What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-21 · 119 added, 97 removed, 208 unchanged (51% of the section changed)

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These forward-looking statements include, but are not limited to :

our ability to identify additional products or product candidates either from our internal research efforts or though acquiring or in-licensing other product candidates or technologies;

our ability to identify additional products or product candidates either from our internal research efforts or through acquiring or in-licensing other product candidates or technologies;

the initiation, timing, cost, progress and success of our research and development programs, pre-clinical studies, and clinical trials;

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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and although we bel ieve such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information.

These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

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The primary endpoint is the median percent change in monthly focal seizure frequency from baseline compared to treatment period of active versus placebo.

We continue to review blinded data from patients who have been treated to date in the X-TOLE trial in order to assess safety, tolerability, and discontinuations.

To date, XEN1101 has been well-tolerated and the rate of discontinuations from the study are below what was modeled.

In addition, more than 90% of subjects to date from the double-blind portion of the trial have rolled-over into the open-label extension phase.

Therefore, based on analysis of the blinded safety data to date, we do not expect the need to conduct an interim analysis, which was an option that would have allowed for re-sizing of lower dose groups or for other changes to the study if tolerability was different than modeled.

In the context of the COVID-19 pandemic, we are in close collaboration with each of the XEN1101 clinical sites in North America and Europe, taking specific direction from their respective clinical guidelines as they relate to new patient screening and randomization.

Our primary efforts are focused on patients currently enrolled in the study, either in the double-blind portion or in the open-label extension portion of the study, while making other necessary amendments in the study, including minimizing any in-person patient visits and making provisions for adequate study drug supplies to patients wherever possible, to ensure that data integrity is maintained.

We are expanding the X-TOLE clinical trial to include new sites in both existing and new jurisdictions to support enhanced patient screening as soon as the individual clinical trial sites deem it safe to do so.

We anticipate topline data in the first half of 2021, dependent upon patient enrollment rates, which may be impacted by the COVID-19 pandemic.

We are in close collaboration with each of the XEN1101 clinical sites in North America and Europe, taking specific direction from their respective clinical guidelines as they relate to new patient screening and randomization in the context of the COVID-19 pandemic.

We are expanding the X-TOLE clinical trial to include new sites in both existing and new jurisdictions to support increased patient screening.

Topline data is anticipated in the first half of 2021, dependent upon the impact of COVID-19 on patient enrollment rates.

We also continue to explore the development of XEN1101 in other neurological indications.

XEN496, a Kv7 potassium channel modulator, is a proprietary pediatric formulation of the active ingredient ezogabine being developed for the treatment of epilepsy.

Food and Drug Administration, or FDA, has granted Orphan Drug Designation, or ODD, and Fast Track designation for the investigation of XEN496 for the treatment of seizures related to KCNQ2 developmental and epileptic encephalopathy, or KCNQ2-DEE.

Published case reports where physicians have used ezogabine in infants and young children with KCNQ2-DEE suggest that ezogabine may be efficacious in this often hard-to-treat pediatric patient population.

To support a planned Phase 3 clinical trial of XEN496 in patients with KCNQ2-DEE, we recently completed a pharmacokinetic, or PK, study testing our proprietary pediatric formulation (XEN496) in 24 healthy adult volunteers.

Subjects were given a single 400 mg dose of XEN496 in either the fed or the fasted state.

While the study was not designed to determine bioequivalence – given ezogabine is not available to use as a comparator – the PK profile observed for XEN496 supports our Phase 3 plans and appears to be comparable to historical PK data for immediate-release ezogabine tablets, with XEN496 showing similar absorption and elimination curves.

We recently received additional feedback from FDA on our Phase 3 program for XEN496.

The FDA has indicated that it is acceptable to study XEN496 in infants and children up to six years old, and that a single, small pivotal trial may be considered adequate in order to demonstrate XEN496’s efficacy in KCNQ2-DEE, provided the study shows evidence of a clinically meaningful benefit in patients with the intended indication.

Based on the FDA’s feedback, we anticipate initiating a randomized, double-blind, placebo-controlled Phase 3 clinical trial to evaluate the clinical efficacy, safety and tolerability of XEN496 in approximately 40 pediatric patients with KCNQ2-DEE.

Food and Drug Administration, or FDA, has granted Fast Track designation for XEN496 for the treatment of seizures associated with KCNQ2 developmental and epileptic encephalopathy, or KCNQ2-DEE, and Orphan Drug Designation, or ODD, for the treatment of KCNQ2-DEE.

Published case reports where physicians have used ezogabine in infants and young children with KCNQ2-DEE suggest that ezogabine may be efficacious in this often hard-to-treat population.

The FDA has indicated that it is acceptable to study XEN496 in pediatric patients (from one month to less than six years old) diagnosed with KCNQ2-DEE, and that a single, small pivotal trial may be considered adequate in order to demonstrate XEN496’s efficacy in pediatric patients with KCNQ2-DEE, provided the study shows evidence of a clinically meaningful benefit in patients with the intended indication.

To support the planned Phase 3 clinical trial of XEN496 in patients with KCNQ2-DEE, we completed a pharmacokinetic, or PK, study testing our proprietary pediatric formulation (XEN496) in 24 healthy adult volunteers.

The PK profile observed for XEN496 is comparable to historical PK data for immediate-release ezogabine tablets, with XEN496 showing similar absorption and elimination curves, which supports plans for Phase 3 development.

The proposed trial design is a randomized, double-blind, placebo-controlled Phase 3 clinical trial to evaluate the clinical efficacy, safety, and tolerability of XEN496 in approximately 40 pediatric patients with KCNQ2-DEE.

The primary endpoint is expected to be the median percent change in seizure frequency from baseline compared to treatment period of active versus placebo.

We expect to initiate the XEN496 Phase 3 clinical trial in 2020.

We have filed the final clinical trial protocol with the FDA, and feedback is expected in the near-term.

We anticipate initiating the XEN496 Phase 3 clinical trial in 2020.

XEN007 (active ingredient flunarizine) is a CNS-acting calcium channel modulator that modulates Cav2.1 and T-type calcium channels.

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A physician-led, Phase 2 proof-of-concept study is examining the potential clinical efficacy, safety, and tolerability of XEN007 as an adjunctive treatment in pediatric patients diagnosed with treatment-resistant childhood absence epilepsy, or CAE.

Results from this Phase 2 study are expected in 2020, dependent upon patient enrollment rates given the ongoing COVID-19 pandemic .

Depending on the final results from the study, CAE may represent a potential orphan indication for future development of XEN007.

Due to the impact of COVID-19 on clinical trial enrollment rates and specifically due to the closure of our investigator site for a number of months in Canada , the topline results from this study are now expected in the first half of 2021.

Depending on the final results, CAE may represent a potential orphan indication for future development of XEN007 .

Partnered Programs

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Neurocrine Biosciences has an exclusive license to XEN901, now known as NBI-921352, a clinical stage selective Nav1.6 sodium channel inhibitor with potential in SCN8A developmental and epileptic encephalopathy, or SCN8A-DEE, and other forms of epilepsy.

Neurocrine Biosciences has indicated that it anticipates filing an IND application with the FDA in mid-2020 in order to start a Phase 2 clinical trial in SCN8A-DEE patients in the second half of 2020.

Neurocrine Biosciences has indicated that it anticipates filing an Investigational New Drug, or IND, application with the FDA in the near-term in order to start a Phase 2 clinical trial in SCN8A-DEE patients in the second half of 2020.

We are eligible to receive up to $25.0 million upon the FDA acceptance of an IND for NBI-921352, with 55% of the amount in the form of an equity investment by Neurocrine Biosciences in our common shares at a 15% premium to our 30-day trailing volume weighted average price at that time.

Flexion Therapeutics, Inc., or Flexion, acquired the global rights to develop and commercialize XEN402, a Nav1.7 inhibitor also known as funapide.

Flexion’s pre-clinical product candidate, FX301 , consists of XEN402 formulated for extended release from a thermosensitive hydrogel.

Flexion’s pre-clinical FX301 consists of XEN402 formulated for extended release from a thermosensitive hydrogel.

The initial development of FX301 is intended to support administration as a peripheral nerve block for control of post-operative pain.

In April 2020, Flexion presented new animal data in an ePoster presentation on the American Society of Regional Anesthesia and Acute Pain website that showed FX301 provided sustained, post-operative analgesic effect with no impairment in motor function compared to liposomal bupivacaine and p lacebo.

In addition, high local concentrations of funapide, the active ingredient in FX301, were measured at the site of administration for the duration of the study which is consistent with the creation of a depot providing controlled drug release.

A GLP toxicology study with FX301 commenc ed in April 2020, triggering a $0.5 millio n milestone payment to us.

Flexion anticipates initiating human clinical trials in 2021 .

We have funded our operations through the sale of equity securities, funding received from our licensees and collaborators, debt financing and, to a lesser extent, government funding.

For the three months ended March 31, 2020, we recognized revenue of $7.1 million in connection with our agreement with Neurocrine Biosciences.

We did not recognize any revenue for the three months ended March 31, 2019 .

We had a net loss of $7.5 million for the three months ended March 31, 2020 and an accumulated deficit of $257.1 million as of March 31, 2020, from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations.

We have not generated any significant royalty revenue from product sales, and do not otherwise anticipate generating revenue from product sales for the foreseeable future, if ever.

For the six months ended June 30, 2020 we recognized revenue of $20.5 million in connection with our agreement with Neurocrine Biosciences.

We did not recognize any revenue for the six months ended June 30, 2019 .

We had a net loss of $7.7 million for the six months ended June 30, 2020 and an accumulated deficit of $257.3 million as of June 30, 2020, from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We have not generated any significant royalty or other revenue from product sales, and do not otherwise anticipate generating revenue from product sales for the foreseeable future, if ever.

We expect that our revenue in the near term will be substantially dependent on our collaboration agreements.

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create additional infrastructure to support our operations and otherwise.

Recent Developments

The board of directors previously approved, subject to shareholder approval, the Amended and Restated 2014 Equity Incentive Plan, or the Amended and Restated 2014 Plan, amending certain provisions of our 2014 Equity Incentive Plan, or the 2014 Plan.

At our 2020 annual meeting of shareholders held on June 1, 2020, our shareholders approved the Amended and Restated 2014 Plan which reserved an additional 4,000,000 of our common shares for issuance over the existing share reserve under the 2014 Plan.

For additional information, see “Amended and Restated 2014 Equity Incentive Plan” below or refer to our Current Report on Form 8-K, filed with the SEC and the Canadian Securities Commissions on June 3, 2020.

Financial Operations Overview

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We have not generated any significant royalty revenue from product sales, and do not otherwise anticipate generating revenue from product sales for the foreseeable future, if ever.

The following table is a summary of revenue recognized from our current collaboration and licensing agreements for the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31,

The following table is a summary of revenue recognized from our current collaboration and licensing agreements for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Neurocrine Biosciences:

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Total collaboration revenue

For the three months ended March 31, 2020 , we recognized revenue of $ 7.1 million in connection with our agreement with Neurocrine Biosciences.

For the three and six months ended June 30, 2020, we recognized revenue of $13.4 million and $20.5 million, respectively, in connection with our agreement with Neurocrine Biosciences.

Pursuant to the terms of our license and collaboration agreement with Neurocrine Biosciences, we received an upfront cash payment of $30.0 million and a $20.0 million equity investment in our common shares.

The equity investment was measured at fair value on the date of issuance and the resulting premium, together with the upfront cash payment, is the transaction price of the arrangement for allocation to the performance obligations.

The allocation was based on the relative estimated standalone selling pric es of each obligation under the agreement including:

(i) an exclusive license to XEN901 with associated technology and know-how transfer, (ii) an exclusive license to pre-clinical compounds for development, XEN393, XPC’535 and XPC’391, collectively referre d to as the development track candidates, or the DTCs, with associated know-how transfer, and (iii) development services under the initial development program for the DTCs.

In the three months ended March 31, 2020 , we recognized $ 5.8 million of the transac tion price allocated to performance obligations (i), (ii) and (iii) .

P erformance obligations (i) and (ii) are being recognized over a ten month period from December 2019 to September 2020 which is the expected period to complete the delivery of the license s and transfer of the relevant technology and know-how.

The allocation was based on the relative estimated standalone selling prices of each obligation under the agreement including:

(i) an exclusive license to XEN901 (now known as NBI-921352) with associated technology and know-how transfer, (ii) an exclusive license to pre-clinical compounds for development, XEN393, XPC’535 and XPC’391, collectively referred to as the development track candidates, or the DTCs, with associated know-how transfer, and (iii) development services under the initial development program for the DTCs.

In the three and six months ended June 30, 2020, we recognized $11.9 million and $17.8 million, respectively, of the transaction price allocated to performance obligations (i), (ii) and (iii).

Performance obligations (i) and (ii) are being recognized over an eleven month period from December 2019 to October 2020 which is the expected period to complete the delivery of the licenses and transfer of the relevant technology and know-how.

Performance obligation (iii) is being recognized over a thirteen month period from March 2020 to March 2021 which is the expected period to complete the development services.

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We expect that any revenue we generate will fluctuate quarter to quarter as a function of the timing and amount of milestones and other payments from our existing collaborations and any future collaborations.

As of March 31, 2020, we have recorded $24.6 million of deferred revenue from upfront payments received under our license and collaboration agreement with Neurocrine Biosciences .

As of June 30, 2020, we have recorded $12.7 million of deferred revenue from the upfront payments received under our license and collaboration agreement with Neurocrine Biosciences .

Operating Expenses

The following table summarizes our operating expenses for the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31,

The following table summarizes our operating expenses for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

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We expense all research and development costs as incurred.

We expect that our research and development expenses will increase in the future as we advance our proprietary product candidates through clinical development, advance our internal drug discovery programs into pre-clinical development and contin ue our early-stage research.

The increase in expense will likely include added personnel and third-party contracts related to research, formulation, process development and manufacturing, pre-clinical studies and clinical trial activities as well as third-party acquisition, license and collaboration fees and laboratory consumables.

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Interest Expense.

Interest expense consists of accrual of the final payment fee, amortization of debt discounts, and interest charged on our borrowings with Silicon Valley Bank which accrue interest at a floating per annum rate of 0.5% above the prime rate.

Interest expense consists of accrual of the final payment fee, amortization of debt discounts, and interest charged on our borrowings with Silicon Valley Bank which accrued interest at a floating per annum rate of 0.5% above the prime rate.

In May 2020, we repaid the total outstanding term loan balance ahead of the maturity date.

Foreign Exchange Gain (Loss).

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We will continue to incur substantial expenses in Canadian dollars and will remain subject to risks associated with foreign currency fluctuations.

Loss on repayment of term loan.

In May 2020, we repaid the total outstanding balance of our term loan with Silicon Valley Bank ahead of the maturity date.

We recorded a one-time loss of $1.0 million on the repayment of the term loan, inclusive of repayment fees.

Critical Accounting Policies and Significant Judgments and Estimates

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stock-based compensation

There have been no material changes in our critical accounting policies and significant judgements and estimates during the three months ended March 31, 2020 , as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condit ions and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates” included in our 2019 Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission, or SEC, and with the securities commissions in Br itish Columbia, Alberta and Ontario, or the Canadian Securities Commissions, on March 9 , 2020 .

We believe that the accounting policies discussed in the Annual Report are critical to understanding our historical and future performance, as these policies rel ate to the more significant areas involving management’s judgments and estimates.

There have been no material changes in our critical accounting policies and significant judgements and estimates during the six months ended June 30, 2020, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates” included in our 2019 Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission, or SEC, and with the securities commissions in British Columbia, Alberta and Ontario, or the Canadian Securities Commissions, on March 9, 2020.

We believe that the accounting policies discussed in the Annual Report are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Results of Operations

Comparison of Three Months Ended March 31, 2020 and 2019

The following table summarizes the results of our operations for the three months ended March 31, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended March 31,

Comparison of Three and Six Months Ended June 30, 2020 and 2019

The following table summarizes the results of our operations for the three and six months ended June 30, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Increase/(Decrease)

Research and development expenses

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Interest expense

Foreign exchange gain (loss)

Foreign exchange gain

Loss on repayment of term loan

Loss before income taxes

Revenue increased by $7.1 million in the three months ended March 31, 2020 as compared to the three months ended March 31, 2019.

Revenue for the three months ended March 31, 2020 related to recognition of $5.8 million of deferred revenue as well as $1.2 million for research and development services under our license and collaboration agreement with Neurocrine Biosciences.

No revenue was recognized in the comparative quarter.

Revenue increased by $13.4 million and $20.5 million in the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019, respectively.

Revenue for the three and six months ended June 30, 2020 related to recognition of $11.9 million and $17.8 million of deferred revenue as well as $1.5 million and $2.7 million for research and development services under our license and collaboration agreement with Neurocrine Biosciences, respectively.

No revenue was recognized in the comparative quarters.

Research and Development Expenses

The following table summarizes research and development expenses for the three months ended March 31, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended March 31,

The following table summarizes research and development expenses for the three and six months ended June 30, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Increase/(Decrease)

XEN1101 expenses

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Total research and development expenses

Research and development expenses increased by $2.7 million in the three months ended March 31, 2020 as compared to the three months ended March 31, 2019.

The increase was primarily attributable to increased spending on our clinical development product candidates XEN496 and XEN1101, and, to a lesser extent, increased spending on our pre-clinical, discovery and other internal program expenses.

This was partially offset by decreased spending on XEN901 (now known as NBI-921352) as clinical developments costs associated with the development of product candidates under the collaboration including NBI-921352 are borne by Neurocrine Biosciences .

Research and development expenses increased by $2.5 million and $5.2 million in the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019, respectively.

For the three and six months ended June 30, 2020, the increases were primarily attributable to increased spending on our clinical development product candidates XEN496 and XEN1101, and, to a lesser extent, increased spending on our pre-clinical, discovery and other internal program expenses.

This was partially offset by decreased spending on XEN901 (now known as NBI-921352) as clinical developments costs associated with the development of product candidates under the Neurocrine Biosciences collaboration including NBI-921352 are borne by Neurocrine Biosciences .

Certain costs related to NBI-921352 development activities have been incurred by Xenon in the period;

Neurocrine Biosciences reimburses Xenon for development services incurred by Xenon at fair market value with the exception of certain near-term manufacturing costs which continue to be borne by Xenon under the terms of the collaboration agreement.

General and Administrati ve Expenses

The following table summarizes general and administrative expenses for the three months ended March 31, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended March 31,

General and Administrative Expenses

The following table summarizes general and administrative expenses for the three and six months ended June 30, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Increase/(Decrease)

General and administrative expenses

General and administrative expenses increased by $0.7 million in the three months ended March 31, 2020 as compared to the three months ended March 31, 2019.

The increase was primarily attributable to increased stock-based compensation expense, salaries and benefits, insurance premiums , and business development expenses , partially offset by a decrease in legal fees for intellectual property protection.

The following table summarizes our other income for the three months ended March 31, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended March 31,

General and administrative expenses increased by $1.0 million and $1.7 million in the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019, respectively.

For the three and six months ended June 30, 2020, the increases were primarily attributable to increased stock-based compensation expense due to an increase in the number of options granted at a higher fair value, salaries and benefits due to increased headcount, and higher insurance premiums as compared to the same periods in 2019.

These increases were partially offset by a decrease in legal fees due to timing of intellectual property protection activities as compared to the same periods in 2019.

The following table summarizes our other income for the three and six months ended June 30, 2020 and 2019 together with changes in those items (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Increase/(Decrease)

Other income increased by $0.1 million in the three months ended March 31, 2020 as compared to the three months ended March 31, 2019.

The increase in other income was primarily driven by an increase in interest income offset by a change in foreign exchange gains and losses.

We recorded an increase of $0.4 million in interest income as a result in an increase in our average cash and investment balances for the three months ended March 31, 2020 as compared to the same period in 2019.

This was partially offset by a foreign exchange loss of $0.2 million for the three months ended March 31, 2020 as compared to a $0.1 million foreign exchange gain for the same period in 2019, largely due to an 8% decrease as compared to a 2% increase in the value of the Canadian dollar, respectively.

Increase/(Decrease)

Other income decreased by $0.04 million and increased by $0.1 million in the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019.

For the three months ended June 30, 2020, the decrease in other income was primarily driven by a one-time loss on the repayment of our term loan with Silicon Valley Bank of $1.0 million, partially offset by an increase in foreign exchange gains.

We recorded a foreign exchange gain of $0.7 million for the three months ended June 30, 2020 as compared to a $0.1 million for the same period in 2019, largely due to an increase in cash and cash equivalent and marketable securities denominated in Canadian dollars and 4% increase as compared to a 2% increase in the value of the Canadian dollar, respectively.

For the six months ended June 30, 2020, the increase in other income was primarily driven by an increase in interest income earned on our marketable securities, partially offset by a one-time loss on the repayment of our term loan with Silicon Valley Bank of $1.0 million.

We recorded an increase of $0.6 million in interest income as a result in an increase in our average cash and investment balances for the six months ended June 30, 2020 as compared to the same period in 2019.

Liquidity and Capital Resources

To date, we have financed our operations primarily through funding received from collaboration and license agreements, private placements of our common and preferred shares, public offerings of our common shares, debt financing and, to a lesser extent, government funding.

As of March 31, 2020, we had cash and cash equivalents and marketable securities of $229.7 million.

As of June 30, 2020, we had cash and cash equivalents and marketable securities of $202.8 million.

We have incurred significant operating losses since inception.

We had a $7.5 million net loss for the three months ended March 31, 2020 and an accumulated deficit of $257.1 million from inception through March 31, 2020.

We had a $7.7 million net loss for the six months ended June 30, 2020 and an accumulated deficit of $257.3 million from inception through June 30, 2020.

We expect to continue to incur significant expenses in excess of our revenue and expect to incur operating losses over the next several years.

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and experience any delays or encounter issues with any of the above.

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

For example, we entered into an underwriting agreement with Jefferies LLC, or Jefferies, Stifel, Nicolaus & Company, Incorporated, or Stifel , and Guggenheim Securities, LLC, relating to an underwritten public offering of 3,750,000 common shares at a public offering price of $16.00 per common share, and granted the underwriters an option for a period of 30 days to purchase up to an additional 56 2,500 common shares.

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.

For example, in August 2020, we entered into an at-the-market equity offering sales agreement with Jefferies LLC, or Jefferies, and Stifel, Nicolaus & Company, Incorporated, or Stifel, to sell our common shares having aggregate sales proceeds of up to $100.0 million, from time to time, through an “at-the-market” equity offering program under which Jefferies and Stifel will act as sales agents.

In addition, we entered into an underwriting agreement with Jefferies, Stifel, and Guggenheim Securities, LLC, relating to an underwritten public offering of 3,750,000 common shares at a public offering price of $16.00 per common share, and granted the underwriters an option for a period of 30 days to purchase up to an additional 562,500 common shares.

The public offering was completed in January 2020 and the underwriters’ option was exercised in full in February 2020.

We issued an aggregate of 4,312,500 common shares and raised total net proceeds of $64.9 million, net of underwritin g discounts and commissions, but before offering expenses.

In December 2019, pursuant to the terms of our license and collaboration agreement with Neurocrine Biosciences, we received an upfront cash payment of $30.0 million and we issued 1,408,847 common s hares to Neurocrine Biosciences for an aggregate purchase price of $20.0 million.

Further, in November 2019, we entered into an at-the-market equity offering sales agreement, or the Sales Agreement, with Jefferies and Stifel, to sell our common shares havi ng aggregate sales proceeds of up to $50.0 million, from time to time, through an “at-the-market” equity offering program under which Jefferies and Stifel acted as sales agent.

We issued an aggregate of 4,312,500 common shares and raised total net proceeds of $64.9 million, net of underwriting discounts and commissions, but before offering expenses.

In December 2019, pursuant to the terms of our license and collaboration agreement with Neurocrine Biosciences, we received an upfront cash payment of $30.0 million and we issued 1,408,847 common shares to Neurocrine Biosciences for an aggregate purchase price of $20.0 million.

Further, in November 2019, we entered into an at-the-market equity offering sales agreement with Jefferies and Stifel, to sell our common shares having aggregate sales proceeds of up to $50.0 million, from time to time, through an “at-the-market” equity offering program under which Jefferies and Stifel acted as sales agent.

As of January 14, 2020, we had sold an aggregate of 3,252,330 common shares for net proceeds of $48.8 million, net of commissions paid, but excluding estimated transaction expenses.

During the year ended December 31, 2018, we also entered into an amended and restated loan and security agreement with Silicon Valley Bank, or the Bank, providing for a term loan to us with an aggregate principal amount of $15.5 million.

In May 2020, we repaid the total outstanding term loan balance ahead of the maturity da te, pursuant to the terms of our amended and restated loan and security agreement.

In May 2020, we repaid the total outstanding term loan balance ahead of the maturity date, pursuant to the terms of our amended and restated loan and security agreement.

Except for any obligations of our collaborators to make milestone payments a nd research and development funding under our agreements with them , we do not have any committed external sources of capital.

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Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials remains uncertain.

The following table shows a summary of our cash flows for the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31,

The following table shows a summary of our cash flows for the six months ended June 30, 2020 and 2019 (in thousands):

Six Months Ended June 30,

Net cash used in operating activities

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Operating Activities

For the three months ended March 31, 2020, net cash used in operating activities totaled $13.1 million, compared to $8.7 million for the same period in 2019.

The increase in cash used in operating activities was primarily related to an increase in research and development and general and administrative expenses and changes in working capital, partially offset by increases in revenue and interest income.

For the six months ended June 30, 2020, net cash used in operating activities totaled $23.9 million, compared to $17.4 million for the same period in 2019.

Investing Activities

For the three months ended March 31, 2020, net cash used in investing activities totaled $52.9 million, compared to net cash used in investing activities of $7.0 million for the same period in 2019.

For the six months ended June 30, 2020, net cash used in investing activities totaled $42.0 million, compared $13.6 million for the same period in 2019.

The increase in cash used investing activities was driven by an increase in purchases of marketable securities, net of redemptions.

Financing Activities

For the three months ended March 31, 2020, net cash provided by financing activities totaled $102.5 million, compared to $0.1 million for the same period in 2019.

The increase in cash provided by financing activities was primarily related to net proceeds from the issuance of common shares during the three months ended March 31, 2020.

For the six months ended June 30, 2020, net cash provided by financing activities totaled $85.8 million, compared to $0.1 million for the same period in 2019.

The increase in cash provided by financing activities was primarily related to $102.5 million net proceeds from the issuance of common shares during the six months ended June 30, 2020, partially offset by the repayment of the term loan.

Contractual Obligations and Commitments

Our future significant contractual obligations as of December 31, 2019 were reported in our Annual Report on Form 10-K, filed with the SEC and the Canadian Securities Commissions on March 9, 2020.

As of March 31, 2020, there have been no material changes from the contractual commitments previously disclosed in the Annual Report on Form 10-K other than the following:

In August 2018, we entered into an amended and restated loan and security agreement with Silicon Valley Bank, or Amended and Restated Loan Agreement, providing for a term loan to us with an aggregate principal amount of $15.5 million.

On May 20, 2020, we repaid the total outstanding term loan balance ahead of the maturity date.

As of June 30, 2020, there have been no material changes from the contractual commitments previously disclosed in the Annual Report on Form 10-K other than the following:

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 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.

Future potential payments to 1st Order include up to $1.2 million in clinical development milestones, up to $6.0 million in regulatory milestones, and $0.5 million in other milestones.

Upon execution of the amendment, a payment of $0.3 million is payable;

this amount has been accrued as of June 30, 2020.

There are no royalty obligations to 1st Order.

In August 2018, we entered into an amended and restated loan and security agreement with Silicon Valley Bank, or the Amended and Restated Loan Agreement, providing for a term loan to us with an aggregate principal amount of $15.5 million.

In May 2020, we repaid the total outstanding term loan balance ahead of the maturity date.

The repayment consisted of (i) the outstanding principal balance, (ii) a final payment fee of $1.0 million, which has been partially accrued over the term of the loan up to the date of repayment, and (iii) a prepayment fee of $0.2 million.

At the time of repayment, all liabilities and obligations under the Amended and Restated Loan Agreement terminated automatically.

The repayment did not affect the Bank’s rights in connection with the warrant to the Bank to purchase 40,000 of our common shares at a price per common share of $9.79 which will remain outstanding until exercised or expired.

We recognized a loss on the repayment of the term loan of $1.0 million, which represented the difference between the carrying value of the term loan on the repayment date and the amount paid to extinguish the term loan.

We do not believe that inflation has had a material effect on our business, financial condition or results of operations in the last two fiscal years.

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Outstanding Share Data

As of May 18, 2020, we had 34,974,119 common shares issued and outstanding, outstanding stock options to purchase an additional 4,492,149 common shares and an outstanding warrant to purchase an additional 40,000 common shares.

As of August 4, 2020, we had 34,994,946 common shares issued and outstanding, outstanding stock options to purchase an additional 4,668,032 common shares and an outstanding warrant to purchase an additional 40,000 common shares.

In addition, we had 1,016,000 Series 1 Preferred Shares issued and outstanding.

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The holders of the Series 1 Preferred Shares are entitled to vote together with the common shares on an as-converted basis and as a single class, subject in the case of each holder of the Series 1 Preferred Shares to the Beneficial Ownership Limitation.

The Series 1 Preferred Shares may be “restricted securities” as such term is defined under applicable Canadian securities laws, as any Series 1 Preferred Shares that are ineligible to be converted into common shares due to the Beneficial Ownership Limitation, measured as of a given record date that applies for a shareholder meeting or ability to act by written consent, shall be deemed to be non-vo ting securities.

For additional information regarding our Series 1 Preferred Shares, see note 10b to our consolidated financial statements included in Part I, Item 1 of this report.

2019 Inducement Equity Incentive Plan

On September 9, 2019, our board of directors adopted the 2019 Inducement Equity Incentive Plan, or the Inducement Plan, and, subject to the adjustment provisions of the Inducement Plan, reserved 400,000 of our common shares for issuance pursuant to equity awards granted under the Inducement Plan.

The Inducement Plan was adopted without shareholder approval in accordance with the applicable Nasdaq Listing Rules.

The Inducement Plan provides for the grant of equity-based awards, including share options, share appreciation rights, restricted share awards, restricted share unit awards and performance share awards, and its terms are substantially similar to our 2014 Equity Incentive Plan, including with respect to treatment of equity awards in the event of a “merger” or “change of control” as defined under the Inducement Plan, but with such other terms and conditions intended to comply with the Nasdaq inducement award exception or to comply with the Nasdaq acquisition and merger exception.

However, our 2014 Equity Incentive Plan permits certain exchange programs (which includes repricings) without shareholder approval, while the Inducement Plan requires shareholder approval for such exchange programs.

In accordance with the applicable Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously serving as our employees or non-employee directors (or following such individuals’ bona fide period of non-employment with us), as an inducement material to the individuals’ entry into employment with us, or, to the extent permitted by the applicable Nasdaq Listing Rules, in connection with a merger or acquisition.

At our 2020 annual meeting of shareholders to be held on June 1, 2020, we are asking our shareholders to approve the amendment and restatement of our 2014 Equity Incentive Plan to increase the number of common shares reserved for issuance thereunder by 4,000,000 shares and to make certain other changes.

If the amendment and restatement of our 2014 Equity Incentive Plan is approved, the 2019 Inducement Equity Incentive Plan will be automatically terminated, but existing outstanding awards granted pursuant to such plan will continue to be governed by such plan’s terms.

Amended and Restated 2014 Equity Incentive Plan

At our 2020 annual meeting of shareholders held on June 1, 2020, our shareholders approved the Amended and Restated 2014 Equity Incentive Plan, or the Amended and Restated 2014 Plan, amending certain provisions of our 2014 Equity Incentive Plan, or the 2014 Plan, including:

An additional 4,000,000 common shares were reserved for issuance over the existing share reserve under the 2014 Plan;

The annual automatic share increase (or “evergreen”) provision of the 2014 Plan was eliminated;

The number of common shares that can be issued through restricted share awards, restricted share unit awards, or performance share awards (“full-value awards”) was limited to 1,000,000 common shares, in the aggregate;

Our ability to perform a repricing or implement an exchange program with respect to awards already granted under the 2014 Plan or to be granted under the Amended and Restated 2014 Plan was eliminated;

We may not pay or credit dividends or other distributions with respect to any common shares subject to any unvested portion of an award;

The definition of “change of control” includes only the specific transactions identified in the definition, such that the Board does not have discretion to determine that any other transaction may qualify as a change of control;

The Amended and Restated 2014 Plan will continue in effect for a term of ten years from April 16, 2020, the date the Board approved the Amended and Restated 2014 Plan.

In connection with the shareholder approval of the Amended and Restated 2014 Plan, our non-shareholder-approved Inducement Plan was terminated (which means no further grants can be made under the Inducement Plan, but existing outstanding awards granted pursuant to such plan will continue to be governed by such plan’s terms).

Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis