $61.7 million for the year ended December 31, 2023 as compared to 2022.

Direct external costs related to azetukalner increased by $51.9 million primarily due to ongoing site initiation and patient enrollment in our Phase 3 epilepsy clinical trials, increase in manufacturing activities to support current and future clinical trials and a potential NDA submission, as well as the completion of our Phase 2 MDD clinical trial.

The decrease in direct external costs related to XEN496 of $9.6 million is due to our decision in May 2023 to no longer pursue the clinical development of XEN496.

Personnel-related costs increased by $14.3 million driven by an increase in headcount to support late-stage development and an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value.

General and Administrative Expenses

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General and administrative expenses

General and administrative expenses increased by $13.7 million in the year ended December 31, 2023 as compared to the same period in 2022.

The increase was primarily attributable to personnel-related costs due to increased headcount to support our expanding research and development activities and stock-based compensation expense due to an increase in the number of options granted at a higher fair value as well as higher professional and consulting fees.

General and administrative expenses increased by $10.8 million in the year ended December 31, 2022 as compared to the same period in 2021.

General and administrative expenses increased by $22.4 million for the year ended December 31, 2024 as compared to 2023.

Personnel-related costs increased by $16.1 million primarily due to higher headcount to support our expanding research and development activities and future potential commercialization as well as an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value.

Professional and consulting fees increased by $5.4 million primarily associated with legal services in support of our ongoing business operations and pre-commercial activities.

General and administrative expenses increased by $13.7 million for the year ended December 31, 2023 as compared to 2022.

Personnel-related costs increased by $9.4 million primarily due to higher headcount to support our expanding research and development activities as well as an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value.

Professional and consulting fees increased by $3.6 million primarily associated with legal services in support of our ongoing business operations and market research activities.

The following table summarizes our other income for the years ended December 31, 2024, 2023 and 2022 together with changes in those items (in thousands):

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Foreign exchange gain (loss)

Other income increased by $27.5 million in the year ended December 31, 2023 as compared to the same period in 2022.

The increase was primarily attributable to an $18.9 million increase in interest income driven by a higher balance of marketable securities and an increase in market yields on investments.

In addition, there was a $6.5 million increase in the unrealized fair value gain on trading securities due to changes in market yields on trading securities, partially offset by a lower balance of trading securities.

There was also a $2.1 million change in the foreign exchange gain (loss) due to fluctuations in the value of the Canadian dollar and a lower balance of cash and cash equivalents denominated in Canadian dollars.

Other income increased by $3.8 million in the year ended December 31, 2022 as compared to the same period in 2021.

The increase was primarily attributable to an $8.2 million increase in interest income driven by a higher balance of marketable securities

and an increase in market yields on investments.

The increase was partially offset by a $2.2 million increase in foreign exchange loss due to a higher balance of cash and cash equivalents denominated in Canadian dollars and a decline in the value of the Canadian dollar, and a $2.2 million increase in the unrealized loss on the fair value of trading securities due to a higher balance of trading securities and increase in market yields on investments.

Other income increased by $9.5 million for the year ended December 31, 2024 as compared to 2023.

Interest income increased by $14.3 million driven by a higher average balance of marketable securities and higher average market yields on investments.

The unrealized fair value gain on trading securities decreased by $3.6 million due to the fact that we did not hold any marketable securities classified as trading in 2024.

Other income increased by $27.5 million for the year ended December 31, 2023 as compared to 2022.

Interest income increased by $18.9 million driven by a higher balance of marketable securities and an increase in market yields on investments.

The unrealized fair value gain on trading securities increased by $6.5 million due to changes in market yields on trading securities, partially offset by a lower balance of trading securities.

Liquidity and Capital Resources

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To date, we have financed our operations primarily through the sale of equity securities, funding received from collaboration and license agreements, and debt financing.

Since our initial public offering through December 31, 2023, we have raised aggregate net cash proceeds of more than $1.3 billion primarily from the issuance of equity securities, including net proceeds of approximately $324.0 million from the sale of common shares and pre-funded warrants in a public offering in November 2023.

Since our initial public offering through December 31, 2024, we have raised aggregate net cash proceeds of more than $1.4 billion primarily from the issuance of equity securities.

As of December 31, 2024, we had cash and cash equivalents and marketable securities of $754.4 million .

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Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of collaboration agreements and equity or debt financings.

We entered into an “at-the-market” equity offering sales agreement in August 2020, amended as of March 2022, with Jefferies LLC, or Jefferies, and Stifel, Nicolaus & Company, Incorporated, or Stifel, pursuant to which we may sell our common shares from time to time.

In January 2021, we sold an aggregate of 733,000 common shares for proceeds of $10.7 million, net of commissions and transaction expenses pursuant to a prospectus supplement filed with the SEC on August 6, 2020, or the August 2020 ATM.

We may sell common shares having gross proceeds of up to $250.0 million, from time to time, pursuant to a new prospectus supplement filed with the SEC on March 1, 2022, or the March 2022 ATM, replacing the August 2020 ATM.

As of December 31, 2023, an aggregate of 855,685 common shares have been sold for proceeds of $29.5 million, net of commissions and transaction expenses, under the March 2022 ATM.

We entered into an “at-the-market” equity offering sales agreement in August 2020, amended as of March 2022, with Jefferies LLC and Stifel, Nicolaus & Company, Incorporated, or the ATM Program, and a new prospectus supplement was filed with the SEC on August 9, 2024, pursuant to which we refreshed the ATM Program and may sell common shares having gross proceeds of up to $350.0 million, from time to time.

As of December 31, 2024, an aggregate of 310,000 common shares have been sold for proceeds of $12.1 million, net of commissions and transaction expenses.

Funding Requirements

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Our net losses may fluctuate significantly from quarter to quarter and year to year.

We expect to incur significant expenses and increasing operating losses for the foreseeable future as we continue our research and pre-clinical and clinical development of our product candidates;

expand the scope of our studies for our current and prospective product candidates;

initiate additional pre-clinical, clinical or other studies for our product candidates;

manufacture drug supply and drug product for clinical trials and commercialization;

We expect to incur significant expenses and increasing operating losses for the foreseeable future as we prepare for the potential commercial launch of azetukalner;

invest significantly to further develop azetukalner for our current and future indications;

advance additional product candidates into pre-clinical and clinical development;

seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical studies;

hire and retain additional personnel;

seek to identify, and validate additional product candidates;

manufacture larger quantities of our product candidates of clinical development and potential commercialization;

hire additional commercial, clinical, scientific, management and administrative personnel;

acquire or in-license other product candidates and technologies;

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Contractual Commitments

In April 2017, we acquired XEN1101 (previously known as 1OP2198) from 1st Order Pharmaceuticals, Inc., or 1st Order, pursuant to an asset purchase agreement.

In April 2017, we acquired azetukalner from 1st Order Pharmaceuticals, Inc., or 1st Order, pursuant to an asset purchase agreement.

In August 2020, we and 1st Order amended the asset purchase agreement to amend certain definitions in the agreement and to modify the payment schedule for certain milestones.

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Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

(1) Amounts have been reclassified as described in Note 2 of our consolidated financial statements.

Operating Activities

For the year ended December 31, 2023, net cash used in operating activities totaled $145.3 million, compared to $98.4 million for the same period in 2022.

The increase was primarily related to higher research and development and general and administrative expenses, and no revenue recognized in 2023.

This was partially offset by higher interest income and changes in operating assets and liabilities.

For the year ended December 31, 2022, net cash used in operating activities totaled $98.4 million, compared to $69.5 million for the same period in 2021.

The increase was primarily related to higher research and development and general and administrative expenses, and lower revenue recognized in connection with the Neurocrine Collaboration and the Pacira Agreement.

This was partially offset by higher interest income and changes in operating assets and liabilities.

For the year ended December 31, 2024, net cash used in operating activities totaled $181.4 million, compared to $151.1 million in 2023.

The increase was primarily related to higher research and development and general and administrative expenses, as well as changes in operating assets and liabilities, partially offset by higher interest income.

For the year ended December 31, 2023, net cash used in operating activities totaled $151.1 million, compared to $101.0 million in 2022.

The increase was primarily related to higher research and development and general and administrative expenses, and a decrease in revenue recognized, partially offset by higher interest income and changes in operating assets and liabilities.

Investing Activities

For the year ended December 31, 2023, net cash used in investing activities totaled $117.2 million, compared to $296.0 million for the same period in 2022.

For the year ended December 31, 2024, net cash provided by investing activities totaled $165.0 million, compared to net cash used of $111.4 million in 2023.

The change was driven primarily by an increase in the redemption of marketable securities, net of purchases.

In addition, there was a decrease in the purchases of property, plant and equipment.

For the year ended December 31, 2023, net cash used in investing activities totaled $111.4 million, compared to $293.4 million in 2022.

The change was driven primarily by an increase in the redemption of marketable securities, net of purchases.

This was partially offset by an increase in the purchases of property, plant and equipment.

For the year ended December 31, 2022, net cash used in investing activities totaled $296.0 million, compared to $246.8 million for the same period in 2021.

The change was driven primarily by an increase in purchases of marketable securities, net of redemptions.

Financing Activities

For the year ended December 31, 2023, net cash provided by financing activities totaled $353.5 million, compared to $278.5 million for the same period in 2022.

For the year ended December 31, 2024, net cash provided by financing activities totaled $12.1 million, compared to $353.5 million in 2023.

The decrease was primarily related to net proceeds from the issuance of common shares of $12.1 million in 2024 as compared to net proceeds of $353.5 million in 2023 from the issuance of common shares and pre-funded warrants.

For the year ended December 31, 2023, net cash provided by financing activities totaled $353.5 million, compared to $278.5 million in 2022.

The increase was primarily related to net proceeds of $353.5 million in 2023 as compared to net proceeds of $277.8 million in 2022 from the issuance of common shares and pre-funded warrants.

For the year ended December 31, 2022, net cash provided by financing activities totaled $278.5 million, compared to $447.5 million for the same period in 2021.

The decrease was primarily related to net proceeds of $277.8 million in 2022 as compared to net proceeds of $447.3 million in 2021 from the issuance of common shares and pre-funded warrants.

Related Party Transactions

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Outstanding Share Data

As of February 26, 2024, we had 75,432,482 common shares issued and outstanding, outstanding pre-funded warrants to purchase an additional 2,173,081 common shares, outstanding stock options to purchase an additional 8,860,105 common shares and an outstanding warrant to purchase an additional 40,000 common shares.

As of February 24, 2025, we had 76,542,811 common shares issued and outstanding, outstanding pre-funded warrants to purchase an additional 2,173,081 common shares, outstanding stock options to purchase an additional 10,364,025 common shares, outstanding performance share units convertible into 194,000 common shares and an outstanding warrant to purchase an additional 40,000 common shares.

Quantitative and Qualitat ive Disclosures About Market Risk

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We do not enter into investments for speculative purposes and have not used any derivative financial instruments to manage interest rate exposure.

Inflation risk

Inflation may generally affect us by increasing our cost of labor and research and development expenses.

While we have experienced increased operating expenses in recent periods, which we believe are due in part to the recent growth in inflation, we do not believe that inflation has had a material effect on our business, financial condition or results of operations during the year ended December 31, 2023;

however, operating expenses may continue to increase in future periods due to inflation.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis