Computer Modelling Group Ltd. — Interim / Quarterly Report 2024

Nov 12, 2024

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section should be read in conjunction with our unaudited interim consolidated financial statements and related notes included in Part I, Item 1 of this report and our audited consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 29, 2024 and with the securities commissions in British Columbia, Alberta and Ontario on February 29, 2024.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and Canadian securities laws. The words or phrases “would be,” “will allow,” “intends to,” “may,” “believe,” “plan,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to :

• our ability to identify additional products or product candidates either from our internal research efforts or through acquiring or in-licensing other product candidates or technologies;

• the initiation, timing, cost, progress and success of our research and development programs, pre-clinical studies, and clinical trials;

• our ability to advance product candidates into, and successfully complete, clinical trials;

• our ability to recruit sufficient numbers of patients for our current and future clinical trials;

• our ability to obtain funding for our operations in sufficient amounts or on terms acceptable to us, including funding necessary to complete further development, approval and, if approved, commercialization of our product candidates;

• our ability to independently develop and commercialize product candidates;

• developments relating to our competitors and our industry, including the success of competing therapies that are or become available;

• our pre-commercial, commercialization, marketing and manufacturing capabilities and strategy;

• our ability to obtain and maintain intellectual property protection for our product candidates and the duration of such protection;

• the therapeutic benefits, effectiveness and safety of our product candidates;

• the timing of, and our and our collaborators’ ability to obtain and maintain, regulatory approvals for our product candidates;

• the accuracy of our estimates of the size and characteristics of the markets that may be addressed by our products and product candidates and our ability to serve those markets, either alone or in partnership with others;

• the rate and degree of market acceptance and clinical utility of any future products;

• the pricing and reimbursement of our product candidates, if approved;

• our expectations regarding federal, state and foreign regulatory requirements;

• our ability to establish and maintain collaborations;

• our expectations regarding market risk, including interest rate changes and foreign currency fluctuations;

• our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

• our ability to engage and retain the employees required to grow our business;

• our future financial performance; and

• the direct and indirect impact of pandemics, epidemics and other public health crises on our business and operations, including supply chain, manufacturing, research and development costs, clinical trial conduct, clinical trial data and employees.

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These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” and elsewhere in this report. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments, except as required by law. In this report, “we,” “our,” “us,” “Xenon,” and “the Company” refer to Xenon Pharmaceuticals Inc. and its subsidiary. Unless otherwise noted, all dollar amounts in this report are expressed in United States dollars.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Overview

We are a neuroscience-focused biopharmaceutical company dedicated to discovering, developing, and delivering life-changing therapeutics. We are advancing an ion channel product portfolio to address areas of high unmet medical need, including epilepsy and depression.

Azetukalner Clinical Development

Azetukalner, a novel, highly potent, selective Kv7 potassium channel opener, represents the most advanced, clinically validated potassium channel modulator in late-stage clinical development for multiple indications. We are currently developing azetukalner for the treatment of epilepsy, including focal onset seizures, or FOS, and primary generalized tonic-clonic seizures, or PGTCS, as well as major depressive disorder, or MDD, while exploring applicability in other neuropsychiatric disorders.

Epilepsy Programs

• Phase 3 FOS studies continue to advance, with the first topline data readout from X-TOLE2 anticipated in the second half of 2025. The Phase 3 FOS clinical trials are multicenter, randomized, double-blind, placebo-controlled studies evaluating the clinical efficacy, safety, and tolerability of azetukalner in patients with FOS.

• Phase 3 X-ACKT clinical study is currently enrolling patients and is intended to support potential regulatory submissions in an additional epilepsy indication of PGTCS. This multicenter, randomized, double-blind, placebo-controlled trial is evaluating the clinical efficacy, safety and tolerability of azetukalner in patients with PGTCS.

• Building upon the 600 patient-years of drug exposure to date, we continue to generate long-term scientific evidence demonstrating azetukalner’s compelling efficacy and safety profile in the ongoing X-TOLE open-label extension, or OLE, study.

MDD Program

• X-NOVA2, the first of three Phase 3 clinical trials evaluating azetukalner in patients with MDD, is expected to initiate before the end of the year.

• We continue to support the investigator-sponsored Phase 2 proof-of-concept study of azetukalner in MDD led by Icahn School of Medicine at Mount Sinai. Patient enrollment for this study is now complete and results are anticipated in the first half of 2025.

Early-Stage Pipeline: Next Generation Ion Channel Modulators

As leaders in the small molecule ion channel space, we continue to expand our portfolio by leveraging its extensive expertise to discover and develop potassium and sodium channel therapeutics, including candidates targeting Kv7, Nav1.7, and Nav1.1 across various indications with the goal of filing multiple INDs, or equivalent, in 2025.

• IND-enabling work is underway with multiple Kv7 development candidates. Kv7 may have utility in a broad range of therapeutic indications including seizures, pain, and neuropsychiatric disorders, such as MDD.

• IND-enabling work is underway with a lead Nav1.7 development candidate. Nav1.7 is an important pain-related target, based on strong human genetic validation, that may represent a new class of medicines without the limitations of opioids.

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• We expect to nominate a lead candidate within our Nav1.1 program in 2025. Pre-clinical data suggests that targeting Nav1.1 could potentially address the underlying cause and symptoms of Dravet Syndrome.

Partnered Program

• As part of our ongoing collaboration with Neurocrine Biosciences to develop treatments for epilepsy, a Phase 2 clinical trial is evaluating NBI-921352 (formerly XEN901) in an orphan pediatric epilepsy (SCN8A-DEE), and the next lead candidate, a Nav1.2/1.6 inhibitor, is in IND-enabling studies with the intent to progress into human clinical trials in 2025 as a potential treatment for FOS.

We have funded our operations primarily through the sale of equity securities, funding received from our licensees and collaborators, and debt financing. To date, we have not had any products approved for sale and have not generated any revenue from product sales. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate, which we expect will take a number of years, if ever, and the outcome of which is subject to significant uncertainty.

We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We have incurred net losses in each year since inception and expect to continue to incur net losses for the foreseeable future. We had a net loss of $168.6 million and $137.7 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $833.8 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We anticipate that our operating expenses will increase substantially, particularly as we:

• prepare for the potential commercial launch of azetukalner;

• invest significantly to further develop azetukalner for our current and future indications;

• advance additional product candidates into pre-clinical and clinical development; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials;

• require the manufacture of larger quantities of our product candidates for clinical development and potential commercialization;

• hire additional commercial, clinical, scientific, management and administrative personnel;

• acquire or in-license other assets and technologies;

• maintain, protect and expand our intellectual property portfolio; and

• create additional infrastructure to support our operations and any future commercialization efforts.

Financial Operations Overview

Operating Expenses

The following table summarizes our operating expenses for the three and nine months ended September 30, 2024 and 2023 (in thousands):

nds):
	Three Months Ended September 30,	Nine Months Ended September 30,
	2024 2023	2024 2023
Research and development	$ 56,970 $ 42,880	$ 150,922 $ 126,436
General and administrative	16,706 12,804	50,899 33,923
Totaloperating expenses	$ 73,676 $ 55,684	$ 201,821 $ 160,359

Research and Development Expenses

Research and development expenses represent costs incurred to conduct development of our proprietary product candidates and our drug discovery efforts, including any acquired or in-licensed product candidates or technology, and costs to support any partnered product candidates.

Research and development expenses consist of costs incurred in performing research and development activities, including:

• personnel-related expenses, consisting of salaries, benefits and stock-based compensation for employees engaged in scientific research and development;

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• third-party expenses incurred in connection with the pre-clinical and clinical development of our product candidates, including under agreements with contract research organizations, or CROs;

• third-party expenses relating to formulation, process development and manufacture of drug substance and drug product for use in our pre-clinical testing, clinical trials and potential commercial supply;

• third-party acquisition, license and collaboration fees;

• laboratory consumables; and

• certain indirect costs incurred in support of overall research and development activities, including facilities, depreciation and information technology costs.

Project-specific expenses reflect costs directly attributable to our clinical development candidates for which we have incurred significant expenses. All remaining research and development expenses are reflected in pre-clinical and discovery expenses. At any given time, we have several active early-stage research and drug discovery programs. Our personnel and infrastructure are typically deployed over multiple projects and are not directly linked to any individual internal early-stage research or drug discovery program. Therefore, we do not maintain financial information for our internal early-stage research and internal drug discovery programs on a project-specific basis.

We expense all research and development costs as incurred. Payments we make for research and development services prior to the services being rendered are recorded as prepaid assets in our consolidated balance sheets and are expensed as the services are provided. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.

We expect that our research and development expenses will increase substantially in the future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance into later stages of development and we continue to conduct clinical trials, advance our internal drug discovery programs into pre-clinical development and continue our early-stage research. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size, scope and duration of later-stage clinical trials.

Clinical development timelines, likelihood of regulatory approval, and commercialization and associated costs are uncertain, difficult to estimate, and can vary significantly. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we cannot accurately estimate or know the nature, timing and costs that will be necessary to complete the pre-clinical and clinical development for any of our product candidates or when and to what extent we may generate revenue from the commercialization and sale of any of our product candidates or achieve profitability.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related expenses, consisting of salaries, benefits and stockbased compensation for our employees engaged in executive, finance, legal, business development, commercial and administrative functions, insurance costs, professional fees for auditing, tax and legal services, costs related to maintenance and filing of intellectual property, costs incurred as we prepare for commercialization, and allocated facility-related and information technology costs not otherwise included in research and development expenses.

We expect that general and administrative expenses will increase in the future as we expand our operating activities to support our continued research activities and development of our product candidates, and as we prepare for commercialization. We will also continue to incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

Other Income (Expense)

Interest income. Interest income consists of income earned on our cash and investment balances. We anticipate that our interest income will continue to fluctuate depending on our cash and investment balances and interest rates.

Unrealized fair value gain on trading securities. Trading securities are recorded at fair value. Unrealized fair value gain on trading securities is related to changes in market pricing on investments classified as trading securities during the period.

Foreign exchange gain (loss). Net foreign exchange gain (loss) consists of gains and losses from the impact of foreign exchange fluctuations on our monetary assets and liabilities that are denominated in currencies other than the U.S. dollar (principally the Canadian dollar). We will continue to incur substantial expenses in Canadian dollars and will remain subject to risks associated with foreign currency fluctuations.

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Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the U.S., or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the revenue and expenses incurred during the reported periods. We base estimates on our historical experience, known trends and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies and significant judgments and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and significant estimates include those related to revenue recognition, research and development costs and stock-based compensation.

There have been no material changes in our critical accounting policies and significant judgments and estimates during the nine months ended September 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates” included in our 2023 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or SEC, and with the securities commissions in British Columbia, Alberta and Ontario, or the Canadian Securities Commissions, on February 29, 2024. We believe that the accounting policies discussed in the Annual Report are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Results of Operations

Comparison of three and nine months ended September 30, 2024 and 2023

The following table summarizes the results of our operations for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

	Three Months Ended September 30, Change 2024 vs. 2023	Nine Months Ended September 30, Change 2024 vs. 2023
	2024 2023 Increase/(Decrease)	2024 2023 Increase/(Decrease)
Research and development expenses	$ 56,970 $ 42,880 $ 14,090	$ 150,922 $ 126,436 $ 24,486
General and administrative expenses	16,706 12,804 3,902	50,899 33,923 16,976
Other:
Interest income	10,329 6,982 3,347	32,521 18,929 13,592
Unrealized fair value gain on trading securities	— 490 (490 )	— 3,404 (3,404 )
Foreign exchange gain (loss)	237 (407 ) 644	414 289 125
Loss beforeincome taxes	$ (63,110 ) $ (48,619 ) $ (14,491 )	$ (168,886 ) $ (137,737 ) $ (31,149 )

Research and Development Expenses

The following table summarizes research and development expenses for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

	Three Months Ended September 30, Change 2024 vs. 2023	Nine Months Ended September 30, Change 2024 vs. 2023
	2024 2023 Increase/(Decrease)	2024 2023 Increase/(Decrease)
Direct external costs:
Azetukalner	$ 29,569 $ 23,285 $ 6,284	$ 76,126 $ 67,774 $ 8,352
XEN496	— 328 (328 )	— 5,108 (5,108 )
Pre-clinical and discovery programs	5,916 4,412 1,504	15,746 10,921 4,825
Indirect costs:
Personnel-related (including stock-based compensation)	17,872 11,571 6,301	49,260 33,715 15,545
Other unallocated expenses	3,613 3,284 329	9,790 8,918 872
Researchand development expenses	$ 56,970 $ 42,880 $ 14,090	$ 150,922 $ 126,436 $ 24,486

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Direct external costs related to azetukalner increased by $6.3 million and $8.4 million for the three and nine months ended September 30, 2024, respectively, primarily due to our ongoing Phase 3 epilepsy clinical trials, start-up costs for our Phase 3 MDD clinical trials, and manufacturing activities to support current and future clinical trials as well as our NDA submission, partially offset by a decrease in costs for our Phase 2 MDD clinical trial which completed in late 2023. The decrease in direct external costs related to XEN496 of $5.1 million for the nine months ended September 30, 2024 is due to our decision in May 2023 to no longer pursue the clinical development of XEN496. Pre-clinical and discovery program costs increased by $1.5 million and $4.8 million for the three and nine months ended September 30, 2024, respectively, related to the advancement of multiple potential drug candidates targeting Kv7, Nav1.7 and Nav1.1. Personnel-related costs increased by $6.3 million and $15.5 million for the three and nine months ended September 30, 2024, respectively, due to increased headcount to support late-stage development and an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value.

General and Administrative Expenses

The following table summarizes general and administrative expenses for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

	Three Months Ended September 30, Change 2024 vs. 2023	Nine Months Ended September 30, Change 2024 vs. 2023
	2024 2023 Increase/(Decrease)	2024 2023 Increase/(Decrease)
Personnel-related (including stock- based compensation)	$ 12,149 $ 8,681 $ 3,468	$ 35,784 $ 23,509 $ 12,275
Professional and consulting fees	2,619 2,626 (7 )	9,836 6,266 3,570
Other	1,938 1,497 441	5,279 4,148 1,131
Generaland administrative expenses	$ 16,706 $ 12,804 $ 3,902	$ 50,899 $ 33,923 $ 16,976

The increase in personnel-related costs of $3.5 million and $12.3 million for the three and nine months ended September 30, 2024, respectively, was primarily due to increased headcount to support our expanding research and development activities and future potential commercialization as well as an increase in stock-based compensation expense due to an increase in the number of options granted at a higher fair value. The increase of $3.6 million in professional and consulting fees for the nine months ended September 30, 2024 was primarily due to an increase in pre-commercial expenses and legal costs related to our ongoing business activities.

Other Income

The following table summarizes our other income for the three and nine months ended September 30, 2024 and 2023 together with changes in those items (in thousands):

	Three Months Ended September 30, Change 2024 vs. 2023	Nine Months Ended September 30, Change 2024 vs. 2023
	2024 2023 Increase/(Decrease)	2024 2023 Increase/(Decrease)
Interest income	$ 10,329 $ 6,982 $ 3,347	$ 32,521 $ 18,929 $ 13,592
Unrealized fair value gain on trading securities	— 490 (490 )	— 3,404 (3,404 )
Foreign exchange gain (loss)	237 (407 ) 644	414 289 125
Other income	$ 10,566 $ 7,065 $ 3,501	$ 32,935 $ 22,622 $ 10,313

The increase in interest income of $3.3 million and $13.6 million for the three and nine months ended September 30, 2024, respectively, was due to a higher average balance of marketable securities and higher average market yields on investments. The decrease of $3.4 million in unrealized fair value gain on trading securities for the nine months ended September 30, 2024 was due to the fact that we did not hold any marketable securities classified as trading securities during that period.

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Liquidity and Capital Resources

Sources of Liquidity

To date, we have financed our operations primarily through the sale of equity securities, funding received from collaboration and license agreements, and debt financing. Since our initial public offering through September 30, 2024, we have raised aggregate net cash proceeds of more than $1.3 billion primarily from the issuance of equity securities. As of September 30, 2024, we had cash and cash equivalents and marketable securities of $803.3 million.

Except for any obligations of our collaborators to make milestone payments under our agreements with them, we do not have any committed external sources of capital. Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of collaboration agreements and equity or debt financings.

We entered into an “at-the-market” equity offering sales agreement in August 2020, amended as of March 2022, with Jefferies LLC and Stifel, Nicolaus & Company, Incorporated, or the ATM Program, and a new prospectus supplement was filed with the SEC on August 9, 2024, pursuant to which we refreshed the ATM Program and may sell common shares having gross proceeds of up to $350.0 million, from time to time. No common shares had been sold under the ATM Program during the nine months ended September 30, 2024.

Funding Requirements

We have incurred significant operating losses since inception. As of September 30, 2024, we had an accumulated deficit of $833.8 million. We expect to continue to incur significant expenses in excess of our revenue and expect to incur operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we prepare for the potential commercial launch of azetukalner; invest significantly to further develop azetukalner for our current and future indications; advance additional product candidates into pre-clinical and clinical development; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials; manufacture larger quantities of our product candidates for clinical development and potential commercialization; hire additional commercial, clinical, scientific, management and administrative personnel; acquire or in-license other product candidates and technologies; make milestone or other payments under our in-license or other agreements, including, without limitation, payments to 1st Order Pharmaceuticals, Inc and other third parties; maintain, protect and expand our intellectual property portfolio; establish a sales, marketing, distribution and other commercial infrastructure to commercialize any products for which we may obtain marketing approval; create additional infrastructure and incur additional costs to support our operations and our product development and planned future commercialization efforts; and experience any delays or encounter issues with any of the above.

Our future capital requirements are difficult to forecast and will depend on many factors, including:

• the scope, progress, results and costs of researching and developing our current product candidates, as well as other additional product candidates we may develop and pursue in the future;

• the timing of, and the costs involved in, obtaining marketing approvals for our product candidates and any other additional product candidates we may develop and pursue in the future;

• the number of future product candidates that we may pursue and their development requirements;

• if approved, the costs of commercialization activities for any product candidate that receives regulatory approval to the extent such costs are not the responsibility of an existing or future collaborator, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

• subject to the receipt of regulatory approval, revenue, if any, received from commercial sales of our product candidates and any other additional product candidates we may develop and pursue in the future;

• whether our existing collaborations generate substantial milestone payments and, ultimately, royalties on future approved products for us;

• our ability to maintain existing collaborations and to establish new collaborations, licensing or other arrangements and the financial terms of such agreements;

• our headcount growth and associated costs as we expand our research and development and initiate pre-commercial and commercial activities;

• the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation; and

• the ongoing costs of operating as a public company.

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Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash and cash equivalents and marketable securities as of the date of this report will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. However, our estimates and assumptions may prove to be wrong, and we cannot guarantee that our existing capital resources will be sufficient to conduct and complete all of our anticipated research and development efforts and future commercialization efforts. Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials remains uncertain. Further, inflation may affect our use of capital resources by increasing our cost of labor and research and development expenses. Our long-term funding requirements will consist of operational, capital, and manufacturing expenditures, including those contractual commitments described below. Because of the inherent risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of capital outflows and operating expenditures associated with our long-term anticipated pre-clinical studies and clinical trials.

Cash Flows

The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

	Nine Months Ended September 30,
	2024 2023(1)
Net cash used in operating activities	$ (127,004 ) $ (115,711 )
Net cash provided by investing activities	66,497 128,405
Net cash provided by financing activities	— 29,508

(1) Amounts have been reclassified as described in Note 2 of our consolidated financial statements.

Operating Activities

For the nine months ended September 30, 2024, net cash used in operating activities totaled $127.0 million, compared to $115.7 million for the same period in 2023. The increase in cash used in operating activities was primarily related to higher research and development and general and administrative expenses, as well as changes in operating assets and liabilities. This was partially offset by higher interest income.

Investing Activities

For the nine months ended September 30, 2024, net cash provided by investing activities totaled $66.5 million, compared to $128.4 million for the same period in 2023. The change was driven primarily by an increase in the purchases of marketable securities, net of redemptions. This was partially offset by a decrease in the purchases of property, plant and equipment.

Financing Activities

For the nine months ended September 30, 2024, net cash provided by financing activities was nil, compared to $29.5 million for the same period in 2023. The cash provided by financing activities during the nine months ended September 30, 2023 was primarily related to net proceeds from the issuance of common shares.

Contractual Obligations and Commitments

Our future significant contractual obligations as of December 31, 2023 were reported in our Annual Report on Form 10-K, filed with the SEC and the Canadian Securities Commissions on February 29, 2024.

As of September 30, 2024, there have been no material changes from the contractual commitments previously disclosed in the Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purposes entities and other structured finance entities.

Outstanding Share Data

As of November 8, 2024, we had 76,239,602 common shares issued and outstanding, outstanding pre-funded warrants to purchase 2,173,081 common shares, outstanding stock options to purchase 10,875,729 common shares, outstanding PSUs convertible into 210,000 common shares and an outstanding warrant to purchase 40,000 common shares.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, including changes in currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices.

Foreign currency risk

As of September 30, 2024, we had U.S. dollar denominated cash and cash equivalents and marketable securities of $757.5 million and Canadian dollar denominated cash and cash equivalents and marketable securities of CAD$62.0 million.

We are subject to foreign currency exchange rate risk in part, as a result of entering into transactions denominated in currencies other than U.S. dollars, particularly those denominated in Canadian dollars. We also hold Canadian dollar denominated cash and cash equivalents, accounts receivable and accounts payable.

Changes in foreign currency exchange rates can create significant foreign exchange gains or losses to us. We do not currently hedge our exposure and thus assume the risk of future gains or losses on the amounts of Canadian dollars held. While we have experienced increased foreign exchange fluctuations in recent periods, we do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to the Canadian dollar would have a material effect on our operating results.

Interest rate sensitivity

As of September 30, 2024, we had cash and cash equivalents and marketable securities of $803.3 million. Our interest rate sensitivity is primarily attributable to our cash and cash equivalents and marketable securities. A 100 basis point, or 1%, increase in interest rates would have resulted in approximately a $4.2 million decrease in the fair value of our marketable securities as of September 30, 2024. We do not enter into investments for speculative purposes and have not used any derivative financial instruments to manage interest rate exposure.

Inflation risk

Inflation may generally affect us by increasing our cost of labor and research and development expenses. While we have experienced increased operating expenses in recent periods, which we believe are due in part to the recent growth in inflation, we do not believe that inflation has had a material effect on our business, financial condition or results of operations during the three and nine months ended September 30, 2024; however, operating expenses may continue to increase in future periods due to inflation.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective, in design and operation, at the reasonable assurance level.

(b) Changes in internal control over financial reporting . There were no changes in our internal control over financial reporting during the period ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent limitation on the effectiveness of internal control.

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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