What changed in this filing

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Item 1A. Risk Factors

2020-08-06 compared with 2020-05-21 · 114 added, 74 removed, 935 unchanged (17% of the section changed)

6 unchanged sentences

We do not expect to have sustained profitability for the foreseeable future.

We had net losses 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, which were driven by expenses incurred in connection with our research and development programs and from g eneral and administrative costs associated with our operations.

We had net losses 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, which were driven by expenses incurred in connection with our research and development programs and from g eneral and administrative costs associated with our operations.

We have devoted most of our financial resources to research and development, including our clinical and pre-clinical development activities.

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and other third parties;

maintain, protect and expand our intellectual prope rty portfolio;

maintain, protect and expand our intellectual property portfolio;

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our shareholders’ equity.

We have not generated any significant royalty revenue from product sales and may never become profitable on a U.S.

We have not generated any significant royalty or other revenue from product sales and may never become profitable on a U.S.

Our ability to generate meaningful revenue and achieve profitability on a U.S.

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Revenue from these agreements is dependent on successful development of our product candidates by us or our collaborators.

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.

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.

If any of our product candidates fail in clinical trials or do not gain regulatory approval, or if any of our future products, if any, once approved, fail to achieve market acceptance or adequate market share, we may never become profitable.

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We will likely need to raise additional funding, which may not be available on acceptable terms, if at all.

Failure to obtain this necessary capit al when needed may force us to delay, limit or terminate our product development efforts or other operations.

Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

Since our inception, we have dedicated most of our resources to the discovery and development of our pre-clinical and clinical product candidates, and we expect to continue to expend substantial resources doing so for the foreseeable future.

These expenditures will include costs associated with research and development, potential milestone payments and royalties to third parties, manufacturing of product candidates and products approved for sale, conducting pre-clinical experiments and clinical trials and obtaining and maintaining regulatory approvals, as well as commercializing any products later approved for sale.

During the three months ended March 31, 2020, we incurred $11.8 million of costs associated with research and development, exclusive of costs incurred by our collaborators in developing our product candidates.

During the six months ended June 30, 2020, we incurred $22.5 million of costs associated with research and development, exclusive of costs incurred by our collaborators in developing our product candidates.

Our current cash and cash equivalents and marketable securities are not expected to be sufficient to complete clinical development of any of our product candidates and prepare for commercializing any product candidate which receives regulatory approval.

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In February 2020, the underwriters of the January 2020 public offering exercised their option to purchase an additional 562 ,500 of our common shares at a public offering price of $16.00 per share, raising additional net proceeds of $8.5 million, net of underwriting discounts and commissions, but before other offering expenses.

Further, in August 2020, we entered into the August 2020 sales agreement with Jefferies and Stifel to sell up to $100.0 million of our common shares, from time to time, through an “at-the-market” equity offering program under which Jefferies and Stifel will act as sales agents.

We were also party to an amended and restated loan and security agreement with Silicon Valley Bank pursuant to which we had borrowed an aggregate principal amount of $15.5 million.

The restated loan and security agreement was secured by substantially all of our assets except intellectual property and required compliance with various affirmative and negative covenants.

On May 20, 2020, we repaid the total outstanding term loan balance ahead of the maturity date and all encumbrances have been removed by Silicon Valley Bank.

In May 2020, we repaid the total outstanding term loan balance ahead of the maturity date and all encumbrances have been removed by Silicon Valley Bank.

Any future incurrence of indebtedness would result in increased fixed payment obligations and, potentially, the imposition of restrictive covenants.

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We are subject to risks associated with currency fluctuations which could impact our results of operations.

As of March 31, 2020 , approximately 4 % of our cash and cash equivalents and marketable securities were denominated in Canadian dollars.

As of June 30, 2020 , approximately 12 % of our cash and cash equivalents and marketable securities were denominated in Canadian dollars.

We incur significant expenses in Canadian dollars in connection with our operations in Canada.

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If more than one of our proprietary or partnered products were approved for the treatment of epilepsy, we anticipate that they could potentially compete with one another and other anti-seizure medications, or ASMs.

Currently prescribed ASMs, among others, include phenytoin, levetiracetam, brivaracetam, carbamazepine, cenobamat, clobazam, lamotrigine, valproate, oxcarbazepine, topiramate, lacosamide, ethosuximide, perampanel and cannabidiol.

Currently prescribed ASMs, among others, include phenytoin, levetiracetam, brivaracetam, carbamazepine, cenobamate, clobazam, lamotrigine, valproate, oxcarbazepine, topiramate, lacosamide, ethosuximide, perampanel, cannabidiol and fenfluramine.

The FDA has not yet approved any drug products specifically for the KCNQ2 developmental and epileptic encephalopathy indication (otherwise known as KCNQ2-DEE or EIEE7) or for the SCN8A developmental and epileptic encephalopathy indication (otherwise known as SCN8A-DEE or EIEE13), an early infantile epileptic encephalopathy due to gain-of-function mutations in the SCN8A gene that encodes the Nav1.6 sodium channel.

There are other ASMs in development that could potentially compete with our products, including products in development from Biogen Inc., Eisai Co., Ltd., Insys Therapeutics Inc., Knopp Biosciences LLC, Marinus Pharmaceuticals, Inc., Neurocrine Biosciences, Inc., Ovid Therapeutics Inc., Praxis Precision Medicines, Inc., Sage Therapeutics, SK Life Science Inc., Sunovion Pharmaceuticals Inc., Supernus Pharmaceuticals, Inc., Takeda Pharmaceutical Company Ltd., UCB, Inc., Upsher-Smith Laboratories, Inc., and Zogenix, Inc.

Drug discovery and development for various pain applications is intensely competitive.

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If we are not successful in discovering, acquiring or in-licensing product candidates in addition to XEN496, XEN1101 and XEN007, our ability to expand our business and achieve our strategic objectives may be impaired.

We have built a product development pipeline by identifying product candidates either from our internal research efforts or though acquiring or in-licensing other product candidates or technologies.

We have built a product development pipeline by identifying product candidates either from our internal research efforts or through acquiring or in-licensing other product candidates or technologies.

To date, our internal discovery efforts have yielded multiple development candidates, including XEN901, which we licensed to Neurocrine Biosciences and is now known as NBI-921352, and XEN402, which has been acquired by Flexion to use in its product candidate FX301.

Both our internal discovery efforts and our assessment of potential acquisition or in-licensing opportunities require substantial technical, financial and human resources, regardless of whether we identify any viable product candidates.

If we are unable to identify additional product candidates suitable for clinical development and commercialization either from our internal research efforts or though acquiring or in-licensing other product candidates or technologies, we may not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and adversely impact the market price of our common shares.

If we are unable to identify additional product candidates suitable for clinical development and commercialization either from our internal research efforts or through acquiring or in-licensing other product candidates or technologies, we may not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and adversely impact the market price of our common shares.

Our approach to drug discovery is unproven, and we do not know whether we will be able to develop any products of commercial value.

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and any product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all.

If our discovery activities fail to identify novel targets for drug discovery, or such targets prove to be unsuitable for treating human disease, or we are unable to develop product candidates with specificity and selectivity for such targets, we will fail to develop viable products.

If our discovery activities fail to identify novel targets for drug discovery, or such targets prove to be unsuitable for treating human disease, or if we are unable to develop product candidates with specificity and selectivity for such targets, we will fail to develop viable products.

If we fail to develop and commercialize viable products, we will not achieve commercial success.

If we fail to attract and retain s enior management and key personnel, we may be unable to successfully develop our product candidates, perform our obligations under our collaboration agreements, conduct our clinical trials and commercialize our product candidates.

If we fail to attract and retain senior management and key personnel, we may be unable to successfully develop our product candidates, perform our obligations under our collaboration agreements, conduct our clinical trials and commercialize our product candidates.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel.

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As our operations expand, we expect that we will need to manage additional relationships with various strategic collaborators, suppliers and other third parties.

Simon Pimstone devotes a small amount of his time to clinical work outside of his duties at our company, conducting, generally, one outpatient clinic per we ek.

Future growth will impose significant added responsibilities on members of management, and our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to manag ing these growth activities.

Simon Pimstone devotes a small amount of his time to clinical work outside of his duties at our company, conducting, generally, one outpatient clinic per week.

If we are unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and grow revenue could be reduced, and we may not be able to implement our business strategy.

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Computer system, network or telecommunications failures due to events such as damage from malware, unauthorized access, terrorism, war, or natural disasters could interrupt our internal or partner operations.

In particular, the COVID-19 pandemic has caused us to modify our business practices, including the requirement that our office-based employees work from home.

In particular, the COVID-19 pandemic has caused us to modify our business practices, including the requirement that many of our employees work from home.

As a result, we are increasingly dependent upon our technology systems to operate our business with a remote workforce and our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data.

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If any of these issues were to occur, our business could be materially harmed.

The COVID-19 pandemic and oth er public health crises may materially and adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic and other public health crises may materially and adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic and other public health crises may materially and adversely affect our business, financial condition and results of operations in several ways.

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We have already experienced a significant reduction in the rate of new patient enrollment in this trial due to the COVID-19 pandemic and our ability to complete patient enrollment will largely depend on future developments around COVID-19.

In addition, our XEN496 Phase 3 clinical trial in KCNQ2-DEE, which is anticipated to start in 2020, is dependent upon our ability to initiate clinical sites and enroll patients despite the ongoing COVID-19 pandemic.

In addition, our XEN496 Phase 3 clinical trial in KCNQ2-DEE, which is anticipated to start in 2020, is dependent upon FDA review of the clinical trial protocol and our ability to initiate clinical sites and enroll patients despite the ongoing COVID-19 pandemic.

We have also implemented work-from-home measures for the majority of our employees since March 2020, resulting in a reduction of laboratory work and a halt of non-essential business travel.

Such measures have negatively affected our employees’ productivity, our ability to perform projects in accordance with certain contractual obligations and our ability to meet other project timelines.

As we transition our employees back to our premises, there is a risk that COVID-19 infections could break out at our offices or laboratory facilities and significantly affect our operations.

Additionally, if any of our critical vendors are impacted, our business could be affected if we become unable to timely procure essential equipment, supplies or services in adequate quantities and at acceptable prices.

As we have started to transition some of our employees back to our premises, there is a risk that COVID-19 infections could break out at our offices or laboratory facilities and significantly affect our operations.

Additionally, if any of our critical vendors are impacted, our business could be affected if we become unable to timely procure essential equipment, clinical trial drug product, supplies or services in adequate quantities and at acceptable prices.

Moreover, the COVID-19 outbreak has caused significant disruption in the global and U.S.

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holder might not be eligible to make a mark-to-market election to mitigate the adverse tax consequences if we are characterized as a PFIC.

holders should consult their own tax advisors with respect to the possibility of m aking this election.

holders should consult their own tax advisors with respect to the possibility of making this election.

In addition, if we are or become a PFIC (or our PFIC status is uncertain), it may deter certain U.S.

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Clinical trial outcomes are inherently uncertain, and failure can occur at any time during the clinical development process.

Clinical trials can be halted or delayed for a variety of reasons, includin g those related to:

Clinical trials can be halted or delayed for a variety of reasons, including those related to:

side effects or adverse events in study participants presenting an unacceptable safety risk;

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These protocol amendments may not be accepted by the review bodies in the form submitted, or at all, which may impact costs, timing or successful completion of a clinical trial.

If we or our collaborators experience delays in the completion of, or termination of, any clinical trial of one of our product candidates, the commercial prospects of the product candidate will be harmed, could shorten the period during which we may have t he exclusive right to commercialize our products under patent protection, and our or our collaborators’ ability to commence product sales and generate product revenue from the product will be delayed.

In addition, any delays in completing our clinical tria ls will increase our costs and slow down our product candidate development and approval process.

We may also be required to develop and implement additional clinical trial policies and procedures designed to help protect subjects from the COVID-19 virus.

For example, in March 2020, FDA issued a guidance, which the FDA subsequently updated, on conducting clinical trials during the pandemic, which describes a number of considerations for sponsors of clinical trials impacted by the pandemic.

If we or our collaborators experience delays in the completion of, or termination of, any clinical trial of one of our product candidates, the commercial prospects of the product candidate will be harmed, could shorten the period during which we may have the exclusive right to commercialize our products under patent protection, and our or our collaborators’ ability to commence product sales and generate product revenue from the product will be delayed.

In addition, any delays in completing our clinical trials will increase our costs and slow down our product candidate development and approval process.

Any of these occurrences may harm our business, financial condition and prospects significantly.

In addition, many of the factors that cause, or lead to, a del ay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

XEN496 targets an ultra-orphan indication of KCNQ2-DEE and the FDA has indicated that a single, small pivotal trial may be sufficient to demonstrate effectiveness and safety in KCNQ2-DEE provided that no new or unexpected safety issues arise during drug development.

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availability of competing therapies and clinical studies;

efforts to facilitate timely enrollment in c linical studies;

efforts to facilitate timely enrollment in clinical studies;

patient referral practices of physicians.

The limited patient populations in ultra-orphan, orphan and niche indications, such as KCNQ2-DEE, SCN8A-DEE, other early i nfantile epileptic encephalopathies, or EIEEs, alternating hemiplegia of childhood, or AHC, and hemiplegic migraine, or HM, present significant recruitment challenges for clinical trials and a full understanding of the size of these populations is still relatively unknown.

The limited patient populations in ultra-orphan, orphan and niche indications, such as KCNQ2-DEE, SCN8A-DEE, other early i nfantile epileptic encephalopathies, or EIEEs, alternating hemiplegia of childhood, or AHC, hemiplegic migraine, or HM, and childhood absence epilepsy, or CAE, present significant recruitment challenges for clinical trials and a full understanding of the size of these populations is still relatively unknown.

Many of these patients may not be suitable or available to participate in our or our collaborators’ clinical trials.

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XEN007, a drug we are evaluating for potential development in HM or AHC, has received orphan drug designation from the FDA for each indication.

We have also received orphan drug designation from the FDA for XEN496, a drug we intend to begin Phase 3 development for the treatment of KCNQ2-DEE in 2020.

We have also received orphan drug designation from the FDA for XEN496, a drug we intend to begin Phase 3 development for the treatment of KCNQ2-DEE in 2020, pending FDA review of the Phase 3 trial protocol.

If we seek orphan drug designations for other indications or in other jurisdictions, we may fail to receive such orphan drug designations and, even if we succeed, such orphan drug designations may fail to result in or maintain orphan drug exclusivity upon approval, which would harm our competitive position.

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Neither orphan drug designation, nor rare pediatric disease, or RPD, designation gives the drug any advantage in the regulatory review or approval process.

Although t he FDA has granted RPD designation to XEN007 for the treat ment of AHC, we may not be able to realize any value from such designation.

Although t he FDA has granted RPD designation to XEN007 for the treatment of AHC, we may not be able to realize any value from such designation.

Our product candidate XEN007 has received RPD designation from the FDA for the treatment of AHC.

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the maintenance of existing or the establishment of new supply arrangements with third-party drug product suppliers and manufacturers;

the maintenance of existing or the establishmen t of new scaled production arrangements with third-party manufacturers to obtain finished products that are appropriately packaged for sale;

the maintenance of existing or the establishment of new scaled production arrangements with third-party manufacturers to obtain finished products that are appropriately packaged for sale;

a continued acceptable safety profile following any marketing approval;

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In addition, prescription drugs may be promoted only for the approved indications in accordance with the approved label.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label u ses, and a company that is found to have improperly promoted off-label may be subject to significant liability.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label may be subject to significant liability.

However, physicians may, in their independent medical judgment, prescribe legally available products for off-label uses.

The FDA does not regula te the behavior of physicians in their choice of treatments but the FDA and other foreign regulators do restrict manufacturer’s communications on the subject of off-label use of their products.

The FDA does not regulate the behavior of physicians in their choice of treatments but the FDA and other foreign regulators do restrict manufacturer’s communications on the subject of off-label use of their products.

If the market opportunities for our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

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There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA, EMA, Health Canada or other regulatory authorities.

Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, m anufacture, sale and distribution expenses.

Interim reimbursement levels for new drugs, if applicable, may also be insufficient to cover our and any collaborator’s costs and may not be made permanent.

Reimbursement rates may vary according to the use of th e drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services.

Net prices for drugs may be reduced by mandatory discounts or reba tes required by government healthcare programs or private payers and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S.

Third-party payers often rely upon Medicar e coverage policy and payment limitations in setting their own reimbursement policies.

Our or any collaborator’s inability to promptly obtain coverage and profitable payment rates from both government-funded and private payers for any approved products tha t we or our collaborators develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services.

Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payers and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S.

Third-party payers often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies.

Our or any collaborator’s inability to promptly obtain coverage and profitable payment rates from both government-funded and private payers for any approved products that we or our collaborators develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Our and our collaborators’ target patient populations in orphan and niche indications, such as KCNQ2-DEE, and SCN8A-DEE, and other potential target patient populations, such as AHC, are relatively small.

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For example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the PPACA, was enacted and includes measures that have significantly changed the way healthcare is financed by both governmental and private insurers.

The Trump administration and Congress, through legislation, executive orders and other measures, has taken action to repeal and replace certain provisions of the PPACA and a recent court decision has called into question the enforceability of the PPACA.

It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal and replace the PPACA will impact the PPACA and our business.

The Trump administration and Congress, through legislation, executive orders and other measures, has taken action to repeal and replace certain provisions of the PPACA.

For example, various portions of the ACA are currently undergoing legal and constitutional challenges in the Fifth Circuit Court in the United States Supreme Court.

It is unclear how such litigation and other efforts to repeal and replace the PPACA will impact the PPACA and our business.

In addition, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products.

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Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

On July 24, 2020, the Trump administration announced four executive orders to lower drug prices, including allowing importation of certain drugs, changing how drug rebates are negotiated by middlemen, like pharmacy benefit managers, and directing such rebates to be passed to patients as point-of-sale discounts, and requiring Medicare to pay certain Part B drugs at the lowest price available in economically comparable countries.

President Trump has delayed the effective date of the international drug pricing order, pending potential discussion with major drug companies.

How these executive orders will be implemented and their impact on the industry remain uncertain.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

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In addition, increased scrutiny by the U.S.

Congress of the FDA’s approv al process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-approval testing and other requirements.

Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-approval testing and other requirements.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S.

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To obtain reimbursement or pricing approval in some countries, we or our collaborators may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies.

As of July 2020, Canada is in the midst of implementing new drug pricing regulations and developing additional pricing guidance that will affect the price at which patented medicines can be sold.

Some countries require approval of the sale price of a drug before it can be marketed.

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a collaborator may exercise its rights under the agreement to terminate our collaboration;

a dispute may arise between us and a collaborator concerning the research or development of a product candidat e, commercialization of a product or payment of royalties or milestone payments, any of which could result in a delay in milestones, royalty payments or termination of a program and possibly resulting in costly litigation or arbitration which may divert ma nagement attention and resources;

a dispute may arise between us and a collaborator concerning the research or development of a product candidate, commercialization of a product or payment of royalties or milestone payments, any of which could result in a delay in milestones, royalty payments or termination of a program and possibly resulting in costly litigation or arbitration which may divert management attention and resources;

a collaborator may not adequately protect the intellectual property rights associated with a product or product candidate;

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Any of the above discussed scenarios could adversely affect the timing and extent of the development and commercialization activities related to NBI-921352, which could materially and adversely impact our business.

We may not be successful in establishing new collaborations or maintaining ou r existing alliances, which could adversely affect our ability to develop future product candidates and commercialize future products.

We may not be successful in establishing new collaborations or maintaining our existing alliances, which could adversely affect our ability to develop future product candidates and commercialize future products.

In the ordinary course, we engage with other biotechnology and pharmaceutical companies to discuss potential in-licensing, out-licensing, alliances and other strategic transactions.

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Any failure by our third-party manufacturers to comply with cGMP or any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates.

We rely on third parti es to monitor, support, conduct, and/or oversee pre-clinical studies and clinical trials of the product candidates that we are developing independently and, in some cases, to maintain regulatory files for those product candidates.

We may not be able to obt ain regulatory approval for our product candidates or commercialize any products that may result from our development efforts, if we are not able to maintain or secure agreements with such third parties on acceptable terms, if these third parties do not pe rform their services as required, or if these third parties fail to timely transfer any regulatory information held by them to us.

We rely on third parties to monitor, support, conduct, and/or oversee pre-clinical studies and clinical trials of the product candidates that we are developing independently and, in some cases, to maintain regulatory files for those product candidates.

We may not be able to obtain regulatory approval for our product candidates or commercialize any products that may result from our development efforts, if we are not able to maintain or secure agreements with such third parties on acceptable terms, if these third parties do not perform their services as required, or if these third parties fail to timely transfer any regulatory information held by them to us.

We rely on entities outside of our control, which may include academic institutions, CROs, hospitals, clinics and other third-party collaborators, to monitor, support, conduct and/or oversee pre-clinical and clinical studies of our current and future product candidates.

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Our intellectual property rights will not necessarily provide us with competitive advantages.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage.

The following examples are illustrative:

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In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from offering to sell, selling, using, making or importing products made using our inventions in and into the U.S.

or other jurisdictions.

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Although we may, under such arrangements, have rights to consult with our collaborators on actions taken as well as back-up rights of prosecution and enforcement, we have in the past and may in the future relinquish rights to prosecute and maintain patents and patent applications within our portfolio as well as the ability to assert such patents against infringers.

For example, currently the rights relating to the patent portfolio for XEN901 (now known as NBI-921352), other selective Nav1.6 inhibitors and dual Nav1.2/1.6 inhibitors are held by Neurocrine Biosciences, some of

the rights relating to the patent portfolio for novel Nav1.7 inhibito rs are held by Genentech and the rights to the patent portfolio for XEN402 were sold to Flexion (now known as FX301).

If any current or future licensee, sublicensee, licensor or other collaborators with rights to prosecute, assert or defend patents related to our product candidates fails to appropriately prosecute and maintain patent protection for patents covering any of our product candidates, or if patents covering any of our product candidates are asserted against infringers or defended against claims of invalidity or unenforceability in a manner which adversely affects such coverage, our ability to develop and commercialize any such product candidate may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products.

For example, currently the rights relating to the patent portfolio for XEN901 (now known as NBI-921352), other selective Nav1.6 inhibitors and dual Nav1.2/1.6 inhibitors are exclusively licensed to Neurocrine Biosciences, some of the rights relating to the patent portfolio for novel Nav1.7 inhibitors are held by Genentech and the rights to the patent portfolio for XEN402 were sold to Flexion (now known as FX301).

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.

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If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common shares.

Claims that our product candidates or the sale or use of our future products infringe the patent or other intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided.

Claims that our product candidates or the sale, offer for sale, importation, manufacture, or use of our future products infringe the patent or other intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided.

Our commercial success depends upon our ability to develop product candidates and commercialize products that may be approved in the future, using our proprietary technology without infringing the intellectual property rights of others.

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Additionally, pending patent applications and patents which have been published can, subject to certain limitations, be later amended in a manner that could cover our current or future products, if any, or their use.

Defending against claims of patent infringement, misappropriation of trade secrets or other violations of intellectual property right s could be costly and time consuming, regardless of the outcome.

Defending against claims of patent infringement, misappropriation of trade secrets or other violations of intellectual property rights could be costly and time consuming, regardless of the outcome.

Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs.

In addition, litigation or threatened litiga tion could result in significant demands on the time and attention of our management team, distracting them from the pursuit of other company business.

Claims that our product candidates or the sale or use making, offering to sell, or importing, of our fut ure products infringe, misappropriate or otherwise violate third-party intellectual property rights could therefore have a material adverse impact on our business.

In addition, litigation or threatened litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit of other company business.

Claims that our product candidates or the selling, using, making, offering to sell, or importing, of our future products infringe, misappropriate or otherwise violate third-party intellectual property rights could therefore have a material adverse impact on our business.

Most of our competitors are larger than we are and have substantially greater financial resources.

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Any of the foregoing events could harm our business significantly.

If we breach any of the agreements under which we license the use, development and commercialization rights to our product cand idates or technology from third parties, we could lose license rights that are important to our business.

If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or technology from third parties, we could lose license rights that are important to our business.

Under our existing license and other agreements, including those associated with our XEN1101 and XEN007 programs, we are subject to various obligations, including diligence obligations such as development and commercialization obligations, as well as potential milestone payments and other obligations.

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Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the patents we own or to which we have a license or third-party patents.

If we do not obtain protection under the Hatch-Waxman Act and similar legislation outside of the U.S.

If we do not obtain protection under the Hatch-Waxman Act in the U.S.

and similar legislation outside of the U.S.

by extending the patent terms for our product candidates, our business may be materially harmed.

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Moreover, the applicable time period or the scope of patent protection afforded could be less than five years, or even less than we request if that number is less than five years.

If we are unable to obtain p atent term extension or restoration or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

We have not registered our corporate name as a trademark in all of our potential markets, and failure to secure those registrations could adversely affect our business.

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however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.

If and when we ob tain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products;

however, we may then be unable to obtain product liability insurance on commercially reasonable terms or in adequate amou nts.

If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products;

however, we may then be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts.

On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects.

A successful product liability claim or series of claims brought against us could cause the market pri ce of our common shares to decline and, if judgments exceed our insurance coverage, could adversely affect our future results of operations and business.

A successful product liability claim or series of claims brought against us could cause the market price of our common shares to decline and, if judgments exceed our insurance coverage, could adversely affect our future results of operations and business.

Patients with certain of the diseases targeted by our product candidates are often already in severe and advanced stages of disease and have both known and unknown significant pre-existing and potentially life-threatening conditions.

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certain payments or other transfers of value made to physicians, as defined by such law, and teaching hospitals and ownership or investment interests held by such healthcare professionals and their immediate family members;

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangemen ts and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers;

state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary complian ce guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers;

state and foreign laws that require drug manufacturers to report information related to paymen ts to physicians and other healthcare providers or marketing expenditures;

effective January 1, 2022, these reporting obligations will extend to include payments and transfers of value made and ownership interests held during the previous year to certain non-physician providers such as physician assistants and nurse practitioners;

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers;

state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers;

state and foreign laws that require drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures;

state and local laws requiring the registration of pharmaceutical sales representatives;

and state and foreign laws governing the collection, export, privacy, use and security of bi ological materials and health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

and state and foreign laws governing the collection, export, privacy, use and security of biological materials and health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs.

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announcements by us or our competitors of new products, product candidates or new uses for existing products, significant contracts, commercial relationships or capital commitments and the timing of these introductions or announcements;

actions by any of our collaborators regarding our product candidates they are developing, including announcements regarding clinical or r egulatory decisions or developments of our collaboration;

actions by any of our collaborators regarding our product candidates they are developing, including announcements regarding clinical or regulatory decisions or developments of our collaboration;

unanticipated serious safety concerns related to the use of any of our products and product candidates;

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commencement of, or our involvement in, litigation;

the impact of the COVID-19 pandemic on our business and the macroeconomic environment;

general economic, industry and market conditions in the pharmaceutical and biotechnology sectors and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies;

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In addition, the stock market in general , and Nasdaq and the biopharmaceutical industry in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies.

The COVID-19 pandemic, for example, has negatively affected the stock market and investor sentiment and has resulted in significant volatility.

The COVID-19 pandemic, for example, has resulted in significant volatility.

These broad market and industry fluctuations may adversely affect the market price of our common shares, regardless of our operating performance.

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In addition, in the future, we may issue additional common shares, preferred shares, or other equity or debt securities convertible into common shares in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise.

Any such issuance could result in substantial dilution to our existing shareholders and could cause the market price of our common shares to decline.

Provisions in our corporate charter documents and Canadian law could make an acquisition of us, which may be beneficial to our s hareholders, more difficult and may prevent attempts by our shareholders to replace or remove our current management and/or limit the market price of our common shares.

Any such issuance , including any issuances pursuant to our “at-the-market” equity offering program under our August 2020 s ales a greement with Jefferies and Stifel, could result in substantial dilution to our existing shareholders and could cause the market price of our common shares to decline.

Provisions in our corporate charter documents and Canadian law could make an acquisition of us, which may be beneficial to our shareholders, more difficult and may prevent attempts by our shareholders to replace or remove our current management and/or limit the market price of our common shares.

Provisions in our articles and our by-laws, as well as certain provisions under the Canada Business Corporations Act, or CBCA, and applicable Canadian securities laws, may discourage, delay or prevent a merger, acquisition, tender offer or other change in control of us that shareholders may consider favorable, including transactions in which they might otherwise receive a premium for their common shares.

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If some investors find our common shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common shares and the market price of our common shares may be more volatile.

Effective December 31, 2019, we are no longer an emerging growth company which may increase our costs and demands on management and could harm our operating results and our ability to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common shares.

Since December 31, 2019, we are no longer an emerging growth company which may increase our costs and demands on management and could harm our operating results and our ability to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common shares.

Prior to our loss of emerging growth company status, we availed ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404.

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If we are not classified as an “accelerated filer” or “large accelerated filer” pursuant to SEC rules, we will continue to be exempt from the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley;

however, we cannot be certain at this time of our fu ture classification and we may remain subject to Section 404(b) of Sarbanes-Oxley.

however, we cannot be certain at this time of our future classification and we may remain subject to Section 404(b) of Sarbanes-Oxley.

We currently do not have an internal audit group, and we may need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and it may be difficult to recruit and maintain such personnel.

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Future sales and issuances of our common shares, preferred shares, or rights to purchase common shares, including warrants or pursuant to our equity incentive plans, could cause you to incur dilution and could cause the market price of our common shares to fall.

As of March 31, 2020, stock options to purchase 4,527,992 of our common shares with a weighted-average exercise price of $8.82 per common share were outstanding, a warrant to purchase 40,000 of our common shares with a weighted-average exercise price of $9.79 per common share was outstanding, and 1,016,000 of our Series 1 Preferred Shares were outstanding, which are convertible into our common shares on a one-for-one basis at the option of the holder, subject to certain ownership limitations following a requested conversion.

As of June 30, 2020, stock options to purchase 4,595,432 of our common shares with a weighted-average exercise price of $9.00 per common share were outstanding, a warrant to purchase 40,000 of our common shares with a weighted-average exercise price of $9.79 per common share was outstanding, and 1,016,000 of our Series 1 Preferred Shares were outstanding, which are convertible into our common shares on a one-for-one basis at the option of the holder, subject to certain ownership limitations following a requested conversion.

During the year ended December 31, 2018, certain funds affiliated with BVF Partners L.P.

exercised their conversion rights to convert 1,852,000 Series 1 Preferred Shares into the same number of common shares.

The exercise of any of these stock options or warrant or conversion of the remaining Series 1 Preferred Shares would result in dilution to current shareholders.

The exercise of any of these stock options or warrant or conversion of the remaining Series 1 Preferred Shares would result in dilution to current common shareholders.

Further, because we anticipate the need to raise additional capital to fund our clinical development programs, we may in the future sell substantial amounts of common shares, preferred shares, or other securities convertible into or exchangeable for common shares.

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If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common shares could decrease, which might cause the market price of our common shares and the trading volume of our common shares to decline.

Our management team has broad dis cretion as to the use of the net proceeds from public and private equity and debt financings and the investment of these proceeds may not yield a favorable return.

Our management team has broad discretion as to the use of the net proceeds from public and private equity and debt financings and the investment of these proceeds may not yield a favorable return.

We may invest the proceeds in ways with which our shareholders disagree.

We have broad discretion in the application of any net proceeds we have received pursuant to our January 2020 public offering of common shares, our November 2019 “at-the-market” equity offering program with Jefferies and Stifel and our sale of common shares to Neurocrine Biosciences in December 2019, as well as the net proceeds to us from previous equity and debt financings.

We have broad discretion in the application of any net proceeds we may receive pursuant to our August 2020 “at-the-market” equity offering program with Jefferies and Stifel, any net proceeds we have received pursuant to our January 2020 public offering of common shares, our November 2019 “at-the-market” equity offering program with Jefferies and Stifel, our sale of common shares to Neurocrine Biosciences in December 2019, as well as the net proceeds to us from previous equity and debt financings.

You may not agree with our decisions, and our use of the proceeds and our existing cash and cash equivalents and marketable securities may not improve our results of operation or enhance the value of our common shares.

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As a result, capital appreciation, if any, of our common shares may be investors’ sole source of gain for the foreseeable future.

(a) Exhibits.

Exhibit Number

Description of Document

Incorporated by Reference

Amended and Restated 2014 Equity Incentive Plan and form of share option agreement used thereunder.

Amendment to Asset Purchase Agreement, dated August 4, 2020, by and between the Company and 1 st Order Pharmaceuticals, Inc.

Certification of Chief Executive Officer pursuant to Rule 13a-14(a).

Certification of Chief Financial Officer pursuant to Rule 13a-14(a).

Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350.

Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350.

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (embedded within the Inline XBRL document).

The Certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Xenon Pharmaceuticals Inc.

under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm to the registrant if disclosed .

Indicates management contract or compensatory plan.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

XENON PHARMACEUTICALS INC.

August 6, 2020

/s/ Simon Pimstone

Simon Pimstone

Chief Executive Officer

August 6, 2020

/s/ Ian Mortimer

President and Chief Financial Officer

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-Q

Item 1A. Risk Factors