Xenon Pharmaceuticals Inc.

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 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.

Current wording

Azetukalner, a novel, potent Kv7 potassium channel opener, represents the most advanced, clinically-validated potassium channel modulator in late-stage clinical development for the treatment of multiple indications, including two in epilepsy – FOS and PGTCS – as well as neuropsychiatric disorders, including MDD and BPD.

Previous 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.

Current wording

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

Previous wording

We expect a lead candidate within our Nav1.1 program will 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

Current wording

IND-enabling studies are ongoing for our Nav1.1 program. Pre-clinical data suggest 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. We did not recognize any revenue in the years ended December 31, 2024 and 2023, as compared to revenue from collaboration agreements of $9.4 million for the year ended December 31, 2022. 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. We recognized revenue from collaboration agreements of $7.5 million for the year ended December 31, 2025. We did not recognize any revenue in the years ended December 31, 2024 and 2023. 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. Our net losses were $234.3 million, $182.4 million, and $125.4 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $899.5 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:

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. Our net losses were $345.9 million, $234.3 million, and $182.4 million for the years ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, we had an accumulated deficit of $1,245.4 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

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 studies;

Previous wording

As part of our ongoing collaboration with Neurocrine Biosciences to develop treatments for epilepsy, NBI-921355, a Nav1.2 and Nav1.6 sodium channel inhibitor in development for the potential treatment for certain types of epilepsy, has progressed into a Phase 1 clinical study in healthy adult participants, triggering an anticipated $7.5 million milestone payment to Xenon.

Current wording

In February 2025, NBI-921355, a Nav1.2 and Nav1.6 sodium channel inhibitor in development for the potential treatment for certain types of epilepsy, progressed into a Phase 1 clinical study in healthy adult participants, triggering a $7.5 million milestone, which was recognized as revenue.

Previous wording

third-party expenses relating to formulation, process development and manufacture of drug substance and drug product for use in our pre-clinical testing, clinical trials and potential commercial supply;

Current wording

third-party expenses relating to formulation, process development and manufacture of drug substance and drug product for use in our pre-clinical testing, clinical studies and potential commercial supply;

Previous wording

We expect that our research and development expenses will increase substantially in the future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance into later stages of development and we continue to conduct clinical trials, advance our internal drug discovery programs into pre-clinical development and continue our early-stage research. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size, scope and duration of later-stage clinical trials.

Current wording

We expect that our research and development expenses will increase substantially in the future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance into later stages of development and we continue to conduct clinical studies, advance our internal drug discovery programs into pre-clinical development and continue our early-stage research. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size, scope and duration of later-stage clinical studies.

Previous wording

Unrealized fair value gain (loss) on trading securities. Trading securities are recorded at fair value. Unrealized fair value gain (loss) on trading securities is related to changes in market pricing on the investments classified as trading securities during the period.

Current wording

Unrealized fair value gain on trading securities. Trading securities are recorded at fair value. Unrealized fair value gain on trading securities is related to changes in market pricing on the investments classified as trading securities during the period.

Previous wording

We accrue for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of pre-clinical studies and clinical trials, and manufacturing activities. Third-party service providers generally provide estimates of proportionate performance to allow us to determine an appropriate accrual. When determining the adequacy of an accrual, we analyze progress based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. Our historical prepaid and accrual estimates have not been materially different from the actual costs.

Current wording

Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. Our historical prepaid and accrual estimates have not been materially different from the actual costs.

Previous wording

Stock-based compensation is a critical accounting estimate due to the magnitude of and the many assumptions that are required to calculate stock-based compensation expense.

Current wording

Stock-based compensation is a critical accounting estimate due to the magnitude of and the many assumptions that are required to calculate stock-based compensation expense. We grant stock options, restricted share units (“RSUs”) and performance share units (“PSUs”) to certain employees, consultants, directors and officers pursuant to our equity incentive plans. Stock-based compensation expense is amortized on a straight-line basis over the requisite service period, and forfeitures are accounted for in the period they occur.

Previous wording

We grant stock options to employees, consultants, directors and officers pursuant to our equity incentive plans. Compensation expense is recorded using the fair value method. We calculate the fair value of stock options using the Black-Scholes option-pricing model which requires that certain assumptions, including the expected life of the option and expected volatility of the stock, be estimated at the time that the options are granted. The expected volatility is based on the historical volatility of our common shares calculated based on a period of time commensurate with the expected term assumption. The expected term of our stock options has been determined utilizing our available historical data and we recognize forfeitures as they occur. We amortize the fair value of stock options using the straight-line method over the vesting period of the options.

Current wording

Compensation expense is recorded using the fair value method. We calculate the fair value of stock options using the Black-Scholes option-pricing model, which requires that certain assumptions, including the expected life of the option and expected volatility of the stock, be estimated at the time that the options are granted. The expected volatility is based on the historical volatility of our common shares calculated based on a period of time commensurate with the expected term assumption. The expected term of our stock options has been determined utilizing our available historical data.

Previous wording

We also grant performance share unit awards (“PSUs”) to certain employees and officers pursuant to our equity incentive plans. The grant date fair value of PSUs is determined based on the closing market price of our common shares. Compensation expense is recognized if the performance condition is considered probable of achievement using our best estimates and is amortized on a straight-line basis over the requisite service period of each separately vesting tranche of the award. Forfeitures are accounted for in the period they occur.

Current wording

The grant date fair value of RSUs and PSUs is determined based on the closing market price of our common shares. Compensation expense for PSUs is recognized if the performance condition is considered probable of achievement using our best estimates.

Previous wording

We did not recognize any revenue in the years ended December 31, 2024 and 2023, as compared to revenue of $9.4 million for 2022. Revenue recognized in 2022 was related to the Neurocrine Collaboration, including $0.4 million of the overall transaction price, $1.9 million in research and development services, and a $7.1 million milestone.

Current wording

Collaboration revenue of $7.5 million recognized for the year ended December 31, 2025 was related to a milestone payment in connection with the Neurocrine Collaboration. We did not recognize any revenue in the years ended December 31, 2024 and 2023.

Previous wording

Research and development expenses increased by $42.9 million for the year ended December 31, 2024 as compared to 2023. Direct external costs related to azetukalner increased by $17.5 million primarily due to our ongoing Phase 3 epilepsy clinical trials and the initiation of our first Phase 3 MDD clinical trial, manufacturing activities to support current and future clinical trials as well as our potential 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 $5.2 million 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 $6.0 million due to the advancement of multiple potential drug candidates targeting Kv7, Nav1.7 and Nav1.1. Personnel-related costs increased by $22.9 million driven by an increase in 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

Direct external costs related to azetukalner increased by $17.5 million for the year ended December 31, 2024, primarily due to our ongoing Phase 3 epilepsy clinical studies and the initiation of our first Phase 3 MDD clinical study, manufacturing activities to support current and future clinical studies as well as our potential NDA submission, partially offset by a decrease in costs for our Phase 2 MDD clinical study, which completed in late 2023. Pre-clinical, discovery and other program costs decreased by $4.0 million due to our decision in May 2023 to no longer pursue the clinical development of XEN496, partially offset by increase in costs due to the advancement of multiple potential drug candidates targeting Kv7, Nav1.7 and Nav1.1. Pain program costs increased by $4.8 million due to the advancement of XEN1120 and XEN1701. Personnel-related costs increased by $22.9 million driven by an increase in 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.

Previous wording

General and administrative expenses increased by $13.7 million for the year ended December 31, 2023 as compared to 2022. Personnel-related costs increased by $9.4 million primarily due to higher headcount to support our expanding research and development activities as well as an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value. Professional and consulting fees increased by $3.6 million primarily associated with legal services in support of our ongoing business operations and market research activities.

Current wording

Personnel-related costs increased by $4.6 million for the year ended December 31, 2025, primarily due to higher headcount to support our expanding research and development activities and future potential commercialization, partially offset by a decrease in stock-based compensation expense and recruitment costs. Professional and consulting fees increased by $4.3 million due to an increase in pre-commercial expenses, partially offset by lower legal costs associated with our ongoing business activities. Other general and administrative costs increased by $1.9 million primarily due to higher information technology costs to support our ongoing business activities.

Previous wording

General and administrative expenses increased by $22.4 million for the year ended December 31, 2024 as compared to 2023. Personnel-related costs increased by $16.1 million primarily due to higher headcount to support our expanding research and development activities and future potential commercialization as well as an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value. Professional and consulting fees increased by $5.4 million primarily associated with legal services in support of our ongoing business operations and pre-commercial activities.

Current wording

Personnel-related costs increased by $16.1 million for the year ended December 31, 2024, primarily due to higher headcount to support our expanding research and development activities and future potential commercialization as well as an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value. Professional and consulting fees increased by $5.4 million primarily associated with legal services in support of our ongoing business operations and pre-commercial activities.

Previous wording

Other income increased by $9.5 million for the year ended December 31, 2024 as compared to 2023. Interest income increased by $14.3 million driven by a higher average balance of marketable securities and higher average market yields on investments. The unrealized fair value gain on trading securities decreased by $3.6 million due to the fact that we did not hold any marketable securities classified as trading in 2024.

Current wording

Interest income increased by $14.3 million for the year ended December 31, 2024, driven by a higher average balance of marketable securities and higher average market yields on investments. The unrealized fair value gain on trading securities decreased by $3.6 million due to the fact that we did not hold any marketable securities classified as trading in 2024.

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 December 31, 2024, we have raised aggregate net cash proceeds of more than $1.4 billion primarily from the issuance of equity securities. As of December 31, 2024, we had cash and cash equivalents and marketable securities of $754.4 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 December 31, 2025, we have raised aggregate net cash proceeds of more than $1.5 billion primarily from the issuance of equity securities. As of December 31, 2025, we had cash and cash equivalents and marketable securities of $586.0 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. As of December 31, 2024, an aggregate of 310,000 common shares have been sold for proceeds of $12.1 million, net of commissions and transaction expenses.

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 December 31, 2025, an aggregate of 2,961,023 common shares have been sold for proceeds of $124.2 million, net of commissions and transaction expenses, of which $112.2 million, net of commissions and transaction expense. were raised during the three months ended December 31, 2025. As of February 23, 2026, we sold an additional 3,134,119 common shares for proceeds of $130.0 million, net of commissions and transaction expenses.

Previous wording

We have incurred significant operating losses since inception. As of December 31, 2024, we had an accumulated deficit of $899.5 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.

Current wording

We have incurred significant operating losses since inception. As of December 31, 2025, we had an accumulated deficit of $1,245.4 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 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.

Previous wording

Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash and cash equivalents and marketable securities as of the date of this report will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. However, our estimates and assumptions may prove to be wrong, and we cannot guarantee that our existing capital resources will be sufficient to conduct and complete all of our anticipated research and development efforts and future commercialization efforts. Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials remains uncertain. Further, inflation may affect our use of capital resources by increasing our cost of labor and research and development expenses. Our long-term funding requirements will consist of operational, capital, and manufacturing expenditures, including those contractual commitments described below. Because of the inherent risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of capital outflows and operating expenditures associated with our long-term anticipated pre-clinical studies and clinical trials.

Current wording

Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash and cash equivalents and marketable securities as of the date of this report will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. However, our estimates and assumptions may prove to be wrong, and we cannot guarantee that our existing capital resources will be sufficient to conduct and complete all of our anticipated research and development efforts and future commercialization efforts. Additionally, the process of testing drug candidates in clinical studies is costly, and the timing of progress in these studies remains uncertain. Further, inflation may affect our use of capital resources by increasing our cost of labor and research and development expenses. Our long-term funding requirements will consist of operational, capital, and manufacturing expenditures, including those contractual commitments described below. Because of the inherent risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of capital outflows and operating expenditures associated with our long-term anticipated pre-clinical studies and clinical studies.

Previous wording

We have operating leases for research laboratories and office space in Burnaby, British Columbia and office space in Needham, Massachusetts. The terms of the leases expire in June 2032 and November 2027, respectively. Amounts related to future lease payments for operating lease obligations as of December 31, 2024 totaled $10.2 million, with $1.7 million expected to be paid within the next 12 months.

Current wording

We have operating leases for research laboratories and office space in Burnaby, British Columbia and office space in Needham, Massachusetts. The terms of the leases expire in June 2032 and November 2027, respectively. Amounts related to future lease payments for operating lease obligations as of December 31, 2025 totaled $8.8 million, with $1.8 million expected to be paid within the next 12 months.

Previous wording

For the year ended December 31, 2023, net cash used in operating activities totaled $151.1 million, compared to $101.0 million in 2022. The increase was primarily related to higher research and development and general and administrative expenses, and a decrease in revenue recognized, partially offset by higher interest income and changes in operating assets and liabilities.

Current wording

For the year ended December 31, 2025, net cash used in operating activities totaled $279.1 million, compared to $181.4 million in 2024. The increase was primarily related to higher research and development and general and administrative expenses, lower interest income as well as changes in operating assets and liabilities, partially offset by revenue recognized in connection with our collaboration agreement with Neurocrine Biosciences.

Previous wording

For the year ended December 31, 2023, net cash used in investing activities totaled $111.4 million, compared to $293.4 million in 2022. The change was driven primarily by an increase in the redemption of marketable securities, net of purchases. This was partially offset by an increase in the purchases of property, plant and equipment.

Current wording

For the year ended December 31, 2025, net cash provided by investing activities totaled $218.0 million, compared to $165.0 million in 2024. The change was driven primarily by a decrease in the purchase of marketable securities, net of redemptions, as well as a decrease in the purchases of property, plant and equipment.

Previous wording

For the year ended December 31, 2023, net cash provided by financing activities totaled $353.5 million, compared to $278.5 million in 2022. The increase was primarily related to net proceeds of $353.5 million in 2023 as compared to net proceeds of $277.8 million in 2022 from the issuance of common shares and pre-funded warrants.

Current wording

For the year ended December 31, 2025, net cash provided by financing activities totaled $117.1 million, compared to $12.1 million in 2024. The increase was primarily related to net proceeds from the issuance of common shares of $112.2 million in 2025 as compared to net proceeds of $12.1 million in 2024 from the issuance of common shares. In addition, there was a $4.9 increase in proceeds from stock options exercises.