What changed in this filing

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Item 1A. Risk Factors

2021-08-11 compared with 2021-05-11 · 88 added, 106 removed, 992 unchanged (16% of the section changed)

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

We had a net loss of $15.8 million for the three months ended March 31, 2021 and an accumulated deficit of $294.3 million as of March 31, 2021, 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 a net loss of $37.9 million for the six months ended June 30, 2021 and an accumulated deficit of $316.4 million as of June 30, 2021, 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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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, 2021, we incurred $16.3 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, 2021, we incurred $34.7 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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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 are acting as sales agents.

As of March 31, 2021, we had sold an aggregate of 733,000 common shares for proceeds of $10.7 million, net of commissions paid and transaction expenses.

As of June 30, 2021, we had sold an aggregate of 733,000 common shares for proceeds of $10.7 million, net of commissions paid and transaction expenses.

In March 2021, we completed an underwritten public offering of 5,135,135 of our common shares, including 810,810 shares sold upon the full exercise of the underwriters’ option to purchase additional shares, and pre-funded warrants to purchase 1,081,081 common shares.

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

As of March 31, 2021 , approximately 4% of our cash and cash equivalents and marketable securities were denominated in Canadian dollars.

As of June 30, 2021 , approximately 5 % 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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For example, 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, cenobamate, clobazam, lamotrigine, valproate, oxcarbazepine, topiramate, lacosamide, ethosuximide, perampanel, cannabidiol, eslicarbazepine acetate and fenfluramine.

The FDA has not yet approved any drug products specifically for KCNQ2 developmental and epileptic encephalopathy (otherwise known as KCNQ2-DEE or EIEE7) or for SCN8A developmental and epileptic encephalopathy (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 clinical development that could potentially compete with our products, including products in development from Angelini Pharma, Eisai Co., Ltd., GW Pharmaceuticals plc, Knopp Biosciences LLC, Longboard Pharmaceuticals Inc, Marinus Pharmaceuticals, Inc., Neurocrine Biosciences, Inc., Ovid Therapeutics Inc., Praxis Precision Medicines, Inc., Sage Therapeutics, SK Life Science Inc., Stoke Therapeutics Inc., Supernus Pharmaceuticals, Inc., Takeda Pharmaceutical Company Ltd., UCB, Inc., Upsher-Smith Laboratories, Inc., Zogenix Inc., and Zynerba Pharmaceuticals, Inc.

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

We have no marketed proprietary products and have not yet completed clinical development beyond Phase 2 clinical trials, which makes it difficult to assess our ability to develop our future product candidates and commercialize any resulting products independently.

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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.

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We could experience difficulties attracting and retaining qualified employees as competition for qualified personnel in the biotechnology and pharmaceutical field is intense.

We are highly dependent upon our senior management, particularly Dr.

Simon Pimstone, our current Chief Executive Officer, who will begin serving as the Executive Chair of the board of directors effective as of the date of our 2021 annual meeting of shareholders, or AGM, and Mr.

Ian Mortimer, our current President and Chief Financial Officer who will take on the role of Chief Executive Officer while retaining his current responsibilities as our President and principal operating officer as of the date of our 2021 AGM, as well as other employees.

The loss of services of either of these individuals or one or more of our other members of senior management could materially delay or even prevent the successful development of our product candidates.

We are highly dependent upon our senior management, particularly Mr.

Ian Mortimer, our President and Chief Executive Officer , as well as other employees.

The loss of services of one or more of our members of senior management could materially delay or even prevent the successful development of our product candidates.

In addition, we will need to hire additional personnel as we expand our clinical development activities and develop commercial capabilities, including a sales infrastructure to support our independent commercialization efforts.

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Computer system, network or telecommunications failures due to events such as damage from malware, unauthorized access, public health pandemics or epidemics (including, for example, the COVID-19 pandemic), terrorism, war, or natural disasters could interrupt our internal or partner operations.

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

A breakdown, invasion, corruption, destruction or breach of our or our third-party contractors’ or vendors’ technology systems, including cloud technologies, and/or unauthorized access to our data and information and cyberattacks such as phishing, social engineering, ransomware and other malware attacks could subject us to liability and increased costs or negatively impact the operation of our business.

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Moreover, the prevalent use of mobile devices that access confidential information and ability to work remotely increases the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other intellectual property.

These risks may be heightened during the current COVID-19 pandemic due to the increase in our and our vendors’ and contractors’ personnel working remotely.

These risks may be heightened due to the increasing number of our and our vendors’ and contractors’ personnel working remotely.

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

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There may be related restrictions on the export, import or shipment of raw materials, drug substance or drug product that could materially delay our business or clinical trials.

Certain of our research and development efforts are also conducted globally, including our ongoing Phase 2b XEN1101 (X-TOLE) clinical trial, which includes investigative sites in North America and Europe, and our Phase 3 XEN496 (EPIK) clinical trial, which includes investigative sites in North America and is expected to include sites in Europe, Australia and Asia.

Certain of our research and development efforts are also conducted globally, including our ongoing Phase 2b XEN1101 (X-TOLE) clinical trial, which includes investigative sites in North America and Europe, and our Phase 3 XEN496 (EPIK) clinical trial, which includes investigative sites in North America and Australia, and is expected to include sites in Europe and Asia.

For example, we previously experienced a significant reduction in the rate of new patient enrollment in our X-TOLE trial due to the COVID-19 pandemic.

While we were able to complete recruitment for this trial, we cannot be certain that the ongoing COVID-19 pandemic or related variants will not negatively impact this or other trials in the future.

While we were able to complete recruitment for this trial, we cannot be certain that the ongoing COVID-19 pandemic or related variants will not negatively impact ongoing or future clinical trials.

Our EPIK trial is dependent upon our ability to initiate clinical sites and enroll patients despite the ongoing COVID-19 pandemic.

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Even if we, or our collaborators, obtain approval for a particular product, regulatory authorities may grant approval contingent on the performance of costly post-approval commitments including clinical trials, or may approve a product with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product.

In addition, because there may be approved treatments for some of the diseases for which we may seek approval, in order to receive regulatory approval, we may need to demonstrate in clinical trials that the product candidates we develop to treat those diseases are not only safe and effective, but may need to be compared to existing products, which may make it more difficult for our product candidates to receive regulatory approval or adequate reimbursement.

In addition, because there may be approved treatments for some of the diseases or disorders for which we may seek approval, in order to receive regulatory approval, we may need to demonstrate in clinical trials that the product candidates we develop to treat those diseases or disorders are not only safe and effective, but may need to be compared to existing products, which may make it more difficult for our product candidates to receive regulatory approval or adequate reimbursement.

Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes.

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inability to reach agreement with prospective CROs and clinical trial sites, or the breach of such agreements;

failure of third-party contractors, such as CROs, or investigators to comply with regulatory requirements, including GCPs;

failure of third-party contractors, such as CROs, or investigators to comply with regulatory requirements, including good clinical practices, or GCPs;

delay or failure in obtaining the necessary approvals from regulators or institutional review boards, or IRBs, in order to commence a clinical trial at a prospective trial site, or their suspension or termination of a clinical trial once commenced;

a requirement to undertake and complete additional pre-clinical studies to generate data required to initiate clinical development or to support the continued clinical development of a product candidate or submission of an NDA;

inability to enroll sufficient patients to complete a protocol, particularly in orphan diseases;

inability to enroll sufficient patients to complete a protocol, particularly in orphan diseases or disorders;

difficulty in having patients complete a trial, adhere to the trial protocol, or return for post-treatment follow-up;

clinical sites deviating from trial protocol or dropping out of a trial;

problems with drug product or drug substance storage, stability and distribution;

problems with investigational medicinal product storage, stability and distribution;

our inability to add new or additional clinical trial sites;

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For example, we previously experienced a significant reduction in the rate of new patient enrollment in our X-TOLE trial due to the COVID-19 pandemic.

While we were able to complete recruitment for this trial, we cannot be certain that the ongoing COVID-19 pandemic or related variants will not negatively impact this or other trials in the future.

In addition, due to the impact of the COVID-19 pandemic, we have experienced an impact on the initiation of clinical sites in our EPIK trial which includes investigative sites in North America and is expected to include clinical sites in Europe, Australia and Asia.

While we were able to complete recruitment for this trial, we cannot be certain that the ongoing COVID-19 pandemic or related variants will not negatively impact other trials in the future.

In addition, due to the impact of the COVID-19 pandemic, we have experienced an impact on the initiation of clinical sites in our EPIK trial which includes investigative sites in North America and Australia, and is expected to include clinical sites in Europe and Asia.

COVID-19 may continue to impact the enrollment of patients in our XEN496 EPIK clinical trial.

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These clinical trials are lengthy and, with respect to non-orphan indications, usually involve many hundreds to thousands of patients.

With respect to orphan indications like KCNQ2-DEE, SCN8A-DEE or childhood absence epilepsy, or CAE, clinical trials can also be lengthy due to the challenge of identifying and recruiting patients.

With respect to orphan indications like KCNQ2-DEE, SCN8A-DEE or childhood or juvenile absence epilepsy, or CAE or JAE, clinical trials can also be lengthy due to the challenge of identifying and recruiting patients.

In addition, if the FDA, EMA, Health Canada or another regulator disagrees with our or our collaborators’ choice of the key testing criterion, or primary endpoint, the results for the primary endpoint are not robust or significant relative to the control group of patients not receiving the experimental therapy, or our statistical analysis is inconclusive, such regulator may refuse to approve our product candidate in the region in which it has jurisdiction.

The FDA, EMA, Health Canada or other regulators also may require additional clinical trials as a condition for approving any of these product candidates.

We could also encounter delays if a clinical trial is suspended or terminated by us, by our collaborators, by the IRBs of the institutions in which such trial is being conducted, by any Data Safety Monitoring Board for such trial, or by the FDA, EMA, Health Canada or other regulatory authorities.

We or our collaborators could also encounter delays if a clinical trial is suspended or terminated by us, by our collaborators, by the IRBs of the institutions in which such trial is being conducted, by any Data Safety Monitoring Board for such trial, or by the FDA, EMA, Health Canada or other regulatory authorities.

Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA, Health Canada or other regulatory authorities resulting in the imposition of a clinical hold, product candidate manufacturing problems, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

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Additionally, changes in applicable regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes or to include additional objectives that could yield important scientific information critical to our overall development strategy.

The protocol amendment process often requires review and approval by several review bodies, including regulatory agencies and scientific, regulatory and ethics boards and IRBs.

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.

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 which have and are expected to continue to increase the cost of our clinical trials.

Since March 2020, the FDA, EMA and Health Canada have issued guidance documents describing a number of considerations for sponsors conducting clinical trials during 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.

The protocol amendment process often requires review and approval by several review bodies, including regulatory agencies and scientific, regulatory and ethics boards and IRBs which may affect timely completion of a clinical trial.

Further, 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.

We may also be required to develop and implement additional clinical trial policies and procedures designed to support remote clinical trial activities which have and are expected to continue to increase the cost and complexity of our clinical trials.

Since March 2020, the FDA, EMA and Health Canada have issued various guidance documents and related guidance updates describing a number of considerations for sponsors conducting clinical trials during the COVID-19 pandemic.

FDA has also issued COVID-19 related guidance addressing resuming normal drug and biologics manufacturing operations;

manufacturing, supply chain, and inspections;

and statistical considerations for clinical trials during the COVID-19 public health emergency, among others.

In view of the spread of the COVID-19 variants, FDA and other regulatory authorities may issue additional guidance and policies that may materially impact our business and clinical development timelines.

Changes to existing policies and regulations can increase our compliance costs or delay our clinical plans.

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 may be harmed, the period during which we may have the exclusive right to commercialize our products under patent protection could be shortened, 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 delay 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 or our collaborators’ 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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Terminating the development of any of our or our collaborators’ product candidates could materially harm our business and the market price of our common shares.

Our and our collaborators’ clinical product candidates, which include XEN1101, XEN496, XEN007, NBI-921352 (previously known as XEN901 and being developed by our collaborator Neurocrine Biosciences), and FX301 (being developed by Flexion Therapeutics, Inc., or Flexion), along with product candidates we expect to enter clinical development which include our pre-clinical compounds, are in varying stages of development and will require substantial clinical development, testing and regulatory approval prior to commercialization.

Our and our collaborators’ clinical product candidates, which include XEN1101, XEN496, XEN007, NBI-921352 (being developed by our collaborator Neurocrine Biosciences), and FX301 (being developed by Flexion), along with product candidates we expect to enter clinical development which include our pre-clinical compounds, are in varying stages of development and will require substantial clinical development, testing and regulatory approval prior to commercialization.

Before obtaining regulatory approvals for the commercial sale of our products, we or our collaborators must demonstrate through lengthy, complex and expensive pre-clinical testing and clinical trials that the product candidate is both safe and effective for use in each target indication.

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Failure of a clinical trial due to any of these reasons could materially harm our business and the market price of our common shares.

In the case of some of our and our collaborators’ product candidates, we and our collaborators are seeking to develop treatments for certain diseases for which there is relatively limited clinical experience, and clinical trials may use novel endpoints and measurement methodologies or subjective patient feedback, which adds a layer of complexity to these clinical trials and may delay regulatory approval.

In the case of some of our and our collaborators’ product candidates, we and our collaborators are seeking to develop treatments for certain diseases or disorders for which there is relatively limited clinical experience, and clinical trials may use novel endpoints and measurement methodologies or subjective patient feedback, which adds a layer of complexity to these clinical trials and may delay regulatory approval.

Negative or inconclusive results from our or our collaborators’ clinical trials could lead to a decision or requirement to conduct additional pre-clinical testing or clinical trials or result in a decision to terminate the continued development of a product candidate .

For example, we currently anticipate releasing topline data from our X-TOLE Phase 2b clinical trial of XEN1101 in adult patients with focal epilepsy by the end of the third quarter of 2021.

For example, we currently anticipate releasing topline data from our X-TOLE Phase 2b clinical trial of XEN1101 in adult patients with focal epilepsy in late September to mid-October 2021.

If these topline data fail to meet the trial endpoints or are otherwise inconclusive, we may cease development of XEN1101 as a treatment for adult patients with focal epilepsy or potentially abandon development of XEN1101 entirely.

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Patient enrollment for clinical trials for ultra-orphan, orphan and niche indications and for more prevalent conditions is affected by factors including:

severity of the disease under investigation;

severity of the disease or disorder under investigation;

design of the study protocol;

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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, as well as potential orphan indications for the future development of XEN007 including alternating hemiplegia of childhood, or AHC, hemiplegic migraine, or HM, and CAE, 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, as well as potential orphan indications for the future development of XEN007 including alternating hemiplegia of childhood, or AHC, hemiplegic migraine, or HM, CAE and JAE, 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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In the EU, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria or can be lost altogether if the marketing authorization holder consents to a second orphan drug application or cannot supply enough drug, or when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug.

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

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

We have also received orphan drug designation from the FDA and orphan medicinal product designation was granted by the European Commission to XEN496 as a treatment of KCNQ2-DEE.

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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 other than potential fee reductions, and in the case of RPD, priority review vouchers.

Although the FDA has granted RPD designation to XEN007 for the treatment of AHC and RPD designation to NBI-921352 for the treatment of SCN8A-DEE, 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 and NBI-921352, being developed by our collaborator Neurocrine Biosciences, has received RPD designation for the treatment of SCN8A-DEE .

Although the FDA has granted RPD designation to XEN007 for the treatment of CAE and AHC and RPD designation to NBI-921352 for the treatment of SCN8A-DEE, 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 CAE and AHC and NBI-921352, being developed by our collaborator Neurocrine Biosciences, has received RPD designation for the treatment of SCN8A-DEE .

The FDA defines a "rare pediatric disease" as a disease that affects fewer than 200,000 individuals in the U.S.

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There is no assurance we or Neurocrine Biosciences will receive a RPD priority review voucher or that use of the priority review voucher will result in a faster review or approval for a subsequent marketing application.

It is possible that even if we or Neurocrine Biosciences obtain approval for XEN007 in AHC or NBI-921352 in SCN8A-DEE , respectively, and qualify for such a priority review voucher, the program may no longer be in effect at the time of approval of either of these product candidates.

It is possible that even if we or Neurocrine Biosciences obtain approval for XEN007 in CAE or AHC or NBI-921352 in SCN8A-DEE , respectively, and qualify for such a priority review voucher, the program may no longer be in effect at the time of approval of either of these product candidates.

Also, although priority review vouchers may be freely sold or transferred to third parties, there is no guarantee that we will be able to realize any value if we were to sell a priority review voucher to a third party.

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Later clinical trial results may not replicate earlier clinical trials for a variety of reasons, including differences in trial design, different trial endpoints (or lack of trial endpoints in exploratory studies), patient population, number of patients, patient selection criteria, trial duration, drug dosage and formulation and lack of statistical power in the earlier studies.

These uncertainties are enhanced where the diseases under study lack established clinical endpoints, validated measures of efficacy, as is often the case with orphan diseases for which no drugs have been developed previously and where the product candidates target novel mechanisms.

These uncertainties are enhanced where the diseases or disorders under study lack established clinical endpoints, validated measures of efficacy, as is often the case with orphan diseases or disorders for which no drugs have been developed previously and where the product candidates target novel mechanisms.

For example, to our knowledge, NBI-921352 is the first selective Nav1.6 sodium channel inhibitor being developed for the treatment of epilepsy and therefore standard pre-clinical models may not be predictive of clinical efficacy due to its novel molecular mechanism.

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Because the target patient populations for some of our product candidates are small, we must be able to successfully identify patients and acquire a significant market share to achieve profitability and growth.

Some of our product candidates focus on treatments for rare and ultra-rare diseases.

Given the small number of patients who have some of the diseases that we are targeting, our profitability and growth depend on successfully identifying patients with these rare and ultra-rare diseases.

Currently, most reported estimates of the prevalence of these diseases are based on studies of small subsets of the population in specific geographic areas, which are then extrapolated to estimate the prevalence of the diseases in the U.S.

Some of our product candidates focus on treatments for rare and ultra-rare disorders.

Given the small number of patients who have some of the disorders that we are targeting, our profitability and growth depend on successfully identifying patients with these rare and ultra-rare disorders.

Currently, most reported estimates of the prevalence of these disorders are based on studies of small subsets of the population in specific geographic areas, which are then extrapolated to estimate the prevalence of the disorders in the U.S.

or elsewhere.

Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on our internal estimates.

Our projections of both the number of people who have these disorders, as well as the subset of people with these disorders who have the potential to benefit from treatment with our product candidates, are based on our internal estimates.

These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, and market research, and may prove to be incorrect.

Further, new studies may change the estimated incidence or prevalence of these diseases, and, as a result, the number of patients with these diseases may turn out to be lower than expected.

Our effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately predict the number of patients for whom treatment might be possible.

Further, new studies may change the estimated incidence or prevalence of these disorders, and, as a result, the number of patients with these disorders may turn out to be lower than expected.

Our effort to identify patients with diseases or disorders we seek to treat is in early stages, and we cannot accurately predict the number of patients for whom treatment might be possible.

Additionally, the potentially addressable patient population for some of our product candidates may be limited or may not be amenable to treatment with our product candidates, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business.

Finally, even if we obtain significant market share for our product candidates focused on treatments for rare and ultra-rare diseases, because the potential target populations are very small, we may never achieve profitability despite obtaining such significant market share.

Finally, even if we obtain significant market share for our product candidates focused on treatments for rare and ultra-rare disorders, because the potential target populations are very small, we may never achieve profitability despite obtaining such significant market share.

Even if we or our collaborators receive approval to commercialize our products, unfavorable pricing regulations and challenging third-party coverage and reimbursement practices could harm our business.

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Our or our collaborators’ 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.

Some of our and our collaborators’ target patient populations in orphan and niche indications, such as KCNQ2-DEE, SCN8A- DEE and CAE.

Some of our and our collaborators’ target patient populations in orphan and niche indications, such as KCNQ2-DEE, SCN8A-DEE, CAE and JAE.

In order for therapies that are designed to treat smaller patient populations to be commercially viable, the pricing, coverage and reimbursement for such therapies needs to be higher, on a relative basis, to account for the lack of volume.

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For example, various portions of the PPACA have been the subject of legal and constitutional challenges, including legal proceedings in the Fifth Circuit Court of Appeals.

The Supreme Court of the United States held oral arguments on the Fifth Circuit Court case in November 2020 and is expected to issue a decision later in 2021.

Litigation and legislation over the PPACA are likely to continue, with unpredictable and uncertain results.

In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the PPACA, dismissing the case without specifically ruling on the constitutionality of the PPACA.

Accordingly, the PPACA remains in effect in its current form.

It is unclear how this Supreme Court decision, future litigation, and healthcare measures promulgated by the Biden administration will impact the implementation of the PPACA, our business, financial condition and results of operations.

Complying with any new legislation or reversing changes implemented under the PPACA could be time-intensive and expensive, resulting in a material adverse effect on our business.

Complying with any new legislation or changes in healthcare regulation could be time-intensive and expensive, resulting in a material adverse effect on 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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In January 2021, the Biden administration issued a “regulatory freeze” memorandum that directs department and agency heads to review new or pending rules of the prior administration.

It is unclear whether these new regulations will be withdrawn or when they will become fully effective under the current administration.

Under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated.

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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 April 2021, Canada is in the midst of implementing new drug pricing regulations and additional pricing guidance that will affect the price at which patented medicines can be sold.

As of July 2021, Canada is in the midst of implementing new drug pricing regulations and 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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We have no control over the resources, time and effort that our collaborators may devote to our programs and limited access to information regarding or resulting from such programs.

We are dependent on our collaborators, including Neurocrine Biosciences, Flexion and Genentech, to fund and conduct the research and any clinical development of product candidates under our agreements with each of them, and for the successful regulatory approval, marketing and commercialization of one or more of such products or product candidates.

We are dependent on our collaborators, including Neurocrine Biosciences and Flexion, to fund and conduct the research and any clinical development of product candidates under our agreements with each of them, and for the successful regulatory approval, marketing and commercialization of one or more of such products or product candidates.

Such success will be subject to significant uncertainty.

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adverse decisions by Neurocrine Biosciences regarding the development and commercialization of NBI-921352;

Neurocrine Biosciences’ failure to collect all data required by FDA to support regulatory approval or an IND or any amendments thereof, address any deficiencies or compliance issues raised by FDA or any other regulatory authority, or comply with all regulatory requirements in order to advance clinical development of NBI-921352 to approval;

Neurocrine Biosciences’ failure to collect all data required by FDA or any other regulatory authority to support an Investigational New Drug application, or IND, or equivalent, or any amendments thereof, address any deficiencies or compliance issues raised by FDA or any other regulatory authority, or comply with all regulatory requirements in order to advance clinical development of NBI-921352 to approval;

possible disagreements as to the timing, nature and extent of development plans, including clinical trials or regulatory strategy;

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For example, following Neurocrine Biosciences’ submission of the IND for NBI-921352, the FDA requested additional non-clinical data to support dose justification in the proposed pediatric study of NBI-921352 in pediatric SCN8A-DEE patients.

Based on this feedback, in January 2021, we announced that Neurocrine Biosciences intends to initiat e a Phase 2 clinical trial in adolescent patients (aged 12 years and older) with SCN8A-DEE in the third quarter of 2021 and to amend the trial protocol to include younger pediatric patients (aged 2-11 years) with SCN8A-DEE following the FDA ’s review and approv al of the additional non-clinical information.

Based on this feedback, in January 2021, we announced that Neurocrine Biosciences intends to initiate a Phase 2 clinical trial in adolescent patients (aged 12 years and older) with SCN8A-DEE in the third quarter of 2021 and to amend the trial protocol to include younger pediatric patients (aged 2-11 years) with SCN8A-DEE following the FDA’s review and approval of the additional non-clinical information.

In connection with this announcement, we and Neurocrine Biosciences amended our collaboration agreement to restructure the terms of potential payments owed to us upon achievement of certain development milestones, including deferring the milestone payment owing to us for the SCN8A-DEE trial until the FDA has approved the protocol amendment to include younger pediatric patients (aged 2-11 years).

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As a result, we have less control over the timing and cost of these studies and the ability to recruit trial subjects than if we conducted these trials with our own personnel.

For example, XEN007 is currently being evaluated under a physician-led, multi-center, Phase 2 proof-of-concept study as an adjunctive treatment in pediatric patients diagnosed with treatment-resistant CAE.

In addition, we expect to initiate in the coming months, a Phase 2 proof-of-concept clinical trial examining XEN1101 in major depressive disorder and anhedonia in partnership with academic collaborators at the Icahn School of Medicine at Mount Sinai.

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We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates.

Our commercial success will depend, in large part, on our ability to obtain and maintain patent and other intellectual property protection with respect to our product candidates.

Our commercial success will depend, in large part, on our ability to obtain and maintain patent, trademark and trade secret protection of our product candidates, their respective components, formulations, methods used to manufacture them and methods of treatment, as well as successfully defending these patents against third-party challenges.

We evaluate our global patent portfolio in the ordinary course of business to enhance patent protection in areas of our strategic focus and in key markets for our potential products and may abandon existing patents or patent applications related to terminated development programs, areas, or markets of low strategic importance.

For example, as of June 30, 2021, we owned two issued U.S.

patents directed to XEN1101 and certain related compounds and methods of using the same for the treatment of seizure disorders which are expected to expire between 2028 and 2029 (absent any extensions of term).

We recently obtained allowance of a U.S.

patent application with claims directed to four distinct crystalline forms of XEN1101, pharmaceutical compositions comprising the same, and methods of preparing and using the same.

Any patent issuing from this allowed application is expected to expire in Q4 2040 (absent any patent term extension).

In July 2021, we also filed a U.S continuation of this allowed patent application.

In addition, we have three pending U.S.

non-provisional patent applications directed to (1) methods of enhancing the bioavailability of XEN1101 by oral administration with, or in temporal proximity to, consuming food;

(2) methods of using XEN1101 for the treatment of depressive disorders;

and (3) methods of using XEN1101 for the treatment of pain disorders.

While there is no guarantee that patents will issue from these three pending U.S.

patent applications, any patents that that may issue are expected to expire between 2039 and 2040 (absent any patent term adjustments or extensions).

While we believe that these allowed and pending patent applications may provide us with additional intellectual property protection for XEN1101, we cannot be certain that such protection will be sufficient or that competitors will not challenge the scope, validity or enforceability of such patents.

Patents might not be issued or granted with respect to our patent applications that are currently pending, and issued or granted patents might later be found to be invalid or unenforceable, be interpreted in a manner that does not adequately protect our current product or any future products, or fail to otherwise provide us with any competitive advantage.

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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 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 (which was acquired by Flexion for use in its product candidate FX301) were sold to Flexion.

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 and the rights to the patent portfolio for XEN402 (which was acquired by Flexion for use in its product candidate FX301) were sold to Flexion.

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, importing, offering for sale, and/or selling competing products.

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In the future, we may receive offers to license and demands to license from third parties claiming that we are infringing their intellectual property or owe license fees and, even if such claims are without merit, we could fail to successfully avoid or settle such claims.

If Neurocrine Biosciences, Flexion, Genentech or other collaborators license or otherwise acquire rights to intellectual property controlled by a third party in various circumstances, for example, where a product could not be legally developed or commercialized in a country without the third-party intellectual property right or, where it is decided that it would be useful to acquire such third-party right to develop or commercialize the product, they are eligible under our collaboration agreements to decrease payments payable to us on a product-by-product basis and, in certain cases, on a country-by-country basis.

If Neurocrine Biosciences, Flexion or other collaborators license or otherwise acquire rights to intellectual property controlled by a third party in various circumstances, for example, where a product could not be legally developed or commercialized in a country without the third-party intellectual property right or, where it is decided that it would be useful to acquire such third-party right to develop or commercialize the product, they are eligible under our collaboration agreements to decrease payments payable to us on a product-by-product basis and, in certain cases, on a country-by-country basis.

Any of the foregoing events could harm our business significantly.

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No consistent policy regarding the breadth of claims allowed in patents in these fields has emerged to date in the U.S.

There have been recent changes regarding how patent laws are interpreted, and both the U.S.

Patent and Trademark Office, or USPTO, and Congress have recently made significant changes to the patent system.

There have been recent changes regarding how patent laws are interpreted, and both the USPTO and Congress have recently made significant changes to the patent system.

There have been U.S.

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For as long as we continue to be a smaller reporting company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to, two years of audited financial statements in our annual reports.

We will remain a smaller reporting company so long as, as of June 30 of the preceding year, (i) the market value of our common shares held by non-affiliates, or our public float, is less than $250 million;

or (ii) we have annual revenues less than $100 million and either we have no public float or our public float is less than $700 million.

Investors could find our common shares less attractive if we choose to rely on these disclosure exemptions.

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, 2021, we will be a large accelerated filer and no longer qualify as a smaller reporting company, which will increase our costs and demands on management.

As a result of our public float (the market value of our common shares held by non-affiliates) as of June 30, 2021, we will become a large accelerated filer as of December 31, 2021 and therefore no longer qualify as a “smaller reporting company” as defined under the Exchange Act.

Our ability to rely on the reduced disclosure requirements available to smaller reporting companies will cease after the filing of our Annual Report on Form 10-K for the year ended December 31, 2021, including those portions of our definitive proxy statement relating to our 2022 annual meeting of shareholders that will be incorporated by reference into Part III of the Annual Report on Form 10-K.

As a smaller reporting company, we have had the option to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

As a non-accelerated filer and smaller reporting company, we have 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.

However, we may no longer avail ourselves of this exemption when we become a large accelerated filer.

When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase.

We expect to incur significant expense and devote substantial management effort toward ensuring compliance with Section 404 in preparation for and once we are a large accelerated filer.

We currently do not have an internal audit group, and we will 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.

Implementing any appropriate changes to our internal control over financial reporting may require specific compliance training for our directors, officers and employees and take a significant period of time to complete.

Such changes may not, however, be effective in maintaining the adequacy of our internal control over financial reporting, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements or other reports on a timely basis, could increase our operating costs and could materially impair our ability to operate our business.

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 shareholders to incur dilution and could cause the market price of our common shares to fall.

As of March 31, 2021, stock options to purchase 5,742,608 of our common shares with a weighted-average exercise price of $11.35 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, 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, and pre-funded warrants to purchase 1,081,081 of our common shares with an exercise price of $0.0001 per share.

As of June 30, 2021, stock options to purchase 5,771,051 of our common shares with a weighted-average exercise price of $12.04 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, 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, and pre-funded warrants to purchase 1,081,081 of our common shares with an exercise price of $0.0001 per share.

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

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a decreased ability to issue additional securities or obtain additional financing in the future.

Recent Sales of Unregistered Securities

On February 18, 2021, we issued 41,152 common shares that were not registered under the Securities Act of 1933, as amended, to Genworks Inc., a consultant, pursuant to the exercise of stock options for cash consideration with exercise proceeds of approximately CAD$120,884.

The common shares issued pursuant to the exercise of options were offered, sold and issued pursuant to the Canadian prospectus exemption under section 2.42 of National Instrument 45-106—Prospectus Exemptions, or NI 45-106, as such securities were offered, sold and issued in accordance with the terms and conditions of securities that we had previously issued.

The options described above were offered, sold and issued pursuant to the Canadian prospectus exemption under section 2.24 of NI 45-106 as such securities were offered, sold and issued by us to our directors, officers, employees and consultants.

This issuance of common shares upon exercise of stock options was exempt from registration under the Securities Act of 1933, as amended, under Section 4(a)(2) thereof as a transaction by an issuer not involving a public offering.

The recipient acquired the securities for investment only and not with a view to or for sale in connection with any distribution of the securities and appropriate legends were affixed thereto.

(a) Exhibits.

Description of Document

Incorporated by Reference

Form of Pre-Funded Warrant.

March 10, 2021

Amendment #1, dated January 13, 2021, to the License and Collaboration Agreement, dated December 2, 2019, by and between Xenon Pharmaceuticals Inc.

and Neurocrine Biosciences, Inc.

January 14, 2021

Employment Agreement, dated January 13, 2021, by and between the Company and Ian Mortimer.

January 14, 2021

Employment Agreement, dated January 13, 2021, by and between the Company and Simon Pimstone.

January 14, 2021

Employment Agreement, dated January 13, 2021, by and between the Company and Sherry Aulin.

January 14, 2021

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.

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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 in accordance with Item 601(b)(10) of Regulation S-K.

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.

/s/ Simon Pimstone

Simon Pimstone

Chief Executive Officer

/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