What changed in this filing

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Item 1A. Risk Factors

2021-11-10 compared with 2021-08-11 · 94 added, 45 removed, 1035 unchanged (12% 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 $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 had a net loss of $53.3 million for the nine months ended September 30, 2021 and an accumulated deficit of $331.8 million as of September 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 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.

During the nine months ended September 30, 2021, we incurred $53.6 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 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.

As of September 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.

The common shares were offered at a public offering price of $18.50 per common share and the pre-funded warrants were offered at a price of $18.4999 per pre-funded warrant, for proceeds of $107.9 million, net of underwriting discounts, commissions and offering expenses.

In September 2021, pursuant to the terms of our collaboration agreement with Neurocrine Biosciences, we issued 275,337 common shares to Neurocrine Biosciences for an aggregate purchase price of $5.5 million.

In October 2021, we completed an underwritten public offering of 10,000,000 of our common shares, including 1,525,423 common shares sold upon the full exercise of the underwriters’ over-allotment option, at a public offering price of $29.50 per common share, and pre-funded warrants to purchase 1,694,915 common shares at $29.4999 per pre-funded warrant, with each pre-funded warrant having an exercise price of $0.0001.

The public offering was completed on October 8, 2021, and we received proceeds of $324.3 million, net of underwriting discounts, commissions, but before offering expenses.

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.

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

As of June 30, 2021 , approximately 5 % of our cash and cash equivalents and marketable securities were denominated in Canadian dollars.

As of September 30, 2021, approximately 7% 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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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., 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.

There are other ASMs in clinical development that could potentially compete with our products, including products in development from Angelini Pharma, Eliem Therapeutics, Inc., Eisai Co., Ltd., Epygenix Therapeutics, Inc., Janssen Pharmaceuticals, Inc., Jazz Pharmaceuticals plc, Knopp Biosciences LLC, Longboard Pharmaceuticals Inc., Marinus Pharmaceuticals, Inc., Neurocrine Biosciences, Ovid Therapeutics Inc., Praxis Precision Medicines, Inc., QurAlis Corporation, Sage Therapeutics, SK Life Science Inc., Stoke Therapeutics Inc., Supernus Pharmaceuticals, Inc., Takeda Pharmaceutical Company Ltd., Taysha Gene Therapies, Inc., 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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economic weakness, including inflation, political instability or open conflict in particular foreign economies and markets;

differing and multiple payor reimbursement regimes, government payors or patient self-pay systems;

differing and multiple payor reimbursement regimes, government payers or patient self-pay systems;

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

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Bribery Act, or of U.S.

and international import, export and re-export control and sanctions laws and regulations, which likelihood may increase with an increase of operations in foreign jurisdictions;

and international import, export and re-export control and sanctions laws and regulations, which likelihood may increase with an increase of operations in foreign jurisdictions, directly or indirectly through third parties (whose corrupt or other illegal conduct may subject us to liability), which may involve interactions with government agencies or government-affiliated hospitals, universities and other organizations, such as conducting clinical trials, selling our products, and obtaining necessary permits, licenses, patent registrations, and other regulatory approvals;

tighter restrictions on privacy and the collection, use and retention of data, including clinical data and genetic material, may apply in jurisdictions outside of North America;

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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 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.

Certain of our research and development efforts are also conducted globally, including our ongoing 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 Phase 2b XEN1101 (X-TOLE) clinical 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 ongoing or future clinical trials.

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Based on the price of our common shares and the composition of our gross income and gross assets, we do not believe we were a PFIC for the taxable years ended December 31, 2020 and 2019 but we could be a PFIC in subsequent years.

Our status as a PFIC is a fact-intensive determination made on an annual basis, and we cannot provide any assurance regarding our PFIC status for future taxable years.

Our status as a PFIC is a fact-intensive determination made on an annual basis, and we cannot provide any assurance regarding our PFIC status for the current taxable year or future taxable years.

If we are a PFIC for any year, U.S.

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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;

effective January 1, 2022, for data reported to CMS in 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;

effective January 1, 2022, for data collected in 2021 and reported to CMS in 2022, these reporting obligations are extended to include payments and transfers of value made and ownership interests held during the previous year to certain non-physician providers, including physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and anesthesiologist assistants, and certified nurse midwives;

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;

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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 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.

Even if the data from our X-TOLE Phase 2b clinical trial are positive, there can be no assurance that we will be able to successfully advance development of this product candidate into later stage clinical trials or obtain regulatory approval of XEN1101.

For example, on October 4, 2021 we released topline data from our X-TOLE Phase 2b clinical trial of XEN1101 in adult patients with focal epilepsy.

Even though the topline data from our X-TOLE Phase 2b clinical trial are positive, there can be no assurance that we will be able to successfully advance development of this product candidate into later stage clinical trials or obtain regulatory approval of XEN1101.

Any of the foregoing outcomes would materially and adversely impact our business, product candidate pipeline and future prospects.

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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, CAE and JAE, 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 infantile 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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and the EU for seven years and ten years, respectively, if a product is the first such product approved for such orphan indication.

This market exclusivity does not, however, pertain to indications other than those for which the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan designations or approvals in these same indications.

In the EU, for orphan medicines, a valid and completed Pediatric Investigation Plan, or PIP, could qualify the sponsor for a two-year marketing exclusivity extension to the ten-year marketing exclusivity which is granted at the time of review of the orphan medicinal designation.

The orphan drug market exclusivity does not, however, pertain to indications other than those for which the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan designations or approvals in these same indications.

Further, even after an orphan drug is approved, the FDA can subsequently approve a drug with similar chemical structure for the same condition if the FDA concludes that the new drug is clinically superior to the orphan product or a market shortage occurs .

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Results of pre-clinical studies and/or earlier clinical trials may not be predictive of the results of later-stage clinical trials and the results of our clinical trials may not satisfy the requirements of the FDA, EMA, Health Canada or foreign regulatory authorities.

The results of pre-clinical studies, either generated by us, such as for XEN901 (which we licensed to Neurocrine Biosciences and is now known as NBI-921352) or XEN402 (which was acquired by Flexion for use in its product candidate FX301), by our CROs or by other third parties from which we have in-licensed or acquired a product candidate, such as for XEN1101, may not be predictive of results in clinical testing.

The results of pre-clinical studies, either generated by us, such as for XEN901 (which we licensed to Neurocrine Biosciences and is now known as NBI-921352) or XEN402 (which was acquired by Flexion for use in its product candidate FX301), by our CROs or by other third parties from which we have in-licensed or acquired a product candidate, may not be predictive of results in clinical testing.

Moreover, pre-clinical results can often be difficult to compare across different studies for a variety of reasons, including differences in experimental protocols and techniques, personnel, equipment and other factors, which may make the pre-clinical results less reliable and predictive of clinical trial results.

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Our strategy involves building our own commercial infrastructure to selectively commercialize future products in certain commercial markets which will be expensive and time consuming.

For certain products and/or commercial markets, we may seek commercial partners and may seek to retain the right to participate in the future development and commercialization of such products if we believe such involvement would advance our business.

To develop internal sales, distribution and marketing capabilities, we will have to invest significant amounts of financial and management resources, some of which will need to be committed prior to any confirmation that any of our product candidates will be approved.

For certain products and/or commercial markets, including XEN496 and XEN1101, we may seek commercial partners for markets outside of North America and may seek to retain the right to participate in the future development and commercialization of such products if we believe such involvement would advance our business.

To develop internal sales, distribution and marketing capabilities in North America, we will have to invest significant amounts of financial and management resources, some of which will need to be committed prior to any confirmation that any of our product candidates will be approved.

We have no prior experience as a company in the marketing, sale and distribution of biopharmaceutical products and there are significant risks involved in building and managing a commercial organization.

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our inability to recruit and retain adequate numbers of qualified sales and marketing personnel or develop alternative sales channels;

the inability of our products to secure acceptance from physicians, healthcare providers, patients, third-party payors and the medical community including identifying an adequate number of physicians and patients, especially for ultra-orphan, orphan or niche indications;

the inability of our products to secure acceptance from physicians, healthcare providers, patients, third-party payers and the medical community including identifying an adequate number of physicians and patients, especially for ultra-orphan, orphan or niche indications;

the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines;

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Any regulatory approvals that we receive for the product candidates we commercialize, alone or with a collaborator, will be subject to limitations on the approved indicated uses for which the product may be marketed or subject to certain conditions of approval and may contain requirements for potentially costly post-approval trials, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the marketed product and compliance with the approved package insert.

In addition, our product candidates may receive schedule classifications under the Controlled Substances Act of 1970 (or scheduling classifications under similar legislation outside of the U.S.) which will result in additional complexity in manufacturing, supply chain, licensing, import/export and distribution.

In addition, our product candidates may receive schedule classifications under the Controlled Substances Act of 1970 (or scheduling classifications under similar legislation outside of the United States) which will result in additional complexity in manufacturing, supply chain, licensing, import/export and distribution.

For any approved product, we or our collaborators will need to ensure continued compliance with extensive regulations and requirements regarding the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product.

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Since its enactment, there have been legislative and judicial efforts to repeal, replace, or change some or all of the PPACA.

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.

For example, various portions of the PPACA have been the subject of legal and constitutional challenges.

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.

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Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business.

In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at increasing competition for prescription drugs.

In response to Biden's executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and potential legislative policies that Congress could pursue to advance these principles.

In addition, Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases.

The impact of these regulations and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is currently unknown.

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.

Further, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization.

These and other health reform measures that are implemented may have a material adverse effect on our operations.

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The continuing efforts of the government, insurance companies, managed care organizations, and other payors of healthcare services and medical products to contain or reduce costs of healthcare and/or impose price controls may adversely affect the demand for our product candidates, if approved, and our ability to achieve or maintain profitability.

In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our current or any future products.

In the EU, similar political, economic and regulatory developments may affect our or our collaborators’ ability to profitably commercialize our current or any future products.

In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level may result in significant additional requirements or obstacles that may increase our operating costs.

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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 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 November 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, with the implementation date delayed until January 2022 to provide additional time for the industry to adapt to new reporting obligations.

Such regulations, as well as future regulations on drug pricing and reporting obligations, will increase manufacturers’ compliance burden, which can be expensive and time consuming.

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

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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 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.

Based on this feedback, Neurocrine Biosciences is advancing a Phase 2 clinical trial in adolescent patients (aged 12 years and older) with SCN8A-DEE and intends 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).

The terms of our amended collaboration agreement with Neurocrine Biosciences are described in greater detail in the section of our Annual Report on Form 10-K filed with the SEC on March 1, 2021 titled “Business — Collaborations, Commercial and License Agreements — License and Collaboration Agreement with Neurocrine Biosciences, Inc.” If Neurocrine Biosciences does not provide the FDA with sufficient additional non-clinical data to support a protocol amendment, we would not qualify for the milestone tied to the SCN8A-DEE development program.

In addition, although we have previously announced that Neurocrine Biosciences is advancing clinical plans to develop NBI-921352 for the treatment of adult focal epilepsy and expects to initiate a Phase 2 clinical trial in 2021, we cannot be certain that Neurocrine Biosciences will continue to pursue this indication and we may not qualify for additional payments under our collaboration agreement.

In addition, although we have previously announced that Neurocrine Biosciences is advancing clinical plans to develop NBI-921352 for the treatment of adult focal epilepsy and expects to initiate a Phase 2 clinical trial later this year, we cannot be certain that Neurocrine Biosciences will continue to pursue this indication and we may not qualify for additional payments under our collaboration agreement.

If either we or Neurocrine Biosciences fail to perform our respective obligations, any clinical trial, regulatory approval or development progress could be significantly delayed or halted, could result in costly or time-consuming litigation or arbitration and could have a material adverse effect on our business.

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If any of our existing collaboration agreements are terminated, or if we determine that entering into other product collaborations is in our best interest but we either fail to enter into, delay in entering into or fail to maintain such collaborations:

the development of certain of our current or future product candidates may be terminated or delayed;

t he development of certain of our current or future product candidates may be terminated or delayed;

our cash expenditures related to development of any such product candidates would increase significantly and we may need to seek additional financing sooner than expected;

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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 absence epilepsy, including CAE and JAE.

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.

In addition, a Phase 2 proof-of-concept clinical trial examining XEN1101 in major depressive disorder and anhedonia is being conducted in partnership with academic collaborators at the Icahn School of Medicine at Mount Sinai, and patient enrollment was initiated in October 2021.

If we are unable to maintain or enter into agreements with these third parties on acceptable terms, or if any such engagement is terminated prematurely, we may be unable to enroll patients on a timely basis or otherwise conduct our trials in the manner we anticipate.

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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.

For example, as of October 2021, we owned (a) 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;

patent with claims directed to four distinct crystalline forms of XEN1101, pharmaceutical compositions comprising the same, and methods of preparing and using the same which is expected to expire in 2040 (absent any extensions of term);

and (c) a U.S.

patent with claims directed to methods of enhancing the bioavailability of XEN1101 by oral administration with, or in temporal proximity to, consuming food which is expected to expire in 2039 (absent any extensions of term).

We also filed in July 2021 a U.S.

continuation application of the aforementioned crystalline form patent and in October 2021 a U.S.

continuation application of the aforementioned bioavailability enhancement patent application.

In addition, as of October 2021, we have two pending U.S.

non-provisional patent applications directed to (1) methods of using XEN1101 for the treatment of depressive disorders;

and (2) 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.

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

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

While we believe that these 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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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.

In addition, we or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inventor.

For example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates.

Litigation may be necessary to defend against these and other claims challenging inventorship or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property.

If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

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.

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

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.

As of September 30, 2021, stock options to purchase 5,919,434 of our common shares with a weighted-average exercise price of $12.22 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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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 or may receive pursuant to our March 2021 public offering of common shares and pre-funded warrants to purchase common shares, 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, 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 have received or may receive pursuant to our October 2021 and March 2021 public offerings of common shares and pre-funded warrants to purchase common shares, our August 2020 “at-the-market” equity offering program with Jefferies and Stifel, our January 2020 public offering of common shares, as well as the net proceeds to us from previous equity and debt financings.

Shareholders 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.

There is no public market for our pre-funded warrants or our Series 1 Preferred Shares.

There is no public trading market for our pre-funded warrants or our Series 1 Preferred Shares and we do not expect a market to develop.

In addition, we do not intend to list the pre-funded warrants or our Series 1 Preferred Shares on the Nasdaq Global Market or any other national securities exchange or nationally recognized trading system.

Without an active trading market, the liquidity of the pre-funded warrants and our Series 1 Preferred Shares will be limited.

There is no public market for our outstanding pre-funded warrants or our Series 1 Preferred Shares.

There is no public trading market for our outstanding pre-funded warrants or our Series 1 Preferred Shares and we do not expect a market to develop.

In addition, we do not intend to list the outstanding pre-funded warrants or our Series 1 Preferred Shares on the Nasdaq Global Market or any other national securities exchange or nationally recognized trading system.

Without an active trading market, the liquidity of the outstanding pre-funded warrants and our Series 1 Preferred Shares will be limited.

General Risk Factors

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

(a) Exhibits.

Incorporated by Reference

Description of Document

Form of Pre-Funded Warrant.

October 6, 2021

Share Purchase Agreement, dated as of September 8, 2021, by and between Xenon Pharmaceuticals Inc.

and Neurocrine Biosciences, Inc.

September 8, 2021

Termination Agreement, dated August 6, 2021, by and among Xenon Pharmaceuticals Inc., Genentech, Inc.

Hoffmann-La Roche Ltd.

August 11, 2021

Employment Agreement, dated August 18, 2021, by and between the Company and Christopher Kenney.

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.

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.

November 10, 2021

XENON PHARMACEUTICALS INC.

/s/ Ian Mortimer

President and Chief Executive Officer

November 10, 2021

/s/ Sherry Aulin

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