UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10‑Q
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of Registrant as Specified in its Charter)
|
|
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
|
|
|
(The Nasdaq Global Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
|
☒ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|||
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 6, 2022, the registrant had
XENON PHARMACEUTICALS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Xenon,” and “the Company” refer to Xenon Pharmaceuticals Inc. and its subsidiary. “Xenon” and the Xenon logo are the property of Xenon Pharmaceuticals Inc. and are registered in the United States and used or registered in various other jurisdictions. This report contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
-1-
Risk Factors Summary
Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report captioned “Risk Factors.” The following is a summary of the principal risks we face:
|
|
• |
We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future; |
|
|
• |
We will likely need to raise additional funding, which may not be available on acceptable terms, if at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations; |
|
|
• |
Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical trials are prolonged, delayed, not completed, unsuccessful or inconclusive, we could experience material harm to our business and the market price of our common shares. In addition, we, or our collaborators, may be unable to commercialize our product candidates on a timely basis or at all; |
|
|
• |
Clinical trials may fail to demonstrate adequately the safety and efficacy of our or our collaborators’ product candidates, at any stage of clinical development. 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; |
|
|
• |
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; |
|
|
• |
The regulatory approval processes of the FDA, EMA, Health Canada and regulators in other jurisdictions are lengthy, time-consuming and inherently unpredictable. If we, or our collaborators, are unable to obtain regulatory approval for our product candidates in a timely manner, or at all, our business will be substantially harmed; |
|
|
• |
If, in the future, we are unable to establish our own sales, marketing and distribution capabilities or enter into agreements for these purposes, we may not be successful in independently commercializing any future products; |
|
|
• |
Our prospects for successful development and commercialization of our partnered products and product candidates are dependent upon the research, development and marketing efforts of our collaborators; |
|
|
• |
We depend on our collaborative relationship with Neurocrine Biosciences Inc. to further develop and commercialize NBI-921352, and if our relationship is not successful or is terminated, we may not be able to effectively develop and/or commercialize NBI-921352, which could have a material adverse effect on our business; |
|
|
• |
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 rely on third parties to conduct our pre-clinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties including to comply with applicable laws and regulations or meet expected deadlines, our business could be substantially harmed; |
|
|
• |
We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates; |
|
|
• |
We may not be able to protect our intellectual property rights throughout the world; |
|
|
• |
Our business and operations could suffer in the event of an information security incident such as a cybersecurity breach, system failure, or other compromise of our systems or those of a contractor or vendor; |
|
|
• |
Health pandemics or epidemics, including the COVID-19 pandemic and other public health crises may materially and adversely affect our business, financial condition and results of operations; |
|
|
• |
The market price of our common shares may be volatile, and purchasers of our common shares could incur substantial losses; |
|
|
• |
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; and |
|
|
• |
We are at risk of securities class action litigation. |
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.
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
XENON PHARMACEUTICALS INC.
Consolidated Balance Sheets
(Unaudited)
(Expressed in thousands of U.S. dollars except share amounts)
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2022 |
|
|
2021 |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Marketable securities |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset, net (note 5) |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses (note 6) |
|
$ |
|
|
|
$ |
|
|
|
Operating lease liability (note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease liability, long-term (note 5) |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
Preferred shares, par value; unlimited shares authorized; issued and outstanding: nil (December 31, 2021 - |
|
$ |
|
|
|
$ |
|
|
|
Common shares, par value; unlimited shares authorized; issued and outstanding: |
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total liabilities and shareholders’ equity |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (note 9) |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
-3-
XENON PHARMACEUTICALS INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(Expressed in thousands of U.S. dollars except share and per share amounts)
|
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
|
2022 |
|
|
2021 |
|
|
||
|
Revenue (note 8) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
Unrealized fair value loss on marketable securities |
|
|
( |
) |
|
|
( |
) |
|
|
Foreign exchange gain |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
Income tax recovery |
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
Net loss attributable to preferred shareholders |
|
|
( |
) |
|
|
( |
) |
|
|
Net loss attributable to common shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Net loss per common share (note 3): |
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Weighted-average common shares outstanding (note 3): |
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
-4-
XENON PHARMACEUTICALS INC.
Consolidated Statements of Shareholders’ Equity
(Unaudited)
(Expressed in thousands of U.S. dollars except share amounts)
|
|
|
Convertible preferred shares |
|
|
Common shares |
|
|
Additional paid-in capital |
|
|
Accumulated deficit |
|
|
Accumulated other comprehensive loss (1) |
|
|
Total shareholders' equity |
|
||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Balance as of December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Net loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Issuance of common shares and pre-funded warrants, net of issuance costs (note 7a and note 7c) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Issued pursuant to exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Balance as of March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Net loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Issuance of common shares, net of issuance costs (note 7a) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Conversion of preferred shares to common shares (note 7b) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Issued pursuant to exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Balance as of March 31, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
(1) |
|
The accompanying notes are an integral part of these financial statements.
-5-
XENON PHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in thousands of U.S. dollars)
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Items not involving cash: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
Deferred income tax recovery |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Unrealized foreign exchange gain |
|
|
( |
) |
|
|
( |
) |
|
Unrealized fair value loss on marketable securities |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
|
Accounts payable and accrued expenses |
|
|
( |
) |
|
|
( |
) |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
|
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from marketable securities |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
Issuance of common shares and pre-funded warrants, net of issuance costs (note 7a) |
|
|
|
|
|
|
|
|
|
Issuance of common shares pursuant to exercise of stock options |
|
|
— |
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
Interest received |
|
$ |
|
|
|
$ |
|
|
|
Cash paid for operating lease |
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash transactions: |
|
|
|
|
|
|
|
|
|
Fair value of stock options exercised on a cashless basis |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
-6-
XENON PHARMACEUTICALS INC
Notes to Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of U.S. dollars except share and per share amounts)
|
|
|
|
|
|
|
|
|
1. |
Nature of the business: |
Xenon Pharmaceuticals Inc. (the “Company”), incorporated in 1996 under the predecessor to the Business Corporations Act (British Columbia) and continued federally in 2000 under the Canada Business Corporations Act, is a clinical stage biopharmaceutical company focused on developing innovative therapeutics to improve the lives of patients with neurological disorders, with a focus on epilepsy.
The Company has incurred significant operating losses since inception. As of March 31, 2022, the Company had an accumulated deficit of $
Until such time as the Company can generate substantial product revenue, if ever, management expects to finance the Company’s cash needs through a combination of collaboration agreements, equity and debt financings. The continuation of research and development activities and the future commercialization of its products are dependent on the Company’s ability to successfully raise additional funds when needed. It is not possible to predict either the outcome of future research and development programs or the Company’s ability to continue to fund these programs in the future.
|
2. |
Basis of presentation: |
These consolidated financial statements are presented in U.S. dollars.
The Company has one wholly-owned subsidiary as of March 31, 2022, Xenon Pharmaceuticals USA Inc., which was incorporated in Delaware on
These unaudited interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany transactions and balances have been eliminated on consolidation. Certain information has been reclassified to conform with the financial presentation adopted for the current year.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these consolidated financial statements do not include all of the information and footnotes required for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2021 included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC and with the securities commissions in British Columbia, Alberta and Ontario on March 1, 2022.
These unaudited interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the three months ended March 31, 2022 and 2021 are not necessarily indicative of results that can be expected for a full year. These unaudited interim consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company included in the Company’s 2021 Annual Report on Form 10-K for the year ended December 31, 2021.
|
3. |
Net income (loss) per common share: |
Basic net income (loss) per common share is calculated using the two-class method required for participating securities which includes the Series 1 Preferred Shares as a separate class for the three months ended March 31, 2022 and 2021. The convertible preferred shares entitle the holders to participate in dividends and in earnings and losses of the Company on an equivalent basis as common shares. Accordingly, undistributed earnings (losses) are allocated to common shares and participating preferred shares based on the weighted-average shares of each class outstanding during the period. In March 2022, the outstanding
The weighted average number of common shares used in the basic and diluted net income (loss) per common share calculations includes the weighted-average pre-funded warrants outstanding during the period as they are exercisable at any time for nominal cash consideration.
-7-
The treasury stock method is used to compute the dilutive effect of the Company’s stock options and warrants. Under this method, the incremental number of common shares used in computing diluted net income (loss) per common share is the difference between the number of common shares assumed issued and purchased using assumed proceeds.
The if-converted method is used to compute the dilutive effect of the Company’s convertible preferred shares. Under the if-converted method, dividends on the preferred shares, if applicable, are added back to earnings attributable to common shareholders, and the preferred shares and paid-in kind dividends are assumed to have been converted at the share price applicable at the end of the period. The if-converted method is applied only if the effect is dilutive.
For the three months ended March 31, 2022 and 2021, all stock options, warrants and convertible preferred shares were anti-dilutive and were excluded from the diluted weighted average common shares outstanding for the period.
|
4. |
Fair value of financial instruments: |
The Company measures certain financial instruments and other items at fair value.
To determine the fair value, the Company uses the fair value hierarchy for inputs used to measure fair value of financial assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority).
|
|
• |
Level 1 - Unadjusted quoted prices in active markets for identical instruments. |
|
|
• |
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). |
|
|
• |
Level 3 - Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available. |
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.
The Company’s Level 1 assets include cash and cash equivalents and marketable securities with quoted prices in active markets. The carrying amount of accounts receivables, accounts payable and accrued expenses approximates fair value due to the nature and short-term of those instruments.
|
5. |
Leases: |
-8-
The cost components of the operating lease were as follows for the three months ended March 31, 2022 and 2021:
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Lease Cost |
|
|
|
|
|
|
|
|
|
Operating lease expense |
|
$ |
|
|
|
$ |
|
|
|
Variable lease expense(1) |
|
|
|
|
|
|
|
|
|
Lease Term and Discount Rate |
|
|
|
|
|
|
|
|
|
Remaining lease term (years) |
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
|
% |
|
|
|
% |
|
|
(1) |
|
Future minimum lease payments as of March 31, 2022 were as follows:
|
Year ending December 31: |
|
|||
|
2022 |
|
$ |
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 and thereafter |
|
|
|
|
|
Total future minimum lease payments |
|
$ |
|
|
|
Less: imputed interest |
|
|
( |
) |
|
Less: future lease incentives reasonably certain of use(1) |
|
|
( |
) |
|
Present value of lease liabilities |
|
$ |
|
|
|
|
(1) |
|
|
6. |
Accounts payable and accrued expenses: |
Accounts payable and accrued expenses consisted of the following:
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2022 |
|
|
2021 |
|
||
|
Trade payables |
|
$ |
|
|
|
$ |
|
|
|
Employee compensation, benefits, and related accruals |
|
|
|
|
|
|
|
|
|
Consulting and contracted research |
|
|
|
|
|
|
|
|
|
Professional fees |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
7. |
Share capital: |
|
|
(a) |
Financing: |
In August 2020, the Company entered into an “at-the-market” equity offering sales agreement, amended as of March 2022, with Jefferies LLC (“Jefferies”) and Stifel, Nicolaus & Company, Incorporated (“Stifel”) pursuant to which the Company may sell common shares from time to time. In January 2021, the Company sold an aggregate of
-9-
In March 2021, the Company entered into an underwriting agreement with Jefferies and Stifel, relating to an underwritten public offering of
In January 2022, in connection with the License and Collaboration Agreement entered in December 2019 and amended in January 2021 (the "Neurocrine Collaboration Agreement"), the Company executed a Share Purchase Agreement ("SPA") pursuant to which the Company issued
|
|
(b) |
Exchange agreement with certain funds affiliated with BVF Partners L.P. (collectively, “BVF”): |
In March 2018, the Company and BVF entered into an exchange agreement pursuant to which the Company issued to BVF
The Series 1 Preferred Shares ranked equally to the common shares in the event of liquidation, dissolution or winding up or other distribution of the assets of the Company among its shareholders and the holders of the Series 1 Preferred Shares were entitled to vote together with the common shares on an as-converted basis and as a single class, subject to certain restrictions.
The Series 1 Preferred Shares were recorded wholly as equity under ASC 480, with no bifurcation of conversion feature from the host contract, given that the Series 1 Preferred Shares cannot be cash settled and had no redemption features.
During the year ended December 31, 2018, BVF converted
|
|
(c) |
Pre-Funded Warrants: |
In connection with the underwritten public offerings completed in March and October 2021, the Company issued
The Pre-Funded Warrants are exercisable at the holder’s discretion from the date of issuance until the date the Pre-Funded Warrant is exercised in full.
Since the Pre-Funded Warrants meet the condition for equity classification, net proceeds from issuances of the Pre-Funded Warrants are recorded in additional paid-in capital. Upon exercise of the Pre-Funded Warrants, the historical costs recorded in additional paid-in capital along with the exercise price collected from holder will be recorded in common shares. As of March 31, 2022,
-10-
|
|
(d) |
Stock-based compensation: |
The following table presents stock option activity for the period:
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Outstanding, beginning of period |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Exercised(1) |
|
|
( |
) |
|
|
( |
) |
|
Forfeited, cancelled or expired |
|
|
( |
) |
|
|
( |
) |
|
Outstanding, end of period |
|
|
|
|
|
|
|
|
|
Exercisable, end of period |
|
|
|
|
|
|
|
|
|
|
(1) |
|
The fair value of each stock option granted is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Average risk-free interest rate |
|
|
|
% |
|
|
|
% |
|
Expected volatility |
|
|
|
% |
|
|
|
% |
|
Average expected term (in years) |
|
|
|
|
|
|
|
|
|
Expected dividend yield |
|
|
|
% |
|
|
|
% |
|
Weighted average fair value of stock options granted |
|
$ |
|
|
|
$ |
|
|
|
8. |
Revenue: |
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Neurocrine Biosciences: |
|
|
|
|
|
|
|
|
|
Recognition of the transaction price |
|
$ |
|
|
|
$ |
|
|
|
Research and development services |
|
|
|
|
|
|
|
|
|
Milestone payments |
|
|
|
|
|
|
|
|
|
Pacira BioSciences: |
|
|
|
|
|
|
|
|
|
Milestone payments |
|
|
|
|
|
|
|
|
|
Total collaboration revenue |
|
$ |
|
|
|
$ |
|
|
|
|
(a) |
Neurocrine Biosciences license and collaboration agreement: |
In December 2019, the Company entered into the Neurocrine Collaboration Agreement with Neurocrine Biosciences. Pursuant to this agreement, the Company granted an exclusive license to XEN901, now known as NBI-921352, and an exclusive license to pre-clinical compounds for development, XEN393, XPC’535 and XPC’391 (collectively, the “DTCs”). The agreement also includes a two-year research collaboration to discover, identify and develop additional novel Nav1.6 and Nav1.2/1.6 inhibitors (“Research Compounds”) which has been extended to June 2022. The Company and Neurocrine Biosciences are collaborating on the conduct of two collaboration programs: (a) a joint research collaboration to discover, identify and preclinically develop Research Compounds (the “Research Program”) and (b) a collaborative development program for NBI-921352 and two DTCs selected by the joint steering committee (the “Initial Development Program”).
-11-
At execution of the agreement, Neurocrine Biosciences paid the Company an upfront cash payment of $
The arrangement consideration related to the services under performance obligations (iii) and (iv) to be performed on behalf of Neurocrine Biosciences were excluded from the initial transaction price allocation because the consideration and performance are contingent upon Neurocrine Biosciences requesting performance of the services and these services are priced at an estimated fair value. None of the at-risk substantive performance milestones, including development, regulatory and sales-based milestones, were included in the transaction price at the inception of the agreement, as all milestone amounts are outside the control of the Company and contingent upon Neurocrine Biosciences’s efforts and success in future clinical trials.
In January 2022, based on the receipt of the U.S. Food and Drug Administration’s (“FDA”) full IND acceptance for NBI-921352, the Company received an aggregate milestone payment of $
During the three months ended March 31, 2022 and 2021, the Company recognized $
The Company is eligible to receive pre-commercial and commercial milestone payments with respect to the licensed products totaling up to an additional $
|
|
(b) |
Asset Purchase Agreement with Flexion Therapeutics, Inc., which was subsequently acquired by Pacira BioSciences, Inc. |
In September 2019, the Company entered into an agreement with Flexion Therapeutics Inc. (“Flexion”), which was acquired by Pacira BioSciences, Inc. (“Pacira BioSciences”) in November 2021, pursuant to which Flexion acquired all rights with respect to XEN402, and a related compound (collectively “XEN402”), including certain regulatory documentation, intellectual property rights, reports, data and all quantities of XEN402, now known as PCRX301, owned or controlled by the Company.
During the three months ended March 31, 2021, the FDA cleared the first investigational new drug application for PCRX301 and Flexion initiated a Phase 1b clinical trial, resulting in milestone payments of $
-12-
|
9. |
Commitments and contingencies: |
|
|
(a) |
Priority access agreement with Medpace Inc. (“Medpace”): |
In August 2015, the Company entered into a priority access agreement with Medpace for the provision of certain clinical development services, under which the Company has committed to using Me