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The following is an excerpt from a S-1 SEC Filing, filed by XENON PHARMACEUTICALS INC. on 9/10/2014.
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XENON PHARMACEUTICALS INC. - S-1 - 20140910 - PROSPECTUS_SUMMARY

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. You should carefully read this entire prospectus, including the matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes.

Unless the context requires otherwise, in this prospectus the terms “Xenon,” “we,” “us,” “our” and “our company” refer to Xenon Pharmaceuticals Inc.

Xenon Pharmaceuticals Inc.

Overview

We are a clinical-stage biopharmaceutical company discovering and developing a pipeline of differentiated therapeutics for orphan indications that we intend to commercialize on our own, and for larger market indications that we intend to partner with global pharmaceutical companies. We have built a core enabling discovery platform for the discovery of validated drug targets by studying rare human diseases with extreme traits, including diseases caused by mutations in ion channels, known as channelopathies. We have an integrated platform that includes in-house capabilities for human genetics, small molecule drug discovery and preclinical and clinical development.

Our business was founded on our proprietary discovery platform, which we refer to as Extreme Genetics. Extreme Genetics involves the study of families where individuals exhibit inherited severe traits, or phenotypes. By identifying and characterizing single-gene defects responsible for these phenotypes, we gain insights into human disease biology to better select targets for therapeutic intervention. Our Extreme Genetics discovery platform has yielded the first approved gene therapy product in the European Union, or the EU, a broad development pipeline and multiple pharmaceutical partnerships.

Our pharmaceutical partners include Teva Pharmaceutical Industries Ltd., or Teva, Genentech, Inc., or Genentech, and Merck & Co., Inc., or Merck, (through its affiliate, Essex Chemie AG). Our pharmaceutical collaborations have generated in aggregate over $140.0 million in non-equity funding to date with the potential to provide us with over $1.0 billion in future milestone payments, as well as royalties and co-promotion income on product sales.

Our most advanced product candidate is TV-45070 (formerly XEN402), which we have partnered with Teva (through its subsidiary, Ivax International GmbH). Teva is currently conducting a 300-patient, randomized Phase 2b clinical trial of TV-45070 in osteoarthritis, or OA, of the knee and is currently planning additional development of TV-45070 in neuropathic pain indications. A second product candidate, GDC-0276, is being developed in collaboration with Genentech, for the treatment of pain. In August 2014, Genentech received approval from Health Canada to initiate a Phase 1 clinical trial for GDC-0276.

We have coupled our Extreme Genetics discovery platform with our integrated drug discovery capabilities, including significant ion channel expertise, to build our product pipeline. Our pipeline is balanced with both proprietary assets for orphan indications that we believe we can develop and commercialize independently and partnered assets in larger therapeutic markets that require significant commercial capabilities. We have implemented our strategic alliance model to establish well-structured partnerships that have front-loaded our product pipeline with near-to-mid-term market opportunities, and that have provided significant non-equity funding to date as well as substantial potential future milestone payments. Since inception, we believe that we have operated in a capital-efficient manner, and, as of June 30, 2014, we have cash, cash equivalents and marketable securities of $44.7 million, which figure excludes an $8.0 million milestone payment we received in August 2014 from Genentech. Since our last equity financing in 2006, we have funded our operations and expanded our platform, product pipeline and infrastructure through a combined strategy, including deploying our own resources and establishing our partnerships. We focus on execution of our corporate goals and partnering obligations, and, as a

 

 

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result, we believe we are well-positioned for potential value-creating inflection points in the near-term in both our partnered and proprietary programs, including the potential receipt of up to $40.5 million in milestone payments under our existing collaboration agreements, over the next 24 months, which includes an $8.0 million milestone payment received from Genentech in August 2014 for the approval of the GDC-0276 Clinical Trial Application, or CTA, from Health Canada.

The following chart summarizes our current product pipeline, including partnered and proprietary Xenon programs:

 

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Our Programs

Approved Product

Glybera: Glybera is the first and currently the only gene therapy product to receive commercial approval in the EU. Glybera, developed by our licensee uniQure Biopharma B.V., or uniQure, is specifically indicated for the treatment of a subset of adult patients diagnosed with the orphan lipid disorder lipoprotein lipase deficiency, or LPLD, confirmed by genetic testing and suffering from severe or multiple pancreatitis attacks, despite dietary fat restrictions. LPLD is a severe metabolic disease of inadequate lipid metabolism, resulting in pancreatitis and, in some cases, death. Together with collaborators from the University of British Columbia, or UBC, we demonstrated that humans with a single gene variant of the lipoprotein lipase, or LPL, gene called LPL S447X , resulted in increased LPL enzyme activity leading to reduced triglyceride levels. Under our sublicense and research agreement with uniQure, we collaborated with uniQure and UBC on preclinical activities, and thereafter uniQure developed an LPL gene therapy product, Glybera, which contains the LPL S447X variant. We believe that the introduction of the therapeutic LPL S447X gene through administration of Glybera provides a clinical benefit for a subset of LPLD patients.

Glybera is the first product whose active ingredient was derived from our platform to receive commercial approval. The goal of Glybera therapy is to treat LPLD in order to achieve sustained improvement of clearance of triglyceride-rich lipid particles known as chylomicrons, and to significantly reduce the risk of pancreatitis

 

 

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attacks in patients suffering from multiple recurrent pancreatitis and abdominal pain events. Glybera was developed by our licensee, uniQure. In 2012, Glybera was approved in the EU and, in July 2013, uniQure announced that it had entered into a partnership with Chiesi Farmaceutici S.p.A., or Chiesi, for the commercialization of Glybera in the EU and more than a dozen other countries, including Brazil, China, Mexico and Russia. We believe that Chiesi plans to launch Glybera in the fourth quarter of 2014 or the first quarter of 2015 in Europe, and that uniQure is pursuing a U.S. product approval strategy, with plans to file a Biologics License Application, or BLA, with the U.S. Food and Drug Administration, or FDA, in 2017. Glybera has received orphan drug designation for the treatment of LPLD in both the EU and the U.S.

We are eligible to receive mid single-digit royalties on net sales of the licensed products, for sales made by uniQure and its affiliates. The royalty rates are reduced to a low single-digit for sales made by uniQure and its affiliates in countries where a licensed technology or a licensed product is not covered by a valid patent claim. With respect to uniQure’s sublicense to Chiesi, we are eligible to receive a percentage in the low twenties of all non-royalty compensation relating to the licensed technology or products that uniQure receives from Chiesi (for example, upfront payments and milestone payments), a percentage in the low twenties of any royalties that uniQure receives from Chiesi based on sales of technology or products covered by the licensed patents, plus a mid single-digit percentage of certain further royalties that uniQure receives from Chiesi based on sales of our licensed technology or products after the expiration of all licensed patents covering the product.

Product Candidates in Development

TV-45070 for the Treatment of Pain: TV-45070 (formerly XEN402) is a small-molecule inhibitor of the sodium channel Nav1.7 and other sodium channels, including those that are expressed in the pain-sensing peripheral nervous system. TV-45070 has potentially broad application in nociceptive pain, mediated by damage or injury to tissues, including the pain sensitivity caused by inflammation, and neuropathic pain mediated by damage, dysfunction or injury of nerves. TV-45070 is partnered with Teva. Pursuant to the terms of the agreement, Teva is obligated to complete three Phase 2 or later stage clinical trials. Using a topical ointment formulation of TV-45070, Teva has initiated a 300-patient, randomized Phase 2b clinical trial in OA of the knee with data expected in the third quarter of 2015. Teva is also developing topical TV-45070 in neuropathic pain indications, and is planning a Phase 2b clinical trial in patients with postherpetic neuralgia, or PHN, that is expected to start in the first half of 2015. In addition, we are working with Teva to evaluate the opportunity to develop TV-45070 for the orphan disease erythromelalgia, or EM. TV-45070 has received both fast track and orphan designations from the FDA for the treatment of EM.

We selected Nav1.7 as a drug target for pain after we discovered that the Nav1.7 protein is deficient in the rare genetic disorder congenital indifference to pain, or CIP, sufferers of which are unable to feel pain. We have observed promising evidence of activity for TV-45070 in four Phase 2 proof-of-concept clinical trials, including two trials in EM, one trial in PHN and one trial in dental pain, a form of nociceptive pain.

In December 2012, we entered into a collaborative development and license agreement with Teva, pursuant to which we granted Teva an exclusive worldwide license to develop and commercialize TV-45070. Under the terms of the agreement, Teva made an upfront payment to us of $41.0 million. In addition, we are eligible to receive potential milestone payments totaling up to $335.0 million, comprised of a $20.0 million clinical milestone payment, up to $285.0 million in regulatory milestone payments, and a $30.0 million sales-based milestone payment. If TV-45070 is approved, we are also eligible to receive royalties in the low teens to the low twenties on net sales of the licensed products for the timeframe that such products are covered by the licensed patents and in certain other instances. We have an option to obtain a 20% to 30% co-promotion interest for products incorporating TV-45070 in the U.S., which is exercisable upon the filing of the first new drug application, or NDA, for a TV-45070 product. If we exercise this option, upon paying an opt-in fee to Teva, we will be eligible to receive, in lieu of royalties with respect to such product sales in the U.S., a share of operating profits from any product sales in the U.S. that is equal to our percent interest of detailing activities and co-promotion expenses.

 

 

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GDC-0276 and Other Selective Inhibitors of Nav1.7 for the Treatment of Pain: In December 2011, we entered into a collaborative research and license agreement with Genentech and its affiliate, F. Hoffmann-La Roche Ltd, or Roche, to discover and develop selective oral inhibitors of Nav1.7 for the treatment of pain. Based on our discovery of Nav1.7 deficiency underlying CIP, we believe that Nav1.7 is a highly-validated target for the treatment of pain. Our Genentech collaboration is focused on discovering and developing selective oral Nav1.7 inhibitors, which is in contrast to our Teva partnership that is focused on developing a topical drug that targets a number of different sodium channels, including Nav1.7. The first small-molecule, preclinical product candidate that was selected for development under our collaboration is GDC-0276. In August 2014, Genentech received approval from Health Canada to initiate a Phase 1 clinical trial for GDC-0276.

Under the terms of the agreement, Genentech paid us an upfront fee of $10.0 million, a $5.0 million milestone payment for the selection of GDC-0276 for development and an $8.0 million milestone payment upon the approval by Health Canada of the Clinical Trial Application, or CTA, for GDC-0276. We are also eligible to receive pre-commercial and commercial milestone payments with respect to the licensed products totaling up to an additional $613.0 million, comprised of up to $45.5 million in preclinical and clinical milestone payments, up to $387.5 million in regulatory milestone payments, and up to $180.0 million in sales-based milestone payments for multiple products and indications. In addition, we are also eligible to receive royalties based on net sales of the licensed products, which range from a mid single-digit percentage to ten percent for small-molecule inhibitors for the timeframe that such products are covered by the licensed patents and a low single-digit percentage thereafter, plus a low single-digit percentage for large-molecule inhibitors of Nav1.7.

Chronic pain conditions, such as severe cancer pain and neuropathic pain, are generally recognized as unmet medical needs providing potential commercial opportunities for a new oral pain drug. Currently available pain drugs often have either a lack of meaningful pain relief or dose-limiting side effects for many patients. An orally administered selective Nav1.7 inhibitor could present a novel mechanism for the treatment of moderate to severe pain as a single agent or in combination with existing analgesics that work through different mechanisms.

Xenon’s Proprietary Preclinical Product Candidates

We are leveraging our core expertise in the genetics of rare diseases and ion channel disorders to identify novel targets and discover differentiated, proprietary product candidates. We are focusing on orphan and niche disease product candidates which we believe we can develop and commercialize independently. We expect our independent development to expand the therapeutic and commercial value of our proprietary pipeline and advance our goals of building a self-sustaining, fully-integrated and profitable company.

Selective Small-Molecule Sodium Channel Inhibitors for the Treatment of Dravet Syndrome

We are developing selective inhibitors of the voltage-gated sodium channel Nav1.6 as a treatment for the orphan disease Dravet Syndrome, or DS. We have developed considerable expertise in voltage-gated sodium channel biology and have accumulated significant experience in the development of selective channel inhibitors. We are leveraging this expertise and chemistry know-how for the development of selective inhibitors of Nav1.6. for the treatment of DS.

DS is a severe form of childhood epilepsy that typically causes mental retardation and, in approximately 10% of cases, premature death before the age of 12 years. The frequency of DS in the U.S. has been estimated to be one in 20,000 to 40,000 births, which, when applied to U.S. federal census data, correlates to approximately 7,500 to 15,000 patients with DS in the U.S.

Based on our experience and know-how in developing selective ion channel inhibitors, we have identified potent, selective Nav1.6 inhibitors. We expect to have preclinical proof-of-concept data in the second half of 2014 in animal models of DS. We anticipate filing an IND for a drug candidate to treat DS in 2016. Given the orphan nature of this disorder, we believe that DS may represent an attractive opportunity for us to advance independently.

 

 

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XEN801 for the Treatment of Acne

XEN801 is a selective, small molecule inhibitor of stearoyl Co-A desaturase, or SCD1, being developed for the treatment of moderate to severe acne. SCD1 is an enzyme involved in lipid synthesis that is expressed in sebaceous glands in the skin. Mice deficient in SCD1 have a marked phenotype of sebaceous gland atrophy suggesting that inhibition of SCD1 activity in the skin may provide a novel treatment option for disorders of enlarged or overactive sebaceous glands, including acne. We have discovered and developed novel small-molecule SCD1 inhibitors to which we have sole rights. In multiple animal models, we have shown that our SCD1 inhibitors can reduce the size and number of sebaceous glands. XEN801 has demonstrated good properties for topical administration, including formulation in a light gel and adequate skin penetration in multiple animal species.

We anticipate selecting a development candidate for IND-enabling studies in the second half of 2014 and filing an IND in the first half of 2015 to initiate clinical development. We believe a selective, small-molecule inhibitor of SCD1 has therapeutic potential for skin disorders such as moderate to severe acne, seborrhoea and sebaceous hyperplasia.

Selective Small-Molecule Inhibitors of Targets for the Treatment of Cardiovascular Disease

We entered into a collaborative research and option agreement with Merck in June 2009 to discover novel targets and compounds for the treatment of cardiovascular disease using our Extreme Genetics discovery platform. In 2012, Merck exercised its option to obtain an exclusive license to a target for the treatment of cardiovascular disease and compound inhibitors that were discovered during the research collaboration. The target, when inhibited, is predicted to provide a beneficial lipid profile with the goal of protecting from cardiovascular disease.

New Pipeline Opportunities

Given the commercial opportunity and the pharmaceutical industry’s interest in the pain market, we are using our Extreme Genetics discovery platform and specialized insights into the biology of pain to identify new drug targets for this common medical problem. We formed a second collaboration with Genentech in March 2014 for pain genetics, pursuant to which we intend to focus on rare phenotypes where individuals have an inability to perceive pain or where individuals have non-precipitated spontaneous severe pain. We believe these phenotypes may unlock new key molecular regulators of pain signaling in humans, which we will seek to validate as targets for new pain drugs. For example, we are analyzing CIP families that are not explained by Nav1.7 deficiency as well as families with severe pain phenotypes, such as paroxysmal extreme pain disorder, or PEPD, inherited EM and cluster headache.

In addition to our study of rare human disorders of extreme pain or the absence of pain, we are studying other rare disorders with extreme phenotypes that we believe could yield new drug targets in disorders where high medical need exists, such as neurological disorders like essential tremor.

In addition, given our expertise in ion channel drug discovery, we are also focusing our discovery efforts on the identification of ion channel targets where we believe novel selective inhibitors might represent significant therapeutic advances with a focus on orphan indications.

Strategic Alliances

We have strategically and selectively established multiple collaborations with leading pharmaceutical companies, including uniQure, Teva, Genentech and Merck.

These collaborations have validated our discovery platform and allowed us to expand and augment our internal discovery and development capabilities and know-how while providing us with significant, non-dilutive funding as well as the potential for future milestone payments, royalty income and commercial participation.

We believe that we have successfully implemented our partnering model by leveraging collaborations to front-load our product pipeline with clinical programs in large market opportunities that are of broad strategic value to our

 

 

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partners, that leverage their established therapeutic expertise and commercial focus, and that they are advancing into later stages of development. At the same time, these partnerships have provided us with the resources to independently advance our proprietary programs in orphan indications into development, and potentially commercialization. We believe that these partnerships enable us to build on our core competencies with greater focus, speed and capital efficiency than we could have achieved independently, and have positioned us to potentially reach a number of near-term value-creating milestones. For additional information regarding our collaborations, please see the section of this prospectus captioned “Business — Strategic Alliances.”

Our Strategy

Our goal is to build a self-sustaining, fully-integrated and profitable company that discovers, develops and commercializes innovative therapeutics, including novel selective ion channel inhibitors, by applying our expertise in the genetics of rare human diseases.

Since our inception, we believe we have operated in a capital-efficient manner to build our capabilities and assets through phased growth, expansion and value creation. Since our last equity financing in 2006, we have funded our operations and expanded our platform, product pipeline and infrastructure through a strategy that combines the deployment of our own resources and the establishment of broadly enabling and well-structured pharmaceutical partnerships with industry leaders.

Our strategy is to:

 

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Expand our pipeline and advance multiple discovery and development programs, focusing on orphan and niche disease market opportunities that we can independently develop and commercialize ourselves.

 

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Selectively establish additional partnerships enabling us to access large commercial indications while leveraging the benefits of those collaborations to expand our internal capabilities.

 

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Further leverage our discovery platform and insights into disease biology to identify novel targets and develop next-generation products.

For additional information about our business, please see the section of this prospectus captioned “Business.”

Risks Associated with Our Business

Our ability to implement our current business strategy is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. These risks include, among others:

 

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We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

 

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We have not generated any royalty revenue from product sales and may never become profitable from royalty revenue.

 

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We will likely need to raise additional funding, which may not be available on acceptable terms, if at all.

 

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Our existing collaborations are important to our business, and future collaborations may also be important to us. If we are unable to maintain any of these collaborations, or if these collaborations are not successful, our business could be adversely affected.

 

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Clinical drug development involves a lengthy and expensive process with uncertain timelines and outcomes. If clinical trials are prolonged or delayed, we, or our collaborators, may be unable to commercialize our product candidates on a timely basis.

 

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The regulatory approval processes of the FDA, the European Medicines Agency, or EMA, and regulators in other jurisdictions are lengthy, time-consuming and inherently unpredictable. If we, or our collaborators, are unable to obtain timely regulatory approval for our product candidates, our business will be substantially harmed.

 

 

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We and our collaborators face substantial competition in the markets for our product candidates.

 

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The novelty of gene therapy products and their lack of a commercial track record may hinder market acceptance of Glybera.

 

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Our approach to drug discovery is unproven, and we do not know whether we will be able to develop any products of commercial value.

 

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We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates.

 

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The limited patient population for orphan and niche indications may prevent us from accurately estimating the market opportunity for our product candidates or enrolling sufficient patients for our clinical trials.

For additional information about the risks we face, please see the section of this prospectus captioned “Risk Factors.”

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These provisions include:

 

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a requirement to have only two years of audited financial statements and only two years of related management’s discussion and analysis;

 

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an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal controls over financial reporting;

 

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an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

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reduced disclosure about our executive compensation arrangements; and

 

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exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a shareholder approval of any golden parachute arrangements.

Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:

 

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the last day of the fiscal year during which we have total annual gross revenue of $1.0 billion or more;

 

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the last day of the fiscal year following the fifth anniversary of the effective date of the registration statement of which this prospectus forms a part;

 

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the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or

 

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the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act (we will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700.0 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months; the value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter).

We may choose to take advantage of some of the available benefits under the JOBS Act, and have taken advantage of some reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other U.S. public companies in which you hold stock.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging

 

 

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growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Corporate Information

We were incorporated in the Province of British Columbia on November 5, 1996 under the predecessor to the Business Corporations Act (British Columbia) under the name “Xenon Bioresearch Inc.” We continued from British Columbia to the federal jurisdiction pursuant to Section 187 of the Canada Business Corporations Act, or the CBCA, on May 17, 2000 and concurrently changed our name to “Xenon Genetics Inc.” We registered as an extra-provincial company in British Columbia on July 10, 2000 and changed our name to “Xenon Pharmaceuticals Inc.” on August 24, 2004. We have no subsidiaries. Our principal executive offices are located at 200 – 3650 Gilmore Way, Burnaby, British Columbia, Canada V5G 4W8, and our telephone number is (604) 484-3300. Our website address is http://www.xenon-pharma.com. We are currently not a reporting issuer, or the equivalent, in any province or territory of Canada and our shares are not listed on any recognized Canadian stock exchange. The information contained in, or that can be accessed through, our website is not part of this prospectus.

The Xenon logo, “Extreme Genetics and other trademarks or service marks of Xenon appearing in this prospectus are trademarked and are the property of Xenon as is the Xenon corporate name. This prospectus contains references to our trademarks and service marks and to those belonging to other entities, including “Glybera ® ,” which is the property of uniQure. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

 

 

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