Xenon Pharmaceuticals (XENE) risk factors, FY2025 10-K

Risks Related to Our Financial Condition and Capital Requirements

1. 01We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future
2. 02create additional infrastructure to support our operations and any future commercialization efforts
3. 03We do not generate any revenue from product sales and may never become profitable
4. 04We will need to raise additional funding, which may not be available on acceptable terms, if at all. Failure to obtain capital when needed may force us to delay, limit or terminate our product discovery and development programs or commercialization efforts or other operations
5. 05the ongoing costs of operating as a public company
6. 06We may allocate our limited resources to pursue a particular product candidate or indication and fail to capitalize on other product candidates or indications that may be more profitable or for which there is a greater likelihood of success
7. 07Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates
8. 08We are subject to risks associated with currency fluctuations which could impact our results of operations

Risks Related to Our Business and Industry

1. 09We 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
2. 10We have no marketed proprietary products and are advancing clinical development through Phase 3 clinical studies for our azetukalner program in epilepsy, major depressive disorder, and bipolar depression. These studies may not result in regulatory approval or successful commercialization of our product candidatesNew
3. 11manage our spending as costs and expenses increase due to clinical studies, regulatory approvals and commercialization activities
4. 12If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives may be impaired
5. 13If we fail to attract and retain our executive officers and key personnel, we may be unable to successfully develop our product candidates, perform our obligations under our collaboration agreements, conduct our clinical studies and commercialize our product candidates
6. 14Our employees, collaborators and other personnel may engage in misconduct or other improper activities, including non-compliance with legal and regulatory standards and requirements, which could cause significant liability for us and harm our reputation
7. 15laws that require the reporting of financial information or data accurately
8. 16We may encounter difficulties in managing our growth, including headcount, and expanding our operations successfully
9. 17We are subject to evolving global laws and regulations relating to privacy, data protection and information security, which may require us to incur substantial compliance costs, and any failure or perceived failure by us to comply with such laws and regulations may harm our business and operations35% rewritten
10. 18Our business and operations could suffer in the event of an actual or perceived information security incident such as a cybersecurity breach, system failure, or other compromise of our systems and/or information, including information held by a third-party contractor or vendor
11. 19A variety of risks associated with international operations could materially harm our business
12. 20U.S. investors should be aware that based on our gross income and gross assets, we were a passive foreign investment company, or PFIC, for the taxable year ended December 31, 2025 and we may be a PFIC in 2026
13. 21Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
14. 22We may become subject to income tax in jurisdictions in which we are organized or operate, which would reduce our future earnings
15. 23Acquisitions or other strategic transactions could disrupt our business, cause dilution to our shareholders and otherwise harm our business
16. 24Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries
17. 25If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business
18. 26We or the third parties upon whom we depend may be adversely affected by earthquakes, climate change or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from serious disaster31% rewritten

Risks Related to the Discovery, Development and Commercialization of Our Product Candidates

1. 27Our business substantially depends upon the successful development of azetukalner. If we are unable to obtain regulatory approval for, and successfully commercialize, azetukalner, our business may be materially harmed44% rewritten
2. 28raising sufficient funds to support regulatory approval and commercialization activities
3. 29Our approach to drug discovery may not reproducibly or cost-effectively result in the discovery of product candidates and development of commercially viable products that safely and effectively treat human disease
4. 30Results of pre-clinical studies and/or earlier clinical studies may not be predictive of the results of later-stage clinical studies and the results of our clinical studies may not satisfy regulatory requirements and we may experience delays or unexpected difficulties in obtaining regulatory approval33% rewritten
5. 31Interim, initial, “topline” and preliminary data from our clinical studies that we announce or publish from time to time may change as more patient data become available, and are subject to audit and verification procedures that could result in material changes in the final data46% rewritten
6. 32We, or our collaborators, may find it difficult to enroll patients in our clinical studies which could delay or prevent the successful completion of clinical studies of our product candidates35% rewritten
7. 33patient referral practices of physicians38% rewritten
8. 34We, or our collaborators, may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our, or our collaborators’, product candidates37% rewritten
9. 35governmental or regulatory delays; and43% rewritten
10. 36Undesirable side effects caused by any of our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical studies and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA or comparable foreign regulatory authorities35% rewritten
11. 37Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay21% rewritten
12. 38the approval policies or regulations of the FDA, EMA or other foreign regulatory authorities may significantly change in a manner rendering our, or our collaborators’, clinical data insufficient for approval33% rewritten
13. 39Even 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
14. 40If product liability lawsuits are brought against us, we may incur substantial liabilities in excess of our limited product liability insurance coverage and may be required to limit commercialization of our current and any future products
15. 41a decline in the market price of our common shares
16. 42Even if regulatory agencies grant marketing approvals to azetukalner or any other of our product candidates, we may not be successful in commercializing any of our future productsNew
17. 43our inability to develop or obtain and sustain sufficient operational functions and infrastructure to support our commercial activitiesNew
18. 44If 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
19. 45our ability to compete with other therapies
20. 46Even if we receive regulatory approval to commercialize any of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and delays25% rewritten
21. 47To the extent we develop and commercialize product candidates that contain or are considered controlled substances, any failure by us or our CROs, CMOs and other contractors to comply with controlled substance laws and regulations, may adversely affect the results of our business operations and our financial condition
22. 48Even if we obtain marketing approval for our product candidates, the presence of a controlled substance in the product candidate may lead to adverse publicity or public perception regarding our current or future product candidates
23. 49Any product candidates for which we obtain approval may become subject to unfavorable third-party coverage and reimbursement practices, as well as pricing regulations, which may adversely affect demand for such products as well as our ability to obtain an appropriate return from the sale of the products26% rewritten
24. 50Healthcare and other reforms may increase the difficulty and cost for us to commercialize any products that we, or our collaborators, develop and affect the prices we may obtain54% rewritten
25. 51Disruptions at the FDA and other government agencies caused by staffing or funding shortages could prevent our product candidates from being developed, approved, or commercialized in a timely manner, or at all, which could negatively impact our business32% rewritten

Risks Related to Our Dependence on Third Parties

1. 52Our 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
2. 53disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions
3. 54We may not be successful in establishing new collaborations or maintaining our existing alliances, which could adversely affect our ability to develop product candidates and commercialize products
4. 55Our reliance on third parties to manufacture our product candidates may increase the risk that we will not have sufficient quantities of our raw materials, APIs or drug products when needed or at an acceptable cost
5. 56If any third-party manufacturer of our product candidates is unable to increase the scale of its production of our product candidates, and/or increase the product yield of its manufacturing, then our costs and time to manufacture the product may increase and commercialization may be delayed
6. 57We rely on third parties to conduct our pre-clinical and clinical studies. 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 harmed34% rewritten
7. 58Ultimately, we are responsible for ensuring that each of our clinical studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities29% rewritten
8. 59Our use of foreign CROs and CMOs in some jurisdictions, such as China, may be or may become subject to U.S. legislation, sanctions, trade restrictions and other regulatory requirements which may increase the cost of, and cause delays for, our pre-clinical product candidates47% rewritten

Risks Related to Intellectual Property

1. 60We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our product candidates or future products
2. 61Our intellectual property rights will not necessarily provide us with competitive advantages
3. 62We may not be able to protect our intellectual property rights throughout the world
4. 63Any of our intellectual property rights could be challenged or invalidated despite measures we or our licensors take to obtain patent and other intellectual property protection with respect to our product candidates and proprietary technology
5. 64Patent protection and patent prosecution for some of our product candidates and future products is dependent on, and the ability to assert patents and defend them against claims of invalidity is maintained by, third parties
6. 65Unfavorable outcomes in intellectual property litigation could limit our research and development activities and/or our ability to commercialize certain products
7. 66If we breach any agreement 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
8. 67If we are unable to prevent unauthorized disclosure of trade secrets and other proprietary information, our competitive position could be harmed
9. 68Changes in U.S. patent law, or laws in other countries, could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our patents, thereby impairing our ability to protect our product candidates and future products
10. 69Intellectual property litigation and/or other administrative proceedings may lead to unfavorable publicity that harms our reputation and causes the market price of our common shares to decline
11. 70If we do not obtain protection under the Hatch-Waxman Act in the U.S. and similar foreign legislation by extending the patent terms for patents covering our product candidates, our business may be materially harmed
12. 71If our trademarks are not adequately protected, we may not be able to build name recognition in our markets of interest, which could adversely affect our business
13. 72Our expanding use of artificial intelligence exposes us to operational, regulatory, legal, and ethical risks that could adversely affect our business, reputation, financial condition, and results of operationsNew

Risks Related to Ownership of Our Common Shares

1. 73The market price of our common shares may be volatile, and purchasers of our common shares could incur substantial losses
2. 74the other factors described in this “Risk Factors” section
3. 75Future 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
4. 76We 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 and U.S. securities laws
5. 77shareholders must give advance notice to nominate directors or to submit proposals for consideration at shareholders’ meetings; and
6. 78U.S. civil liabilities may not be enforceable against us, our directors, or our officers
7. 79We are at risk of securities class action litigation
8. 80Our management has broad discretion over the use of our cash and we may not use our cash effectively, which could adversely affect our results of operations
9. 81We do not anticipate paying any cash dividends on our common shares in the foreseeable future
10. 82Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our common shares
11. 83There is no public market for our outstanding pre-funded warrants
12. 84Unstable market and economic conditions may have serious adverse consequences on our business and financial condition52% rewritten
13. 85We have incurred, and expect to continue to incur, significant costs as a result of laws, regulations and investor-driven standards relating to corporate governance and other matters