UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(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:
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(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.
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Smaller reporting company |
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Emerging growth company |
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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 ☐ No
As of August 5, 2024, the registrant had
XENON PHARMACEUTICALS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2024
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:
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)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities (note 6) |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Marketable securities, long-term (note 6) |
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Operating lease right-of-use asset, net (note 7) |
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Property, plant and equipment, net |
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Deferred tax assets |
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Prepaid expenses, long-term |
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Total assets |
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$ |
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$ |
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Accounts payable and accrued expenses (note 8) |
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$ |
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$ |
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Operating lease liability (note 7) |
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Operating lease liability, long-term (note 7) |
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Total liabilities |
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$ |
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$ |
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Shareholders’ equity: |
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Common shares, par value; shares authorized; issued and |
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$ |
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$ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total shareholders' equity |
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$ |
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$ |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Loss from operations |
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( |
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( |
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( |
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Other income: |
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Interest income |
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Unrealized fair value gain on trading securities |
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— |
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— |
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Foreign exchange gain |
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Loss before income taxes |
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( |
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( |
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( |
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( |
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Income tax recovery (expense) |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Unrealized loss on available-for-sale |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net loss per common share (note 4): |
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Basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average common shares outstanding (note 4): |
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Basic and diluted |
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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)
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Common shares |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Balance as of |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss for the period |
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— |
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— |
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— |
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( |
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— |
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( |
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Conversion of pre-funded |
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( |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issued pursuant to exercise of |
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( |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Balance as of |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss for the period |
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— |
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— |
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— |
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( |
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— |
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( |
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Conversion of pre-funded |
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( |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issued pursuant to exercise of |
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( |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance as of |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Balance as of |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss for the period |
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— |
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— |
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— |
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( |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issued pursuant to exercise of |
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( |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net loss for the period |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issued pursuant to exercise of |
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( |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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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)
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Six Months Ended June 30, |
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2024 |
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2023 |
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Operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Items not involving cash: |
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Depreciation |
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Deferred income tax expense |
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Stock-based compensation |
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Unrealized foreign exchange (gain) loss |
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( |
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Unrealized fair value gain on trading securities |
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— |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Accounts payable and accrued expenses |
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Net cash used in operating activities |
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( |
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( |
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Investing activities: |
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Purchases of property, plant and equipment |
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( |
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( |
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Purchases of marketable securities |
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( |
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( |
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Proceeds from marketable securities |
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Net cash provided by investing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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Increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental disclosure: |
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Cash paid for operating lease |
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$ |
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$ |
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Supplemental disclosures of non-cash transactions: |
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Fair value of stock options exercised on a cashless basis |
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Fair value of pre-funded warrants exercised |
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— |
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Increase in operating lease liability and accounts receivable related to |
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— |
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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)
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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 neuroscience-focused biopharmaceutical company dedicated to discovering, developing, and delivering life-changing ion channel therapeutics for patients in need.
The Company has incurred significant operating losses since inception. As of June 30, 2024, 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.
These unaudited interim consolidated financial statements are presented in U.S. dollars and include the accounts of the Company and its wholly-owned subsidiary, Xenon Pharmaceuticals USA Inc., a Delaware corporation. All intercompany transactions and balances have been eliminated on consolidation.
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, 2023 included in the Company’s 2023 Annual Report on Form 10-K filed with the SEC and with the securities commissions in British Columbia, Alberta and Ontario on February 29, 2024.
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 and six month periods ended June 30, 2024 and 2023 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 2023 Annual Report on Form 10-K for the year ended December 31, 2023, with the exception of the policy described in note 3 below.
The Company grants performance share unit awards (“PSUs”) to certain employees and officers.
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, performance share units 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.
For the three and six months ended June 30, 2024 and 2023, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
The fair value hierarchy consists of the following three levels:
The Company’s cash and cash equivalents and marketable securities are measured at fair value on a recurring basis.
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June 30, 2024 |
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December 31, 2023 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash and cash equivalents |
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Cash and money market fund |
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$ |
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$ |
— |
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$ |
— |
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$ |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Marketable securities |
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Guaranteed investment certificates |
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— |
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— |
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— |
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— |
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U.S. treasuries |
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— |
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— |
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— |
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— |
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U.S. government securities |
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— |
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— |
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— |
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— |
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Commercial paper |
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— |
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|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
The fair values of the Company’s U.S. government securities, commercial paper and corporate debt securities are based on prices obtained from independent pricing sources. Securities with validated quotes from pricing services are reflected within Level 2, as they are primarily based on observable pricing for similar assets or other market observable inputs. Typical inputs used by these pricing services include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers or estimates of cash flow, prepayment spreads and default rates.
As of June 30, 2024 and December 31, 2023, the Company did not hold any securities classified as Level 3.
-8-
As of June 30, 2024, the Company had $
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Amortized |
|
|
Unrealized |
|
|
Fair |
|
|
Amortized |
|
|
Unrealized |
|
|
Fair |
|
||||||
Contractual maturity of 0 to 1 years: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Guaranteed investment certificates |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
U.S. treasuries |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
U.S. government securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Commercial paper |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate debt securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Contractual maturity of 1 to 3 years: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. treasuries |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate debt securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Allowance for credit losses or impairment on these marketable securities have not been recognized as these securities are high credit quality, investment grade securities that the Company does not intend to sell and will not be required to sell prior to their anticipated recovery, and the decline in fair value is primarily due to changes in interest rates.
The cost components of the operating leases were as follows for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Lease Cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease expense(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease Term and Discount Rate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average remaining lease term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average discount rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Future minimum lease payments as of June 30, 2024 were as follows:
Year ending December 31: |
|
|||
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 and thereafter |
|
|
|
|
Total future minimum lease payments |
|
$ |
|
|
Less: imputed interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
-9-
Accounts payable and accrued expenses consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Trade payables |
|
$ |
|
|
$ |
|
||
Employee compensation, benefits, and related accruals |
|
|
|
|
|
|
||
Consulting and contracted research |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
In August 2020, the Company entered into an “at-the-market” equity offering sales agreement, amended as of March 2022, with Jefferies LLC and Stifel, Nicolaus & Company, Incorporated pursuant to which the Company may sell common shares from time to time. In January 2021, the Company sold an aggregate of
The following table summarizes the pre-funded warrants activity for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Outstanding, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised (1) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Outstanding, end of period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Each pre-funded warrant is exercisable for the purchase of a common share at the holder's discretion at an exercise price of $
-10-
Stock Options
The following table presents stock option activity for the six months ended June 30, 2024 and 2023:
|
|
Six Months Ended June 30, |
|||||||||||||
|
|
2024 |
|
Weighted Average |
|
|
2023 |
|
Weighted Average |
|
|
||||
Outstanding, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised(1) |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
||
Forfeited, cancelled or expired |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
||
Outstanding, end of period |
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable, end of period |
|
|
|
|
|
|
|
|
|
|
|
||||
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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Average risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected volatility |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Average expected term (in years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected dividend yield |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Weighted average fair value of stock options granted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Performance Share Units
During the six months ended June 30, 2024, the Company granted
In April 2017, the Company acquired azetukalner (XEN1101) from 1st Order pursuant to an asset purchase agreement. In August 2020, the Company and 1st Order amended the asset purchase agreement to amend certain definitions in the agreement and to modify the payment schedule for certain milestones. Through June 30, 2024, the Company has paid $