Xenon Pharmaceuticals Inc

Previous wording

This section should be read in conjunction with our unaudited interim consolidated financial statements and related notes included in Part I, Item 1 of this report and our audited consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 29, 2024 and with the securities commissions in British Columbia, Alberta and Ontario on February 29, 2024.

Current wording

This section should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes included in Part I, Item 1 of this report and our audited consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 27, 2025 and with the securities commissions in British Columbia, Alberta and Ontario on February 27, 2025.

Previous wording

the direct and indirect impact of pandemics, epidemics and other public health crises on our business and operations, including supply chain, manufacturing, research and development costs, clinical trial conduct, clinical trial data and employees.

Current wording

the direct and indirect impact of pandemics, epidemics and other public health emergencies on our business and operations, including supply chain, manufacturing, research and development costs, clinical trial conduct, clinical trial data and employees.

Previous wording

Azetukalner, a novel, highly potent, selective Kv7 potassium channel opener, represents the most advanced, clinically validated potassium channel modulator in late-stage clinical development for multiple indications. We are currently developing azetukalner for the treatment of epilepsy, including focal onset seizures, or FOS, and primary generalized tonic-clonic seizures, or PGTCS, as well as major depressive disorder, or MDD, while exploring applicability in other neuropsychiatric disorders.

Current wording

Azetukalner, a novel, highly potent, selective Kv7 potassium channel opener, represents the most advanced, clinically validated potassium channel modulator in late-stage clinical development for the treatment of multiple indications that include epilepsy, including focal onset seizures, or FOS, and primary generalized tonic-clonic seizures, or PGTCS, as well as neuropsychiatric disorders including major depressive disorder, or MDD, and bipolar depression, or BPD.

Previous wording

Phase 3 X-ACKT clinical study is currently enrolling patients and is intended to support potential regulatory submissions in an additional epilepsy indication of PGTCS. This multicenter, randomized, double-blind, placebo-controlled trial is evaluating the clinical efficacy, safety and tolerability of azetukalner in patients with PGTCS.

Current wording

Phase 3 X-ACKT clinical study continues to enroll patients and is intended to support potential regulatory submissions in an additional epilepsy indication of PGTCS.

Previous wording

X-NOVA2, the first of three Phase 3 clinical trials evaluating azetukalner in patients with MDD, is expected to initiate before the end of the year.

Current wording

X-NOVA2, the first of three planned Phase 3 clinical trials evaluating azetukalner in patients with MDD is currently enrolling patients, and X-NOVA3 is expected to initiate mid-year.

Previous wording

We continue to support the investigator-sponsored Phase 2 proof-of-concept study of azetukalner in MDD led by Icahn School of Medicine at Mount Sinai. Patient enrollment for this study is now complete and results are anticipated in the first half of 2025.

Current wording

The investigator-sponsored Phase 2 proof-of-concept study of azetukalner in MDD led by Icahn School of Medicine at Mount Sinai did not meet its primary neuroimaging endpoint. Compared to placebo, azetukalner demonstrated drug activity and was associated with a numerically higher improvement in MADRS and SHAPS scores across all time periods measured, consistent with results seen in our Phase 2 X-NOVA study. Azetukalner was generally well tolerated, with a low rate of treatment discontinuations due to adverse events, or AEs, one serious adverse event deemed unrelated to study drug, and an AE profile consistent with prior studies and the known mechanism.

Previous wording

As leaders in the small molecule ion channel space, we continue to expand our portfolio by leveraging its extensive expertise to discover and develop potassium and sodium channel therapeutics, including candidates targeting Kv7, Nav1.7, and Nav1.1 across various indications with the goal of filing multiple INDs, or equivalent, in 2025.

Current wording

We continue to expand its portfolio by leveraging its extensive expertise to discover and develop potassium and sodium channel therapeutics, with the goal of filing multiple INDs, or equivalent, in 2025.

Previous wording

IND-enabling work is underway with multiple Kv7 development candidates. Kv7 may have utility in a broad range of therapeutic indications including seizures, pain, and neuropsychiatric disorders, such as MDD.

Current wording

A Clinical Trial Application was recently accepted for XEN1120, a Kv7 channel opener, with a Phase 1 study in healthy adult participants now underway. Work remains ongoing with additional Kv7 development molecules and chemistries. Kv7 may have utility in a broad range of therapeutic indications including seizure disorders, pain, and neuropsychiatric disorders, such as MDD and BPD.

Previous wording

IND-enabling work is underway with a lead Nav1.7 development candidate. Nav1.7 is an important pain-related target, based on strong human genetic validation, that may represent a new class of medicines without the limitations of opioids.

Current wording

IND-enabling work is underway with multiple Nav1.7 development candidates, with an IND (or equivalent) filing and Phase 1 study initiation for our lead candidate, XEN1701, expected in the third quarter. Nav1.7 is an important pain-related target, based on strong human genetic validation, that may represent a new class of medicines without the limitations of opioids.

Previous wording

We expect to nominate a lead candidate within our Nav1.1 program in 2025. Pre-clinical data suggests that targeting Nav1.1 could potentially address the underlying cause and symptoms of Dravet Syndrome.

Current wording

We expect a lead candidate within its Nav1.1 program to enter IND-enabling studies in 2025. Pre-clinical data suggests that targeting Nav1.1 could potentially address the underlying cause and symptoms of Dravet Syndrome.

Previous wording

We have funded our operations primarily through the sale of equity securities, funding received from our licensees and collaborators, and debt financing. To date, we have not had any products approved for sale and have not generated any revenue from product sales. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate, which we expect will take a number of years, if ever, and the outcome of which is subject to significant uncertainty.

Current wording

We have funded our operations primarily through the sale of equity securities, funding received from our licensees and collaborators, and debt financing. For the three months ended March 31, 2025 and 2024, we recognized revenue of $7.5 million and nil, respectively, in connection with our agreement with Neurocrine Biosciences. To date, we have not had any products approved for sale and have not generated any revenue from product sales. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate, which we expect will take a number of years, if ever, and the outcome of which is subject to significant uncertainty.

Previous wording

We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We have incurred net losses in each year since inception and expect to continue to incur net losses for the foreseeable future. We had a net loss of $168.6 million and $137.7 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $833.8 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We anticipate that our operating expenses will increase substantially, particularly as we:

Current wording

We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We have incurred net losses in each year since inception and expect to continue to incur net losses for the foreseeable future. We had a net loss of $65.0 million and $47.9 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had an accumulated deficit of $964.5 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We anticipate that our operating expenses will increase substantially, particularly as we:

Previous wording

advance additional product candidates into pre-clinical and clinical development; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials;

Current wording

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

Previous wording

third-party expenses incurred in connection with the pre-clinical and clinical development of our product candidates, including under agreements with contract research organizations, or CROs;

Current wording

third-party expenses incurred in connection with the pre-clinical and clinical development of our product candidates, including under agreements with clinical research organizations;

Previous wording

Project-specific expenses reflect costs directly attributable to our clinical development candidates for which we have incurred significant expenses. All remaining research and development expenses are reflected in pre-clinical and discovery expenses. At any given time, we have several active early-stage research and drug discovery programs. Our personnel and infrastructure are typically deployed over multiple projects and are not directly linked to any individual internal early-stage research or drug discovery program. Therefore, we do not maintain financial information for our internal early-stage research and internal drug discovery programs on a project-specific basis.

Current wording

Project-specific expenses reflect costs directly attributable to our clinical development candidates for which we have incurred significant expenses. All remaining research and development expenses are reflected in pre-clinical, discovery and other program expenses. At any given time, we have several active early-stage research and drug discovery programs. Our personnel and infrastructure are typically deployed over multiple projects and are not directly linked to any individual internal early-stage research or drug discovery program. Therefore, we do not maintain financial information for our internal early-stage research and internal drug discovery programs on a project-specific basis.

Previous wording

Foreign exchange gain (loss). Net foreign exchange gain (loss) consists of gains and losses from the impact of foreign exchange fluctuations on our monetary assets and liabilities that are denominated in currencies other than the U.S. dollar (principally the Canadian dollar). We will continue to incur substantial expenses in Canadian dollars and will remain subject to risks associated with foreign currency fluctuations.

Current wording

Foreign exchange gain. Net foreign exchange gain consists of gains and losses from the impact of foreign exchange fluctuations on our monetary assets and liabilities that are denominated in currencies other than the U.S. dollar (principally the Canadian dollar). We will continue to incur substantial expenses in Canadian dollars and will remain subject to risks associated with foreign currency fluctuations.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the U.S., or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the revenue and expenses incurred during the reported periods. We base estimates on our historical experience, known trends and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States, or GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the revenue and expenses incurred during the reported periods. We base estimates on our historical experience, known trends and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Previous wording

There have been no material changes in our critical accounting policies and significant judgments and estimates during the nine months ended September 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates” included in our 2023 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or SEC, and with the securities commissions in British Columbia, Alberta and Ontario, or the Canadian Securities Commissions, on February 29, 2024. We believe that the accounting policies discussed in the Annual Report are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Current wording

There have been no material changes in our critical accounting policies and significant judgments and estimates during the three months ended March 31, 2025, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates” included in our 2024 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or SEC, and with the securities commissions in British Columbia, Alberta and Ontario, or the Canadian Securities Commissions, on February 27, 2025. We believe that the accounting policies discussed in the Annual Report are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Previous wording

The following table summarizes the results of our operations for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

Current wording

The following table summarizes the results of our operations for the three months ended March 31, 2025 and 2024 together with changes in those items (in thousands):

Previous wording

The following table summarizes research and development expenses for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

Current wording

The following table summarizes research and development expenses for the three months ended March 31, 2025 and 2024 together with changes in those items (in thousands):

Previous wording

Direct external costs related to azetukalner increased by $6.3 million and $8.4 million for the three and nine months ended September 30, 2024, respectively, primarily due to our ongoing Phase 3 epilepsy clinical trials, start-up costs for our Phase 3 MDD clinical trials, and manufacturing activities to support current and future clinical trials as well as our NDA submission, partially offset by a decrease in costs for our Phase 2 MDD clinical trial which completed in late 2023. The decrease in direct external costs related to XEN496 of $5.1 million for the nine months ended September 30, 2024 is due to our decision in May 2023 to no longer pursue the clinical development of XEN496. Pre-clinical and discovery program costs increased by $1.5 million and $4.8 million for the three and nine months ended September 30, 2024, respectively, related to the advancement of multiple potential drug candidates targeting Kv7, Nav1.7 and Nav1.1. Personnel-related costs increased by $6.3 million and $15.5 million for the three and nine months ended September 30, 2024, respectively, due to increased headcount to support late-stage development and an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value.

Current wording

Research and development expenses increased by $17.0 million in the three months ended March 31, 2025 as compared to the same period in 2024. Direct external costs related to azetukalner increased by $8.3 million primarily due to our Phase 3 epilepsy clinical trials and our Phase 3 X-NOVA2 clinical trial in MDD which initiated in late 2024. Personnel-related costs increased by $6.9 million driven by an increase in headcount to support late-stage development. Pre-clinical and discovery program costs increased by $1.3 million due to the advancement of multiple potential drug candidates targeting Kv7, Nav1.7 and Nav1.1.

Previous wording

The following table summarizes general and administrative expenses for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

Current wording

The following table summarizes general and administrative expenses for the three months ended March 31, 2025 and 2024 together with changes in those items (in thousands):

Previous wording

The following table summarizes our other income for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

Current wording

The following table summarizes our other income for the three months ended March 31, 2025 and 2024 together with changes in those items (in thousands):

Previous wording

To date, we have financed our operations primarily through the sale of equity securities, funding received from collaboration and license agreements, and debt financing. Since our initial public offering through September 30, 2024, we have raised aggregate net cash proceeds of more than $1.3 billion primarily from the issuance of equity securities. As of September 30, 2024, we had cash and cash equivalents and marketable securities of $803.3 million.

Current wording

To date, we have financed our operations primarily through the sale of equity securities, funding received from collaboration and license agreements, and debt financing. Since our initial public offering through March 31, 2025, we have raised aggregate net cash proceeds of more than $1.4 billion primarily from the issuance of equity securities. As of March 31, 2025, we had cash and cash equivalents and marketable securities of $691.1 million.

Previous wording

We entered into an “at-the-market” equity offering sales agreement in August 2020, amended as of March 2022, with Jefferies LLC and Stifel, Nicolaus & Company, Incorporated, or the ATM Program, and a new prospectus supplement was filed with the SEC on August 9, 2024, pursuant to which we refreshed the ATM Program and may sell common shares having gross proceeds of up to $350.0 million, from time to time. No common shares had been sold under the ATM Program during the nine months ended September 30, 2024.

Current wording

We entered into an “at-the-market” equity offering sales agreement in August 2020, amended as of March 2022, with Jefferies LLC and Stifel, Nicolaus & Company, Incorporated, or the ATM Program, and a new prospectus supplement was filed with the SEC on August 9, 2024, pursuant to which we refreshed the ATM Program and may sell common shares having gross proceeds of up to $350.0 million, from time to time. As of March 31, 2025, an aggregate of 310,000 common shares have been sold for proceeds of $12.1 million, net of commissions and transaction expenses.

Previous wording

We have incurred significant operating losses since inception. As of September 30, 2024, we had an accumulated deficit of $833.8 million. We expect to continue to incur significant expenses in excess of our revenue and expect to incur operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we prepare for the potential commercial launch of azetukalner; invest significantly to further develop azetukalner for our current and future indications; advance additional product candidates into pre-clinical and clinical development; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials; manufacture larger quantities of our product candidates for clinical development and potential commercialization; hire additional commercial, clinical, scientific, management and administrative personnel; 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 1st Order Pharmaceuticals, Inc and other third parties; maintain, protect and expand our intellectual property portfolio; establish a sales, marketing, distribution and other commercial infrastructure to commercialize any products for which we may obtain marketing approval; create additional infrastructure and incur additional costs to support our operations and our product development and planned future commercialization efforts; and experience any delays or encounter issues with any of the above.

Current wording

We have incurred significant operating losses since inception. As of March 31, 2025, we had an accumulated deficit of $964.5 million. We expect to continue to incur significant expenses in excess of our revenue and expect to incur operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we prepare for the potential commercial launch of azetukalner; invest significantly to further develop azetukalner for our current and future indications; advance additional product candidates into pre-clinical and clinical development; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical studies; manufacture larger quantities of our product candidates of clinical development and potential commercialization; hire additional commercial, clinical, scientific, management and administrative personnel; 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 1st Order Pharmaceuticals, Inc and other third parties; maintain, protect and expand our intellectual property portfolio; establish a sales, marketing, distribution and other commercial infrastructure to commercialize any products for which we may obtain marketing approval; create additional infrastructure and incur additional costs to support our operations and our product development and planned future commercialization efforts; and experience any delays or encounter issues with any of the above.

Previous wording

The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

Current wording

The following table shows a summary of our cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Previous wording

(1)Amounts have been reclassified as described in Note 2 of our consolidated financial statements.

Current wording

(1)Amounts have been reclassified as described in Note 2 of our condensed consolidated financial statements.

Previous wording

For the nine months ended September 30, 2024, net cash used in operating activities totaled $127.0 million, compared to $115.7 million for the same period in 2023. The increase in cash used in operating activities was primarily related to higher research and development and general and administrative expenses, as well as changes in operating assets and liabilities. This was partially offset by higher interest income.

Current wording

For the three months ended March 31, 2025, net cash used in operating activities totaled $61.7 million, compared to $46.2 million for the same period in 2024. The increase in cash used in operating activities was primarily related to higher research and development and general and administrative expenses, as well as changes in operating assets and liabilities, partially offset by an increase in interest cash received on marketable securities.

Previous wording

For the nine months ended September 30, 2024, net cash provided by investing activities totaled $66.5 million, compared to $128.4 million for the same period in 2023. The change was driven primarily by an increase in the purchases of marketable securities, net of redemptions. This was partially offset by a decrease in the purchases of property, plant and equipment.

Current wording

For the three months ended March 31, 2025, net cash provided by investing activities totaled $34.5 million, compared to net cash used of $43.2 million for the same period in 2024. The change was driven primarily by an increase in the redemption of marketable securities, net of purchases.

Previous wording

For the nine months ended September 30, 2024, net cash provided by financing activities was nil, compared to $29.5 million for the same period in 2023. The cash provided by financing activities during the nine months ended September 30, 2023 was primarily related to net proceeds from the issuance of common shares.

Current wording

For the three months ended March 31, 2025, net cash provided by financing activities was $1.2 million, compared to nil for the same period in 2024. The change was primarily driven by proceeds from stock options exercises during the three months ended March 31, 2025.

Previous wording

As of November 8, 2024, we had 76,239,602 common shares issued and outstanding, outstanding pre-funded warrants to purchase 2,173,081 common shares, outstanding stock options to purchase 10,875,729 common shares, outstanding PSUs convertible into 210,000 common shares and an outstanding warrant to purchase 40,000 common shares.

Current wording

As of May 8, 2025, we had 76,733,599 common shares issued and outstanding, outstanding pre-funded warrants to purchase 2,173,081 common shares, outstanding stock options to purchase 11,902,727 common shares, outstanding performance share units convertible into 269,350 common shares, outstanding restricted share units convertible into 301,867 common shares, and an outstanding warrant to purchase 40,000 common shares.