Xenon Pharmaceuticals Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Financial amounts are in U.S. dollars; figures below are in millions unless stated otherwise. Xenon is a clinical-stage biopharmaceutical company focused on neurological disorders, particularly epilepsy, and had no products approved for sale.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparator |
|---|---|---|
| Revenue | $0 | $8.8 |
| Research and development expense | $39.5 | $19.4 |
| General and administrative expense | $9.5 | $6.8 |
| Total operating expenses | $49.1 | $26.1 |
| Loss from operations | $(49.1) | $(17.4) |
| Other income (expense), net | $7.6 | $(2.7) |
| Net loss | $(41.7) | $(19.7) |
| Net loss per common share, basic and diluted | $(0.63) | $(0.35) |
| Net cash used in operating activities | $(34.4) | $(18.4) |
Gross margin is not meaningful because the company reported no revenue in Q1 2023. At March 31, cash and cash equivalents were $69.5 and marketable securities were $617.8, totaling $687.3, compared with $720.8 at December 31, 2022. Total assets were $719.9; current assets were $533.4 and current liabilities were $22.5. The filing lists no borrowings; reported liabilities were primarily accounts payable, accruals and operating lease liabilities. Accumulated deficit was $524.5.
Material changes versus Q1 2022
- Revenue fell $8.8 million to zero. The prior-year period included Neurocrine collaboration revenue, including a milestone and research services; the research collaboration ended in June 2022.
- R&D expense increased $20.2 million, mainly from XEN1101 Phase 3 and Phase 2 development, increased personnel, and stock-based compensation. XEN1101 direct external costs rose to $21.1 million from $4.2 million.
- G&A expense increased $2.8 million, primarily due to personnel, stock-based compensation, legal compliance and market research costs.
- Net loss more than doubled, despite $7.6 million of other income versus $2.7 million of expense a year earlier. Higher interest income and a fair-value gain on trading securities contributed to the change.
- Operating cash use increased $16.0 million. Investing activities provided $46.6 million, principally reflecting net redemptions of marketable securities; there was no financing cash flow in Q1 2023.
Outlook, programs and risks
- Management expects significant expenses and operating losses for the foreseeable future. It stated that cash, cash equivalents and marketable securities as of the report date were expected to fund operating expenses and capital requirements for at least the next 12 months; actual needs may differ, and further financing may be required.
- XEN1101 is the central internal program: two Phase 3 trials are evaluating focal onset seizures, a Phase 3 trial is evaluating primary generalized tonic-clonic seizures, and the Phase 2 X-NOVA MDD trial was expected to screen its last patient in June 2023, with topline results anticipated in Q4 2023.
- Neurocrine was conducting Phase 2 studies of NBI-921352 in adults with focal onset seizures and in patients aged 2–21 with SCN8A-DEE; data from the adult study were expected in Q4 2023. Xenon’s potential future milestone and royalty receipts depend on Neurocrine’s development and commercialization efforts.
- Xenon said it would no longer pursue clinical development of XEN496, prioritizing pediatric development plans for XEN1101.
- Key risks include clinical-trial efficacy, safety, enrollment and timing; regulatory approval; reliance on collaborators and third-party manufacturers/CROs; intellectual-property protection; cybersecurity; and the need for additional capital. The company reported no material legal proceedings and said disclosure controls were effective.
- Potential collaboration payments include up to $1.67 billion in additional development, regulatory and sales milestones, plus royalties; timing and receipt are uncertain. The company also had up to $6 million in potential regulatory milestones payable to 1st Order Pharmaceuticals related to XEN1101.
Important facts for investors to verify
- Progress, enrollment, safety and results timing for the XEN1101 Phase 3 trials and X-NOVA, including whether the stated Q4 2023 data expectations were met.
- Neurocrine’s progress and decisions on NBI-921352, and the conditions and timing for any related milestones or royalties.
- Cash burn, investment portfolio value and management’s runway estimate, particularly as development spending rises and collaboration revenue remains uncertain.
- Potential dilution: at May 5, 2023, Xenon reported 63.56 million common shares outstanding, 2.25 million pre-funded warrants, 8.76 million options and another 40,000 warrant shares.
- Interest-rate and foreign-exchange exposure: the filing estimated that an unfavorable 100-basis-point rate change would reduce marketable-securities fair value by about $3.2 million; the company did not hedge Canadian-dollar exposure.