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Item 1A. Risk Factors

2022-05-10 compared with 2021-11-10 · 201 added, 166 removed, 963 unchanged (28% of the section changed)

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Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.

Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

Risks Related to Our Financial Condition and Capital Requirements

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

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 had a net loss of $19.7 million for the three months ended March 31, 2022 and an accumulated deficit of $377.0 million as of March 31, 2022, 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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continue our research and pre-clinical and clinical development of our product candidates;

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

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

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

change or add additional manufacturers or suppliers and manufacture drug supply and drug product for clinical trials and commercialization;

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

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

seek to identify and validate additional product candidates;

acquire or in-license other product candidates and technologies;

make milestone or other payments under our in-license or other agreements, including, without limitation, payments to Memorial University of Newfoundland, 1st Order Pharmaceuticals, Inc.

make milestone or other payments under our in-license or other agreements, including, without limitation, payments to 1st Order Pharmaceuticals, Inc.

and other third parties;

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completing research, pre-clinical and clinical development of our product candidates;

seeking and obtaining regulatory and marketing approvals for product candidates for which we complete clinical studies;

seeking and obtaining regulatory and marketing approvals for product candidates for which we complete clinical trials;

commercializing products for which we obtain regulatory and marketing approval, either with a collaborator or, if launched independently, by establishing sales, marketing and distribution infrastructure;

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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 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.

During the three months ended March 31, 2022, we incurred $19.4 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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The sale of additional equity or convertible securities also would dilute all of our shareholders.

For example, in November 2019, we entered into the November 2019 sales agreement with Jefferies LLC, or Jefferies, and Stifel, Nicolaus & Company, Incorporated, or Stifel, to sell up to $50.0 million of our common shares, from time to time, through an “at-the-market” equity offering program under which Jefferies and Stifel acted as sales agents.

As of January 2020, we had sold an aggregate of 3,252,330 common shares for proceeds of $48.5 million, net of commissions paid and transaction expenses.

In January 2020, we completed an underwritten public offering of 3,750,000 of our common shares at a public offering price of $16.00 per share for proceeds of $56.3 million, net of underwriting discounts, commissions and offering expenses.

In February 2020, the underwriters of the January 2020 public offering exercised their option to purchase an additional 562,500 of our common shares at a public offering price of $16.00 per share, raising additional proceeds of $8.4 million, net of underwriting discounts, commissions and offering expenses.

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

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.

For example, 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.

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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.

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

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

The public offering was completed on October 8, 2021, and we received proceeds of $323.9 million, net of underwriting discounts, commissions and offering expenses.

In January 2022, pursuant to the terms of our collaboration agreement with Neurocrine Biosciences, we issued 258,986 common shares to Neurocrine Biosciences for an aggregate purchase price of $8.25 million.

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

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

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

As of March 31, 2022, no common shares have been sold under the March 2022 ATM .

Historically, we have also financed our operations through the incurrence of debt.

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

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

As of September 30, 2021, approximately 7% of our cash and cash equivalents and marketable securities were denominated in Canadian dollars.

As of March 31, 2022, 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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make certain investments.

For example, in August 2018, we entered into an amended and restated loan and security agreement with Silicon Valley Bank providing for a term loan to us with an aggregate principal amount of $15.5 million.

Borrowings under this amended and restated loan and security agreement were secured by substantially all of our assets except intellectual property and also subjected us to certain affirmative and restrictive covenants.

In May 2020, we repaid our borrowings and terminated the amended and restated loan agreement;

however, we may consider similar debt financing arrangements in the future.

While we are not currently a party to any material debt financing arrangements, we may consider such debt financing arrangements in the future.

Any such debt financing we seek in the future may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies.

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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, gabapentin 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, 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.

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

The FDA has not yet approved any drug products specifically for KCNQ2 developmental and epileptic encephalopathy (otherwise known as KCNQ2-DEE) or for SCN8A developmental and epileptic encephalopathy (otherwise known as SCN8A-DEE).

There are other ASMs in clinical development that could potentially compete with our products, including products in development from Angelini Pharma, Biohaven Pharmaceutical Holding Company, Ltd .

, Cerevel Therapeutics Holdings, Inc., Eisai Co., Eliem Therapeutics, Inc., Ltd., Epygenix Therapeutics, Inc., H.

Lundbeck A/S, Janssen Pharmaceuticals, Inc., Jazz Pharmaceuticals plc, Longboard Pharmaceuticals Inc., Marinus Pharmaceuticals, Inc., Neurocrine Biosciences, Otsuka Pharmaceutical Co., Ltd., Praxis Precision Medicines, Inc., QurAlis Corporation, SK Life Science Inc., Stoke Therapeutics Inc., Supernus Pharmaceuticals, Inc.

, Takeda Pharmaceutical Company Ltd., Taysha Gene Therapies, Inc., and UCB, 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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If we are unsuccessful in accomplishing these objectives, we will not be able to develop and commercialize any future product candidates independently and could fail to realize the potential advantages of doing so.

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

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

We have built a product development pipeline by identifying product candidates either from our internal research efforts or 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 Therapeutics, Inc., or Flexion, to use in its product candidate FX301.

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 we sold to Flexion Therapeutics, Inc., or Flexion, acquired by Pacira BioSciences, Inc.

in November 2021, or Pacira BioSciences, to use in its product candidate FX301, now known as PCRX301.

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 are exposed to the risk of fraud or other misconduct by our employees, collaborators, vendors, principal investigators, consultants and commercial partners.

Misconduct by these parties could include intentional failures to comply with the regulations of the FDA, EMA, Health Canada and other regulators, provide accurate information to the FDA, EMA, Health Canada and other regulators, comply with data privacy and security and healthcare fraud and abuse laws and regulations in the U.S.

Misconduct by these parties could include intentional failures to comply with the regulations of the FDA, EMA, Health Canada and other regulators, provide accurate information to the FDA, EMA, Health Canada and other regulators, comply with data privacy, data protection and security and healthcare fraud and abuse laws and regulations in the U.S.

and abroad, report financial information or data accurately or disclose unauthorized activities to us.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

Additionally, laws regarding data privacy and security, including the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, the General Data Protection Regulation (EU) 2016/679, or GDPR, and the Personal Information Protection and Electronic Documents Act, or PIPEDA, as well as comparable laws in other jurisdictions, may impose obligations with respect to safeguarding the privacy, use, security and transmission of individually identifiable health information such as genetic material or information we have obtained through our direct-to-patient web-based recruitment approach for identifying patients with rare or extreme phenotypes or patients identified for clinical trials.

Additionally, laws regarding data privacy and security, including the U.S.

federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, the General Data Protection Regulation (EU) 2016/679, or GDPR, and the Canadian federal Personal Information Protection and Electronic Documents Act, or PIPEDA, as well as comparable laws in other jurisdictions, impose obligations with respect to safeguarding the privacy, use, security, protection and transmission of individually identifiable health information or other personal information such as genetic material or information we have obtained through our direct-to-patient web-based recruitment approach for identifying patients with rare or extreme phenotypes or patients identified for clinical trials.

Various laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Any misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation.

We have adopted a code of conduct applicable to all of our employees, officers, directors, agents and representatives, including consultants, but it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent misconduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws and regulations.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions, exclusion from participation in government healthcare programs, or the curtailment or restructuring of our operations.

Any misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation.

We have adopted a code of conduct applicable to all of our employees, officers, directors, agents and representatives, including consultants, but it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent misconduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or claims, demands, or lawsuits stemming from an actual or alleged failure to comply with these laws and regulations.

If any such actions are instituted against us, and we are not successful in defending ourselves, achieving a favorable settlement or otherwise asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions, exclusion from participation in government healthcare programs, or the curtailment or restructuring of our operations.

Additionally, defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources.

Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

We may encounter difficulties in managing our growth, including headcount, and expanding our operations successfully.

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In order to execute on this strategy, we will need to build out a regulatory, sales, manufacturing, supply chain and marketing infrastructure and expand our development capabilities or contract with third parties to provide these capabilities and infrastructure for us.

To achieve this, we will need to identify, hire and integrate personnel who have not worked together as a group previously.

To achieve this, we will need to identify, hire and integrate personnel who have not worked together as a group previously and compensate our employees on adequate terms in an increasingly competitive, inflationary market.

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

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To meet business objectives, we rely on both internal information technology systems and networks, and those of third parties and their vendors and contractors, to process and store sensitive data, including confidential research, business plans, financial information, intellectual property, and personal data that may be subject to legal protection.

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.

Computer system, network or telecommunications failures due to events such as damage or disrupted operations from ransomware or other 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 or our third-party contractors’ or vendors’ 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.

A breakdown, invasion, corruption, destruction, breach or other compromise of our or our third-party contractors’ or vendors’ technology systems, including cloud technologies, and/or unauthorized access to, or the loss, destruction, alteration, prevention of access to, disclosure, or dissemination of, or damage or unauthorized access to, our data (including trade secrets or other confidential information, intellectual property, proprietary business information, and personal information) or data that is processed or maintained on our behalf, 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.

In addition, the loss of or alteration or other damage to pre-clinical trial data, data from completed or ongoing clinical trials for our product candidates or other confidential information could result in delays in our regulatory filings and development efforts, significantly increase our costs and result in other adverse impacts to our business.

To the extent that any disruption or cybersecurity breach was to result in a loss of or alteration or other damage to our data, or inappropriate disclosure of confidential, personal or proprietary information, we could incur liability and other remediation costs, could suffer harm to our reputation and the development of our product candidates could be delayed.

To date, we have not experienced any material impact to our business, financial position or operations resulting from information security incidents or cyberattacks such as phishing, social engineering, ransomware or malware attacks;

Any disruption or cybersecurity breach or other security incident that results in the loss, destruction, alteration, prevention of access to, disclosure, or dissemination of, or damage or unauthorized access to, our data (including trade secrets or other confidential information, intellectual property, proprietary business information, and personal information) or data that is processed or maintained on our behalf, including inappropriate disclosure, use or other processing of confidential, personal or proprietary information, or the perception or belief that any such incident has occurred, could cause us to be the subject of claims, demands, lawsuits, and other proceedings by private parties or governmental authorities, and to incur liability and other remediation costs, could harm our reputation and market position, and could result in delays in the development of our product candidates.

To date, we have not experienced any material impact to our business, financial position or operations resulting from cyberattacks or other information security incidents such as phishing, social engineering, ransomware or malware attacks;

however, because of the frequently changing attack techniques, along with the increased volume and sophistication of such attacks, our business, financial position or operations could be adversely impacted in the future.

This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action.

This impact could result in reputational, competitive, operational or other business harm as well as financial costs and private claims, demands or litigation and regulatory action.

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.

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workforce uncertainty in countries where labor unrest is more common than in North America;

controlled substance legislation differs between countries and legislation in certain countries may restrict or limit our ability to manufacture and/or transport our product candidates;

controlled substance legislation differs between countries and legislation in certain countries may restrict, limit or delay our ability to manufacture and/or transport our product candidates;

likelihood of potential or actual violations of domestic and international anti-corruption laws, such as the U.S.

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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;

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

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires;

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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 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.

Certain of our research and development efforts are also conducted globally, including our ongoing Phase 3 XEN496 (EPIK) clinical trial.

In addition, we recently initiated our Phase 2 XEN1101 (X-NOVA) clinical trial.

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.

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

We continue to provide many of our employees the option to work from home and implemented a halt of non-essential business travel since March 2020.

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

Our EPIK and X-NOVA clinical trials are dependent upon our ability to initiate clinical sites and enroll patients despite the ongoing COVID-19 pandemic.

With the number of COVID-19 variants on the rise, including the more contagious Omicron variant and subvariants, there is a continued risk that COVID-19 infections could affect a sizable number of employees at the same time, which could in turn significantly affect our operations.

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

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We may become subject to income tax in jurisdictions in which we are organized or operate, which would reduce our future earnings.

There is a risk that we may become subject to income tax in jurisdictions outside of Canada and the United States, if under the laws of any such jurisdiction, we are considered to be carrying on a trade or business there or earn income that is considered to be sourced there and we do not qualify for an exemption.

There is a risk that we may become subject to income tax in jurisdictions outside of Canada and the U.S., if under the laws of any such jurisdiction, we are considered to be carrying on a trade or business there or earn income that is considered to be sourced there and we do not qualify for an exemption.

In jurisdictions where we do not believe we are subject to tax, we can provide no certainty that tax authorities in those jurisdictions will not subject one or more tax years to examination.

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a decline in the market price of our common shares.

We currently carry product liability insurance of $10,000,000 per occurrence and $10,000,000 aggregate limit.

We believe our product liability insurance coverage is appropriate relative to our current clinical programs;

We currently carry product liability insurance with amounts of coverage that we believe are appropriate relative to our current clinical programs;

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

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federal civil and criminal false claims laws, including the federal False Claims Act, which can be enforced through civil whistleblower, or qui tam actions, as well as civil monetary penalty laws can impose criminal and civil penalties, assessment, and exclusion from participation for various forms of fraud and abuse involving the federal health care programs, such as Medicare and Medicaid;

HIPAA, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

HIPAA, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters, and which, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and HIPAA’s and HITECH’s implementing regulations, also imposes obligations, including mandatory contractual terms, on covered entities, which are health plans, healthcare clearinghouses, and certain health care providers, as those terms are defined by HIPAA, and their respective business associates and their subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

the federal Physicians Payment Sunshine Act, also referred to as the CMS Open Payments, which requires applicable manufacturers of certain drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS, information related to:

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 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;

certain payments or other transfers of value made to physicians (defined to include doctors of medicine and osteopathy, dentists, podiatrists, optometrists and licensed chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others), and teaching hospitals as well as information regarding ownership or investment interests held by physicians and their immediate family members;

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

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

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

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

It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

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

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare and privacy and data protection laws and regulations may involve substantial costs and may require us to undertake or implement additional policies or measures.

We may face claims and proceedings by private parties, and claims, investigations and other proceedings by governmental authorities, relating to allegations that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations, and it is possible that courts or governmental authorities may conclude that we have not complied with them, or that we may find it necessary or appropriate to settle any such claims or other proceedings.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, and the curtailment or restructuring of our operations, which could have a material adverse effect on our business .

If any of the physicians or other providers or entities with whom we expect to do business, including our collaborators, is found not to be in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government healthcare programs, which could also materially affect our business.

Further, defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources.

Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

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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 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.

In addition, the FDA, EMA, Health Canada or other regulatory authorities’ policies with respect to clinical trials may change and additional government regulations may be enacted.

For instance, the regulatory landscape related to clinical trials in the EU recently evolved.

The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022.

The implementation of the CTR also includes the implementation of the Clinical Trials Information System, a new clinical trial portal and database that will be maintained by the EMA in collaboration with the European Commission and the EU Member States.

The objectives of the CTR include consistent rules for conducting trials throughout the EU, consistent data standards and adverse events listing, and consistent information on the authorization status.

Information on the conduct and results of each clinical trial carried out in the EU will be made publicly available.

Complying with changes in regulatory requirements can result in additional costs, delay our clinical development plans, or expose us to greater liability if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans, including XEN1101, may be impacted.

Additionally , 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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our inability to add new or additional clinical trial sites;

our inability to manufacture, or obtain from third parties, adequate supply of drug substance or drug product sufficient to complete our pre-clinical studies and clinical trials;

our inability to manufacture, or obtain from third parties, adequate supply of drug substance or drug product sufficient to complete our pre-clinical studies and clinical trials, including supply chain issues resulting from any events affecting raw material supply or manufacturing capabilities abroad;

unforeseen disruptions, caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic;

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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.

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.

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 or juvenile absence epilepsy, or CAE or JAE, clinical trials can also be lengthy due to the challenge of identifying and recruiting patients.

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

Even if patients are successfully identified, they may fail screening criteria including baseline seizure burden and, as a result, not be enrolled in the trial.

Any challenges associated with identifying, screening and/or enrolling patients in our trials may extend the time needed to complete our EPIK trial or other clinical trials or require additional sites to be initiated in order to achieve target enrollment numbers and to complete our clinical trials , which may increase the cost of our operations and/or delay the timing of our regulatory approval.

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.

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However, other regulatory authorities may require additional data.

Further, even though we believe the safety and efficacy profile of ezogabine, the active ingredient in XEN496, in pediatric patients with KCNQ2-DEE generated to date by others appears promising based on published clinical case reports, we do not yet know if the pediatric-specific formulation of XEN496 will have the same or similar safety, pharmacokinetic and/or efficacy profile in pediatric patients with KCNQ2-DEE as the original formulation of ezogabine.

Further, even though we believe the safety and efficacy profile of ezogabine, the active ingredient in XEN496, in pediatric patients with KCNQ2-DEE generated to date by others appears promising based on published clinical case reports, we do not yet know if our pediatric-specific formulation of XEN496 will have the same or similar safety, pharmacokinetic and/or efficacy profile in pediatric patients with KCNQ2-DEE as the original formulation of ezogabine.

If we are unable to replicate the published clinical case reports, due to the new formulation or any other factors, the clinical development of XEN496 may not be successful and the FDA or other regulatory authorities may require additional data in more patients or we may not be able to generate sufficient data for approval in this patient population.

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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 (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.

Our and our collaborators’ clinical product candidates, which include XEN1101, XEN496, NBI-921352 (being developed by our collaborator Neurocrine Biosciences), and PCRX301 (being developed by Pacira BioSciences), 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 product candidates, we or our collaborators must demonstrate through lengthy, complex and expensive pre-clinical testing and clinical trials that each product candidate is both safe and effective for use in each target indication.

Failure can occur at any time during the clinical trial process.

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In such case, we would need to develop other compounds and conduct associated pre-clinical testing and clinical trials, as well as potentially seek additional financing, all of which would have a material adverse effect on our business, growth prospects, operating results, financial condition and results of operations.

We or our collaborators may find it difficult to enroll patients in our clinical studies, including for ultra-orphan, orphan or niche indications, which could delay or prevent clinical studies of our product candidates.

We or our collaborators may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a study, to complete clinical studies in a timely manner, or at all.

We or our collaborators may find it difficult to enroll patients in our clinical trials, including for ultra-orphan, orphan or niche indications, which could delay or prevent clinical trials of our product candidates.

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

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perceived risks and benefits of the product candidate under study;

proximity and availability of clinical study sites for prospective patients;

availability of competing therapies and clinical studies;

efforts to facilitate timely enrollment in clinical studies;

proximity and availability of clinical trial sites for prospective patients;

availability of competing therapies and clinical trials;

efforts to facilitate timely enrollment in clinical trials;

patient referral practices of physicians.

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.

The limited patient populations in ultra-orphan, orphan and niche indications, such as KCNQ2-DEE, SCN8A-DEE and other early infantile epileptic encephalopathies , 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.

This means that we or our collaborators will generally have to run multi-site and potentially multi-national trials, which can be expensive and require close coordination and supervision.

If we or our collaborators’ experience delays in completing our clinical trials, such delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our product candidates or termination of the clinical studies altogether.

Even if we or our collaborators’ are successful in receiving regulatory approval, the limited patient populations in ultra-orphan, orphan and niche indications may impact the successful commercialization of our or our collaborators’ product candidates and reimbursement rates, which could impact revenue and our ability to achieve profitability.

If we fail to obtain or maintain orphan drug designation or other regulatory exclusivity for some of our product candidates, our competitive position would be harmed.

Although we have pending provisional and non-provisional patent applications related to XEN496 and XEN007, these product candidates are not currently covered by any issued patents and we may have to rely solely on orphan drug designation to gain market exclusivity for these product candidates.

Although we have pending provisional and non-provisional patent applications related to XEN496, this product candidate is not currently covered by any issued patents and we may have to rely solely on orphan drug designation to gain market exclusivity for this product candidate.

Currently, this designation provides market exclusivity in the U.S.

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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, 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.

We have 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 and Neurocrine Biosciences received orphan drug designation from the FDA for NBI-921352 as a treatment of SCN8A.

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

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

Although the FDA has granted RPD designation to NBI-921352 for the treatment of SCN8A-DEE, we may not be able to realize any value from such designation.

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.

primarily under the age of 18 years old.

Under the FDA's RPD priority review voucher program, upon the approval of a new drug application, NDA, or a biologics license application, BLA, for the treatment of an RPD, the sponsor of such application would be eligible for a priority review voucher that can be used to obtain priority review for a subsequent NDA or BLA.

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 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.

Under the FDA’s RPD priority review voucher program, upon the approval of an NDA or a biologics license application, BLA, for the treatment of an RPD, the sponsor of such application would be eligible for a priority review voucher that can be used to obtain priority review for a subsequent NDA or BLA.

There is no assurance 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 Neurocrine Biosciences obtains approval for NBI-921352 in SCN8A-DEE and qualifies for such a priority review voucher, the program may no longer be in effect at the time of approval of this product candidate.

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 or our any of our collaborators were to sell a priority review voucher to a third party.

In addition, as part of the Coronavirus Response and Relief Supplemental Consolidated Appropriations Act of 2021, Congress extended FDA authorization to operate the RPD Priority Review Voucher Program through fiscal year 2024.

RPD Designation does not lead to faster development or regulatory review of the product, or increase the likelihood that it will receive marketing approval.

Even though XEN496 has Fast Track designation from FDA for the prevention of KCNQ2-DEE, it may not lead to a faster development or regulatory review or approval process, and will not increase the likelihood that XEN496 will receive marketing approval.

If a drug is intended for the treatment of a serious or life-threatening condition or disease, and non-clinical or clinical data demonstrate the potential to address an unmet medical need, the product may qualify for FDA Fast Track or Breakthrough Therapy designations and/or PRIority Medicines, or PRIME, designation from the EMA, for which sponsors must apply.

The FDA and the EMA have broad discretion whether or not to grant those designations.

Although we have received Fast Track designation for the investigation of XEN496 for the treatment of KCNQ2-DEE, we may not experience a faster development process, review or approval compared to conventional FDA procedures.

In addition, the FDA may withdraw Fast Track or Breakthrough Therapy designation and the EMA may withdraw PRIME designation if the relevant agency believes that the designation is no longer supported by data from the applicable clinical development program.

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, may not be predictive of results in clinical testing.

The results of pre-clinical studies, either generated by us, such as for XEN901 (licensed to Neurocrine Biosciences and is now known as NBI-921352) or XEN402 (owned by Pacira BioSciences for use in its product candidate PCRX301), 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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Furthermore, any of these regulatory authorities may also approve our product candidates for a narrower indication than we request or may grant approval contingent on the performance of costly post-marketing clinical trials.

Interim, initial, “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or top-line data from our pre-clinical studies and clinical trials, which are based on preliminary analyses of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular pre-clinical study or clinical trial.

We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.

As a result, the top-line or preliminary results that we report may differ from future results of the same studies or trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Top-line data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

As a result, top-line data should be viewed with caution until the final data are available.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and could have a material adverse effect on the success of our business.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, results of operations, prospects or financial condition.

Further, disclosure of interim, top-line or preliminary data by us or by our competitors could result in volatility in the price of our common s hares .

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

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Our drug discovery efforts may initially show promise in identifying additional potential product candidates yet fail to yield viable product candidates for clinical development or commercialization.

Such failure may occur for many reasons, including the following:

any product candidate may, on further study, be shown to have serious or unexpected side effects or other characteristics that indicate it is unlikely to be safe or otherwise does not meet applicable regulatory criteria;

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

Such failure may occur for many reasons, including that any product candidate may, on further study, be shown to have serious or unexpected side effects or other characteristics that indicate it is unlikely to be safe or otherwise does not meet applicable regulatory criteria and/or not be capable of being produced in commercial quantities at an acceptable cost, or at all.

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

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For example, XEN496 is a pediatric-specific formulation of ezogabine and we have also developed a pediatric formulation for NBI-921352 that was included in the license to Neurocrine Biosciences.

Any of these changes could cause our product candidates to perform differently and not provide the same drug exposure profile in children and/or cause side effects different to those observed with formulations previously tested in adults.

Unexpected changes in the performance of a new formulation may affect the results of planned clinical trials or other future clinical trials conducted with the altered materials.

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Even if our product candidates are approved, regulatory approval for any product may be withdrawn by the regulatory authorities in a particular jurisdiction.

Even if a product is approved, the FDA, EMA, Health Canada, or another applicable regulatory authority, as the case may be, may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming post-approval commitments including clinical trials or onerous risk management activities, including Risk Evaluation and Mitigation Strategies, or REMS, in the United States as conditions of approval to help ensure that the benefits of the drug outweigh the potential risks.

as conditions of approval to help ensure that the benefits of the drug outweigh the potential risks.

REMS can include medication guides, communication plans for health care professionals, and elements to assure safe use, or ETASU.

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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, 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.

For certain products, including XEN496 and XEN1101, and/or specific commercial markets, we may seek commercial partners.

In some cases, we 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.

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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 United States) 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 U.S.) which will result in additional complexity and may result in delays and restrictions with respect to 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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The FDA does not regulate the behavior of physicians in their choice of treatments but the FDA and other foreign regulators do restrict manufacturer’s communications on the subject of off-label use of their products.

To the extent we develop and commercialize product candidates that contain or are considered controlled substances, such product candidates are subject to controlled substance laws and regulations in the territories where the product candidates will be developed and commercialized, and any failure by us or our CROs, CMOs and other contractors to comply with controlled substance laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition

XEN496 contains ezogabine, a Schedule V controlled substance, and is subject to controlled substance laws and regulations in the U.S.

We have received letters of no objection which confirm XEN496 is not considered a controlled substance in Canada, Australia and the European countries where XEN496 will be imported for the EPIK trial.

We may in the future develop other product candidates that are considered controlled substances in multiple jurisdictions, such as the U.S., Canada, and the EU, which will expose us to additional controlled substance regulatory requirements in each applicable jurisdiction where we engage in regulated activities, including storage, manufacture, research, clinical trials, import, and export, among other activities.

For example, obtaining and maintaining the necessary registrations may result in delay of the importation, manufacturing or distribution of our controlled substance product candidates and may extend our anticipated timelines for our XEN496 EPIK trial or other clinical trials we run.

Controlled substances or scheduled substances are regulated by the DEA under the CSA.

The DEA regulates compounds as Schedule I, II, III, IV or V substances.

Pharmaceutical products approved for use in the U.S.

may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances.

Scheduling determinations by the DEA are dependent on FDA approval of a substance or a specific formulation of a substance.

This scheduling determination will be dependent on FDA approval and the FDA’s recommendation as to the appropriate schedule, which may introduce a delay into the approval and any potential rescheduling process.

There can be no assurance that the DEA will make a favorable scheduling decision.

Substances that are Schedule II, III, IV or V controlled substances at the federal level may also require scheduling determinations under state laws and regulations, as well as similar foreign controlled substances regulations, if applicable.

If approved by the FDA, a number of post-approval activities involving controlled substances will be subject to regulation by the DEA, including DEA regulations relating to registration and inspection of facilities, manufacturing, storage, distribution and physician prescription procedures, among others.

Furthermore, failure of our contractors, such as our CROs and CMOs, to maintain compliance with the CSA during development and/or commercialization, as applicable, can result in a material adverse effect on our business, financial condition and results of operations.

Individual U.S.

states and countries outside of the U.S.

have also established controlled substance laws and regulations.

Those laws and regulations, including state controlled substances laws that often but not necessarily mirror federal law, may separately schedule our product candidates.

Complying with different controlled substances requirements across different jurisdictions can increase the cost of our operations and expose us to additional liabilities.

Even if we obtain marketing approval for our product candidates, the presence of a controlled substance in the product candidate may lead to adverse publicity or public perception regarding our current or future product candidates.

Our product candidate XEN496 contains a Schedule V controlled substance.

If XEN496 or our other product candidates that are subject to controlled substances regulation are approved for commercial sale, adverse publicity or public perception of controlled substances in general or other controlled substances could negatively impact market acceptance or consumer perception of our product candidates.

We may face limited adoption if clinicians or patients are unwilling to try a novel treatment that contains a controlled substance.

Any adverse publicity associated with illness or other adverse effects resulting from patients’ use or misuse of our or similar therapies distributed by other companies could have a material adverse impact on our business, prospects, financial condition and results of operations.

Future adverse events and research in controlled substances that are present in the product candidates could also result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approvals of our product candidates.

Any increased scrutiny could delay or increase the costs of obtaining regulatory approval for our product candidates.

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

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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, CAE and JAE.

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

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.

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.

In June 2021, the U.S.

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.

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Multiple lawsuits have been brought against the HHS challenging various aspects of these new rules.

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.

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

We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare.

We are unable to predict the future course of federal or state healthcare legislation in the U.S.

directed at broadening the availability of healthcare and containing or lowering the cost of healthcare.

These and any further changes in the law or regulatory framework could reduce our ability to generate revenue in the future or increase our costs, either of which could have a material and adverse effect on our business, financial condition and results of operations.

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Foreign governments tend to impose strict price controls, which may adversely affect our future profitability.

In most foreign countries, particularly those in the EU and Canada, prescription drug pricing and/or reimbursement is subject to governmental control.

In many countries outside the U.S., particularly those in the EU and Canada, prescription drug pricing and/or reimbursement is subject to governmental control.

In those countries that impose price controls, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

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 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.

As of May 2022, 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 July 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.

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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 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.

We are dependent on our collaborators, including Neurocrine Biosciences and Pacira BioSciences, 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 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;

Neurocrine Biosciences’ failure to collect all data required by FDA or any other regulatory authority to 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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possible disagreements with Neurocrine Biosciences regarding the agreement, for example, with regard to ownership of intellectual property rights.

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, 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 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.

Although we have previously announced that Neurocrine Biosciences is conducting a Phase 2 clinical trial evaluating NBI-921352 in adult patients with focal onset seizures and a Phase 2 clinical trial evaluating NBI-921352 in pediatric patients (aged between 2 and 21 years) with SCN8A-DEE, we cannot be certain that Neurocrine Biosciences will continue to pursue these indications 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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the competitiveness of any product that is commercialized could be reduced.

We intend to rely on third-party manufacturers to produce our clinical product candidates and commercial supplies.

Any failure by a third-party manufacturer to produce acceptable supplies for us may delay or impair our ability to initiate or complete our clinical trials, gain regulatory approvals or commercialize approved products.

We rely on third-party manufacturers to produce our product candidates and on other third parties to store, monitor and transport bulk drug substance and drug product.

We and our third-party partners may encounter difficulties with respect to these activities that may delay or impair our ability to initiate or complete our clinical trials, gain regulatory approvals or commercialize approved products.

We do not currently own or operate any manufacturing facilities nor do we have significant in-house manufacturing experience or personnel.

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If we or our collaborators are unable to arrange for such third-party manufacturing sources, or fail to do so on commercially reasonable terms, we or our collaborators may not be able to successfully produce sufficient supply of a product candidate or we or our collaborators may be delayed in doing so.

Such failure or substantial delay could materially harm our business.

Such failure or substantial delay could delay our clinical trials and materially harm our business.

The manufacture of biopharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

The process of manufacturing our product candidates is susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, vendor or operator error, contamination and inconsistency in yields, variability in product characteristics and difficulties in scaling the production process.

Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions.

If microbial, viral or other contaminations are discovered in our product candidates or in the third-party manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.

Any adverse developments affecting manufacturing operations for our product candidates, if any are approved, may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products.

We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, including reliance on the third party for regulatory compliance and quality control and assurance, volume production, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure to synthesize and manufacture our product candidates in accordance with our product specifications) and the possibility of termination or nonrenewal of the agreement by the third party at a time that is costly or damaging to us.

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

In addition to third-party manufacturers, we rely on other third parties to store, monitor and transport bulk drug substance and drug product.

If we are unable to arrange for such third-party sources, or fail to do so on commercially reasonable terms, we may not be able to successfully supply sufficient product candidate or we may be delayed in doing so.

Such failure or substantial delay could materially harm our business.

We rely on third parties to conduct our pre-clinical studies and clinical trials.

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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 absence epilepsy, including CAE and JAE.

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.

For example, a Phase 2 proof-of-concept clinical trial examining XEN1101 in MDD 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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Regulatory authorities enforce these regulations through periodic inspections of clinical trial sponsors, principal investigators, clinical trial sites, manufacturing facilities, nonclinical testing facilities and other contractors.

If we or any of our CROs or CMOs fail to comply with these applicable regulations, the clinical data generated in our nonclinical studies and clinical trials may be deemed unreliable and our submission of marketing applications may be delayed or the FDA, EMA, Health Canada or another regulatory authority may require us to perform additional clinical trials before approving our marketing applications.

If we or any of our CROs or CMOs fail to comply with these applicable regulations, the clinical data generated in our non-clinical studies and clinical trials may be deemed unreliable and our submission of marketing applications may be delayed or the FDA, EMA, Health Canada or another regulatory authority may require us to perform additional clinical trials before approving our marketing applications.

Upon inspection, the FDA, EMA, Health Canada or another regulatory authority could determine that any of our clinical trials fail or have failed to comply with applicable cGCP regulations.

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Our failure to comply with cGLP, cGCP and cGMP regulations may require us to repeat clinical trials or manufacture additional batches of drug which would delay the regulatory approval process and increase our costs.

Moreover, our business may be implicated if any of our CROs or CMOs violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

Moreover, our business may be implicated if any of our CROs or CMOs violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws, or if this is asserted or reported to have occurred.

If any of our clinical trial sites terminates for any reason, we may experience the loss of follow-up information on patients enrolled in our ongoing clinical trials unless we are able to transfer the care of those patients to another qualified clinical trial site.

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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 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);

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 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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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 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 were sold to Pacira BioSciences (for use in its product candidate PCRX301).

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 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, Pacira BioSciences 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.

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

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

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

If we fail to comply with any of these obligations or otherwise breach our license agreements, our licensing partners may have the right to terminate the applicable license in whole or in part, or convert an exclusive license to a non-exclusive license.

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If we cannot maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information would be jeopardized, which would adversely affect our competitive position.

Recent court decisions could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Changes in U.S.

patent law, or laws in other countries, could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, thereby impairing our ability to protect our product candidates.

Our success is heavily dependent on intellectual property, particularly patents.

The patent positions of pharmaceutical and biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved.

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 USPTO and Congress have recently made significant changes to the patent system.

or other countries.

In addition, Congress or other foreign legislative bodies may pass patent reform legislation that is unfavorable to us.

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

As an example, by as early as October 1, 2022, European patent applications will have the option, upon grant of a patent, of becoming a Unitary Patent, which will be subject to the jurisdiction of the Unitary Patent Court, or UPC.

The option of a Unitary Patent will be a significant change in European patent practice.

As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation in the UPC.

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

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

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

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

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

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courts, brought in Canadian courts, including courts in the Province of British Columbia.

We are governed by the corporate and securities laws of Canada which in some cases have a different effect on shareholders than the corporate laws of Delaware, U.S.

We are governed by the corporate and securities laws of Canada which in some cases have a different effect on shareholders than the corporate laws of Delaware and U.S.

securities laws.

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and (ii) under the CBCA holders of 5% or more of our shares that carry the right to vote at a meeting of shareholders can requisition a special meeting of shareholders, whereas such right does not exist under the DGCL.

We are a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to such companies could make our common shares less attractive to investors.

We are a “smaller reporting company,” as defined under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

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.

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 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.

Future sales and issuances of our common shares or securities convertible into or exchangeable for common shares would cause our shareholders to incur dilution and could cause the market price of our common shares to fall.

As of March 31, 2022, stock options to purchase 7,075,073 of our common shares with a weighted-average exercise price of $16.73 per common share were outstanding, a warrant to purchase 40,000 of our common shares with a weighted-average exercise price of $9.79 per common share was outstanding, and pre-funded warrants to purchase 2,775,996 of our common shares with an exercise price of $0.0001 per share were outstanding.

The exercise of any of these stock options or warrants would result in dilution to current common shareholders.

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

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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 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.

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 “at-the-market” equity offering program with Jefferies and Stifel, 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 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.

There is no public market for our outstanding pre-funded warrants.

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

In addition, we do not intend to list the outstanding pre-funded warrants 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 will be limited.

General Risk Factors

Unstable market and economic conditions may have serious adverse consequences on our business and financial condition.

Global credit and financial markets have at times experienced extreme disruptions, including most recently in connection with the novel coronavirus, or COVID-19 pandemic, characterized by increased market volatility, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.

Global credit and financial markets have at times experienced extreme disruptions, including most recently in connection with the COVID-19 pandemic, characterized by increased market volatility, increased rates of inflation, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.

If another such disruption in credit and financial markets and deterioration of confidence in economic conditions occurs, our business may be adversely affected.

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We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually.

We may also be required to obtain an independent assessment of the effectiveness of our internal controls which could detect problems that our management’s assessment might not.

Going forward, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses or significant deficiencies with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.

We are also required to obtain an independent assessment of the effectiveness of our internal controls which could detect problems that our management’s assessment might not.

Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses or significant deficiencies with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.

If we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements, investors may lose confidence in our reported financial information, which could cause the market price of our common shares to decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

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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.

Amendment No.

1 to the At-the-Market Equity Offering Sales Agreement, dated March 1, 2022, by and among Xenon Pharmaceuticals Inc., Jefferies LLC and Stifel, Nicolaus & Company, Incorporated.

March 1, 2022

Share Purchase Agreement, dated as of January 11, 2022, 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.

January 12, 2022

Amendment #2, dated February 25, 2022, to the License and Collaboration Agreement, dated December 2, 2019, by and between Xenon Pharmaceuticals Inc.

and Neurocrine Biosciences, Inc.

March 1, 2022

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.

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

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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.

Portions of this exhibit have been omitted in accordance with Item 601(b)(10) of Regulation S-K because they are private, confidential and not material.

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.

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President and Chief Executive Officer

November 10, 2021

/s/ Sherry Aulin

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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