We are a clinical stage biopharmaceutical company committed to developing innovative therapeutics to improve the lives of patients with neurological disorders including rare central nervous system, or CNS, conditions. We are advancing a novel product pipeline of neurology-focused therapies to address areas of high unmet medical need, with a focus on epilepsy. To date, our pharmaceutical collaborations have generated in aggregate over $160.0 million in non-equity funding with the potential to provide us with future milestone payments, as well as royalties on product sales.
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.
We may allocate our limited resources to pursue a particular drug candidate or indication and fail to capitalize on other drug candidates or indications that may be more profitable or for which there is a greater likelihood of success.
We are party to a loan and security agreement that contains operating and financial covenants that may restrict our business and financing activities and we may be required to repay the outstanding indebtedness in an event of default, which could have a materially adverse effect on our business.
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Unstable market and economic conditions may have serious adverse consequences on our business and financial condition.
We, or our collaborators, may fail to successfully develop our product candidates.
We and our collaborators face substantial competition in the markets for our product candidates, which may result in others discovering, developing or commercializing products before us or doing so more successfully than we or our collaborators do.
We have no marketed proprietary products and have not yet advanced a product candidate beyond Phase 2 clinical trials, which makes it difficult to assess our ability to develop our future product candidates and commercialize any resulting products independently.
If we are not successful in discovering, acquiring or in-licensing product candidates in addition to XEN496, XEN1101, XEN901, and XEN007, our ability to expand our business and achieve our strategic objectives may be impaired.
If we fail to attract and retain senior management and key personnel, we may be unable to successfully develop our product candidates, perform our obligations under our collaboration agreements, conduct our clinical trials and commercialize our product candidates.
Our employees, collaborators and other personnel may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We may encounter difficulties in managing our growth, including headcount, and expanding our operations successfully.
Our business and operations could suffer in the event of system failures.
U.S. holders of our common shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company.
We may become subject to income tax in jurisdictions in which we are organized or operate, which would reduce our future earnings.
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.
Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical trials are prolonged, delayed or not completed, we, or our collaborators, may be unable to commercialize our product candidates on a timely basis.
Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which could prevent or delay regulatory approval and commercialization.
AHC, KCNQ2-EE and SCN8A-EE have no FDA-approved treatments, and the clinical endpoints required to obtain approval are not well defined.
If we fail to obtain or maintain orphan drug designation or other regulatory exclusivity for some of our product candidates, our competitive position would be harmed.
The FDA has granted RPD designation to XEN007 for treatment of AHC; however, we may not be able to realize any value from such designation.
Results of pre-clinical studies may not be predictive of clinical trial results and results of earlier clinical trials may not be predictive of the results of later-stage clinical trials and the results of our clinical trials may not satisfy the requirements of the FDA, EMA, Health Canada or foreign regulatory authorities.
Even if we obtain and maintain approval for our product candidates from one jurisdiction, we may never obtain approval for our product candidates in other jurisdictions, which would limit our market opportunities and adversely affect our business.
We work with outside scientists and their institutions in executing our business strategy of developing product candidates. These scientists may have other commitments or conflicts of interest, which could limit our access to their expertise and harm our ability to develop viable product candidates.
If, in the future, we are unable to establish our own sales, marketing and distribution capabilities or enter into licensing or collaboration agreements for these purposes, we may not be successful in independently commercializing any future products.
Even if we receive regulatory approval to commercialize any of the product candidates that we develop independently, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense.
Even if we or our collaborators receive approval to commercialize our products, unfavorable pricing regulations and challenging third-party coverage and reimbursement practices could harm our business.
Foreign governments tend to impose strict price controls, which may adversely affect our future profitability.
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 intend to rely on third-party manufacturers to produce our clinical product candidate supplies. Any failure by a third-party manufacturer to produce acceptable supplies for us may delay or impair our ability to initiate or complete our clinical trials or commercialize approved products.
We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates.
Our intellectual property rights will not necessarily provide us with competitive advantages.
We may not be able to protect our intellectual property rights throughout the world.
Our patents covering one or more of our products or product candidates could be found invalid or unenforceable if challenged.
Patent protection and patent prosecution for some of our product candidates is dependent on, and the ability to assert patents and defend them against claims of invalidity is maintained by, third parties.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.
Claims that our product candidates or the sale or use of our future products infringe the patent or other intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided.
Unfavorable outcomes in intellectual property litigation could limit our research and development activities and/or our ability to commercialize certain products.
If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or technology from third parties, we could lose license rights that are important to our business.
Recent court decisions could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
If we do not obtain protection under the Hatch-Waxman Act and similar legislation outside of the U.S. by extending the patent terms for our product candidates, our business may be materially harmed.
We have not registered our corporate name as a trademark in all of our potential markets, and failure to secure those registrations could adversely affect our business.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our current and any future products.
We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from serious disaster.
The market price of our common shares may be volatile, and purchasers of our common shares could incur substantial losses.
Future sales of our common shares in the public market could cause the market price of our common shares to fall.
Provisions in our corporate charter documents and Canadian law could make an acquisition of us, which may be beneficial to our shareholders, more difficult and may prevent attempts by our shareholders to replace or remove our current management and/or limit the market price of our common shares.
U.S. civil liabilities may not be enforceable against us, our directors, or our officers.
We are governed by the corporate and securities laws of Canada which in some cases have a different effect on shareholders than the corporate laws of Delaware, U.S. and U.S. securities laws.
An active trading market for our common shares may not be maintained.
We are an emerging growth company and a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to such companies could make our common shares less attractive to investors.
Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results and our ability to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common shares.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the market price of our common shares.
Future sales and issuances of our common shares, preferred shares, or rights to purchase common shares, including warrants or pursuant to our equity incentive plans, could cause you to incur dilution and could cause the market price of our common shares to fall.
We are at risk of securities class action litigation.
Nasdaq may delist our securities from its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our management team has broad discretion as to the use of the net proceeds from previous public and private equity and debt financings and the investment of these proceeds may not yield a favorable return. We may invest the proceeds in ways with which our shareholders disagree.
We do not anticipate paying any cash dividends on our common shares in the foreseeable future.
Research and development expenses increased by $3.6 million in the three months ended March 31, 2019 as compared to the three months ended March 31, 2018. The increase was primarily attributable to increased spending on our XEN1101 and XEN901 product candidates and our XEN496 product candidate which was announced in September 2018, partially offset by a decrease in pre-clinical, discovery and other internal program expenses.
General and administrative expenses increased by $0.4 million in the three months ended March 31, 2019 as compared to the three months ended March 31, 2018. The increase was primarily attributable to increased legal expenses for intellectual property protection and business development expenses.
Other income decreased by $3.6 million in the three months ended March 31, 2019 as compared to the three months ended March 31, 2018. The decrease was primarily driven by a $4.4 million gain on the termination of the collaboration agreement with Teva in March 2018, partially offset by a change in foreign exchange gains and losses and an increase in interest income earned on our marketable securities. We recorded a foreign exchange gain of $0.1 million in the three months ended March 31, 2019 as compared to a $0.3 million foreign exchange loss for the same period in 2018, largely due to a 2% increase as compared to a 3% decrease in the value of the Canadian dollar, respectively.