Xenon Pharmaceuticals Inc. Q2 FY2021 Earnings Call

Good day, everyone, and welcome to the Q2 2021 Xenon Pharmaceuticals Inc. Earnings Conference Call. At this moment, all participants are in listen-only mode. This conference call is being recorded. I will now hand it over to your host, Ms. Jodi Regts. Thank you. Please proceed.

Thank you. Good afternoon. Thanks for joining us on our call and webcast to discuss our second quarter 2021 financial and operating results. Joining me on today's call are Ian Mortimer, Xenon's President and Chief Executive Officer; Simon Pimstone, Executive Chair of Xenon's Board; Sherry Aulin, Xenon’s Chief Financial Officer; and Chris Von Seggern, Xenon's Chief Commercial Officer. Please be advised that during this call we will make a number of statements that are forward-looking, including statements regarding the anticipated impact and timing of the COVID-19 pandemic on our business, research and clinical development plans, and timelines and results of operations, the timing of and results from clinical trials and preclinical development activities of our proprietary and partnered product candidates, the potential efficacy, safety profile, future development plans, addressable market, regulatory success, and commercial potential of our proprietary and partnered product candidates. The anticipated timing of IND or IND-equivalent submissions and the initiation of future clinical trials for our proprietary products and those related to our other partner candidates. The efficacy of our clinical trial designs, our ability to successfully develop our proprietary development programs, the timing and results of our and our collaborators' interactions with regulators, the timing and anticipated enrollment in our clinical trials, the potential receipt of milestone payments and royalties from our collaborators, our expectation of having sufficient cash to fund operations into 2023 and the timing of potential publication or presentation of future clinical data. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time-to-time in our SEC filings. Our results may differ materially from those projected on today's call. We undertake no obligation to publicly update any forward-looking statements. Today's press release summarizing Xenon's second quarter 2021 financial results and the accompanying quarterly report on Form 10-Q will be made available under the Investors section of our website at www.xenon-pharma.com and filed with the SEC and on SEDAR. Now, I would like to turn the call over to Ian.

Thank you, Jodi, and good afternoon everyone, and thanks for joining us today. We continue to make strong progress across our portfolio of proprietary and partnered neurology-focused therapeutic programs. Importantly, we remain on track to report top line data from our XEN1101 Phase 2b X-TOLE study in late September to mid-October. In anticipation of this important milestone, we will focus the majority of our attention on XEN1101 today. I will, however, begin with a brief overview of the rest of our proprietary and partnered programs. I will then have Simon provide an update on our XEN1101 X-TOLE clinical trial, and then I'll provide some commentary on the study design and statistical assumptions. And Chris will provide an overview of the work we've done on the commercial assessment of XEN1101 and where XEN1101 could fit into the treatment of adult focal epilepsy. Sherry will provide a financial update and then we'll open the call up for your questions. So I'll start with an update on our non-XEN1101 programs and partnered assets. Briefly in our XEN496 program, site initiation as well as patient identification and enrollment continue in our Phase 3 randomized, double-blind, placebo-controlled parallel group, multicenter clinical trial called the EPIK study to evaluate the efficacy, safety, and tolerability of XEN496 in approximately 40 pediatric patients aged 1 month to less than 6 years with KCNQ2 developmental and epileptic encephalopathy. Based on its Kv7 mechanism of action as well as published physician case studies, we believe that XEN496 has the potential to address an important unmet medical need for these young patients. And we look forward to keeping you updated on the progress of the EPIK study. Patient enrollment also continues in the investigator-led Phase 2 proof-of-concept study examining the potential clinical efficacy, safety, and tolerability of XEN007 as a treatment in pediatric patients diagnosed with treatment-resistant absence seizures. This study has enrolled different conditions with absence seizures including Jeavons syndrome, childhood absence epilepsy or CAE, and juvenile absence epilepsy or JAE. Based on the initial data and promising signs of drug activity in three patients with CAE, which we presented at AES at the end of last year, the goal is to focus future enrollment on childhood and juvenile absence seizures. The lead investigator has also expanded the study to include an additional Canadian site, which is currently screening patients and is also evaluating the addition of other sites. Additional results from a larger cohort are anticipated by the end of this year, which will help inform our decision regarding the future development of XEN007. In addition to the clinical progress, we have also recently received both orphan drug designation and rare pediatric designation for CAE. These are important milestones for this program. Moving to our partnered programs where we also expect important milestone events in 2021. Neurocrine Biosciences is anticipating the advancement of NBI-921352 into Phase 2 clinical development with two efficacy studies expected to initiate this year. One in adult focal seizures and the second in patients older than 12 years of age with SCN8A, developmental and epileptic encephalopathy. In addition, Flexion Therapeutics is expecting top line results from its Phase 1b FX301 clinical trial in bunionectomy later this year. We look forward to keeping you updated on our collaborators' progress. So now let's turn our attention to XEN1101, which is a novel next-gen Kv7 modulator being developed for the treatment of epilepsy and potentially other neurological disorders, where we're looking forward to our top line data from our Phase 2b X-TOLE clinical trial expected in late September to mid-October. We are encouraged by the compelling product profile that is emerging for XEN1101. Last month, we hosted a webinar with two leading key opinion leaders in the epilepsy space to discuss the focal epilepsy landscape, the X-TOLE clinical trial, and the important attributes of XEN1101 and its potential in the treatment of adult focal epilepsy. We also disclosed in our quarterly report today an update on our strategy to continue to expand the intellectual property protection of XEN1101. We have recently received allowance of the U.S. patent application with claims directed to four distinct crystalline forms of XEN1101, and any patent issued from this allowed application is expected to expire in 2040. Additionally, we have a number of pending patent applications which we believe will continue to provide added protection to XEN1101. Overall, we're very pleased with the progress we've made on our XEN1101 intellectual property portfolio. So at this point, I'd like to turn the call over to Simon, and he'll provide an overview of our clinical experience to date, and the trial design of our Phase 2b X-TOLE study, and what we can expect in our top line data press release. Simon?

Thank you, Ian, and hi to everyone. Ian, as you noted, in the near-term, our focus is on the upcoming data readout from our Phase 2b X-TOLE study. Today, I'll provide a brief overview of some of the clinical development highlights to date that have led us to this important readout and I'll also discuss our plans regarding the X-TOLE study top line data release. Our Phase 1 studies with XEN1101 showed a promising drug profile. Results from Phase 1 SAD and MAD studies demonstrated favorable PK supporting once-daily dosing. XEN1101 was well tolerated in Phase 1 studies including at the doses currently being tested in our Phase 2b clinical trial. For the majority of AEs being reported as mild and CNS-related, its dose-dependent AEs provide additional support of drug activity in the CNS. In addition to the Phase 1 SAD, MAD cohorts, we also completed a Phase 1b trans-cranial magnetic stimulation or TMS pharmacodynamic study that showed XEN1101 reduces corticospinal excitability with a strong PK, PD relationship. Although not analyzed head-to-head, the effect was more robust when compared to that of ezogabine in the literature. Data from the Phase 1 SAD, MAD, and TMS studies together with numerous non-clinical in vivo studies informed dose selection in the Phase 2b X-TOLE trial. X-TOLE is designed as a double-blind, placebo-controlled, multicenter Phase 2b clinical trial to evaluate the efficacy, safety, and tolerability of XEN1101 administered as adjunctive treatment in adult patients with focal epilepsy. The primary endpoint is the median percent change or MPC in monthly focal seizure frequency from baseline to the 8-week double-blind treatment period for XEN1101 compared to placebo. I'm pleased to report that we have completed the randomization of 326 patients in late June. Patients have been randomized in a blinded manner to one of three active treatment groups or placebo in a two to one to one to two fashion: that being XEN1101 25 milligrams, XEN1101 20 milligrams, XEN1101 10 milligrams, and placebo. With randomization now complete, we anticipate top line results from the Phase 2b X-TOLE clinical trial as guided in late September to mid-October. I would also like to provide a little more detail on what, at a minimum, we expect to include in the top line press release. Firstly, we will include the median percent change for each of the four arms of the study, and the P values associated with different statistical analyses that Ian will walk through. In addition, we will present the 50% responder analysis for the arms of the study as this is a key secondary endpoint. We will also provide commentary on the overall safety and tolerability, and given the history with ezogabine, we will discuss observed urinary AEs and pigmentation. Overall, we expect that we will be in a position upon receipt of top line data to provide information on the key efficacy and tolerability measures in the study and provide our perspective on these data in the context of the opportunity for XEN1101 to be a novel mechanism for the treatment of refractory focal epilepsy. I'll pause here. I'll ask Ian to comment further on the study design and our modeling and powering assumptions as well as the statistics. Ian, back to you.

Great. Thanks, Simon. I will begin with how we design the X-TOLE study and our powering assumptions. As we have discussed previously, placebo rates have been going up over time in adult focal epilepsy clinical trials. In this study, we modeled a 20% reduction in the MPC in the placebo arm. For the active arms, we have modeled a dose response and used the historical ezogabine clinical data as our guide, and we've modeled a 25% reduction in MPC for the 10 milligram arm, a 30% reduction for the 20 milligram arm, and a 35% reduction for the 25 milligram arm. Our primary statistical analysis takes into consideration all subjects in the study in a monotonic dose response, where the null hypothesis is there is no change between placebo and the active dose groups. The alternative hypothesis is there is a positive dose response. The rejection of the null hypothesis and a statistically significant outcome would conclude one dose is better than placebo. Under these assumptions that we modeled, we have good power in the 88% to 90% range. After this analysis, we will then run pairwise statistical analysis comparing 25 milligrams to placebo for both MPC and the 50% responder analysis and then we’ll move to the other two dose groups. Overall, we feel the study is well conducted and well designed with good power, and we're looking forward to the top line data. I'd now like to introduce Chris Von Seggern, Xenon's Chief Commercial Officer. Chris joined Xenon last year as our first CCO. Previously, he was a partner at ClearView Healthcare Partners, where he oversaw a number of commercial engagements as well as strategic due diligence on in-licensing and M&A opportunities. Chris has done an immense amount of work, analyzing the commercial opportunity for XEN1101, both from primary and secondary market research sources. So he will share some of those insights today. Chris?

Thanks, Ian. I'm pleased to share some more information from our market research on XEN1101 on the call today. By way of background, we conducted market research in a blinded fashion with 50 clinicians ranging from academic epileptologists to high-volume prescribing neurologists and epileptologists across the U.S with the goal of pinpointing the drivers of their clinical decision-making, understanding the unmet medical need in focal onset seizures, and identifying the key attributes desired for future anti-seizure medications. Today, I'll briefly summarize some of the key findings. First, at a high level, our findings indicate that an enduring unmet need remains despite the availability of numerous ASMs. Physicians emphasize that a high clinical unmet need exists, particularly among patients who are not well controlled despite being treated with multiple drugs and the polypharmacy approach. Looking at the XEN1101 profile opportunity, XEN1101 is based on a previously proven Kv mechanism of action with validated anti-seizure activity, and if approved, would be the only drug in its class available on the market. From our research, we understand that the efficacy of many anti-seizure medications is perceived to be roughly equivalent, and that other ease of use and tolerability attributes are important in prescribing decisions. Therefore, if we obtain efficacy measures that are within the range of other anti-seizure medications, there are a number of other positive attributes of XEN1101 that we believe could further differentiate within the adult focal epilepsy market. From our discussions, we believe that this unique mechanism of action and currently apparent low drug-drug interaction risk may be leveraged in a rational polypharmacy approach. We believe XEN1101's one pill once-daily regimen may be attractive to both physicians and patients with a forgiving PK profile that may provide coverage for missed doses. Additionally, no drug dose titration is anticipated, which compares favorably to the majority of other therapies used to treat adult focal seizures. Furthermore, given that ASMs are generally perceived as having non-differential efficacy, the safety and tolerability profile is another key treatment driver. XEN1101 was reported to be well-tolerated in Phase 1 clinical studies. When taken as an evening dose, the drug Cmax is reached during sleeping hours, which may blunt potential Cmax-related CNS AEs. Another very important differentiator might be the potential mood benefits of XEN1101. We have strong scientific rationale to further explore major depressive disorder based on preclinical data and clinical work to date that supports the use of Kv7 modulators for the treatment of depression and anhedonia. If XEN1101 could present a mood benefit beyond its impact on seizures, this added positive effect would be a striking differentiator given that many ASMs are associated with negative mood symptoms, and depression is a common co-morbidity in focal onset patients. Hope this provides a succinct snapshot of some of our important findings where XEN1101 is clearly differentiated based on its novel mechanism of action, apparent low DDI risk, one pill once a day, no titration, potential mood benefits, and eased dosing. We believe these combined attributes stack up well against other ASMs currently available to treat adult focal epilepsy. And we are looking forward to our top line Phase 2b X-TOLE data in the near-term. Ian, I'll turn things back to you.

Thanks, Chris. On the whole, taking into account our findings and conclusions from preclinical studies and clinical results to date, along with the market research exploring the current gaps in the adult focal epilepsy space, we believe XEN1101 has a product profile that could be meaningfully differentiated from other anti-seizure medications. I will now ask Sherry to recap our financial position. Sherry?

Thanks, Ian. Today I will focus on some highlights from this quarter's financial statements and would refer you to our news release and 10-Q report for further details. Cash and cash equivalents and marketable securities as of June 30, 2021, were $260.5 million compared to $177 million as of December 31, 2020. Based on current assumptions, which include fully supporting the XEN1101 X-TOLE trial and company-sponsored MDD proof-of-concept study, the XEN496 EPIK trial, the XEN007 investigator-led proof-of-concept study, as well as funding our preclinical and discovery activities, we anticipate having sufficient cash to fund operations into 2023, excluding any revenue generated from existing partnerships, or potential new partnering arrangements. We plan to revisit our cash runway guidance post X-TOLE data, with increased visibility on our spend in 2022 and beyond. We expect to have more clarity on partnership milestone revenue in the coming months as well. Bolstered by our strong balance sheet, we continue to have a lot of flexibility as we manage our business and continue to advance our product candidates. As of June 30, 2021, there were 41,117,568 common shares, 1,081,081 pre-funded warrants, and 1,016,000 Series 1 Preferred Shares outstanding. I would refer you to today's press release and our 10-Q filing for other specific details from this quarter's financial statements. At this point, I'll turn the call back to Ian who will summarize the key milestone events we're anticipating for the remainder of this year. Ian?

Thanks, Sherry. As we look ahead, our key corporate objectives include, importantly within our XEN1101 Phase 2b X-TOLE clinical trial. We anticipate top line data in late September to mid-October. The continued advancement of our EPIK Phase 3 clinical trial in pediatric patients with KCNQ2-DEE, a development decision and results from a larger patient cohort by year-end from the investigator-led XEN007 proof-of-concept study in absence seizures, continued support from our partner programs with Neurocrine Biosciences, including the anticipated initiation of two Phase 2 clinical trials with NBI-921352 in 2021 and results from Flexion's FX301 Phase 1b clinical trial anticipated in late 2021. Additionally, we anticipate the initiation of an investigator-led Phase 2 proof-of-concept study, as well as ongoing planning for a company-sponsored clinical trial examining XEN1101 in major depressive disorder. We are incredibly proud of the breadth and depth of our neurology pipeline, and equally excited about our upcoming release of top line data from our XEN1101 Phase 2b X-TOLE clinical trial. I'll now ask the operator to open the line for questions. Operator?

Thank you, sir. Your first question is from Paul Matteis from Stifel. Your line is open.

Great. Thanks so much. Two statistical questions for me, if you don't mind, making it for all the color. For the primary analysis for the linear regression analysis, can you speak a little bit qualitatively to some of the scenarios there? I guess, if the lower doses are being subclinical or having no effect versus placebo, does that mess up the powering if the highest dose looks good? And then second, I was wondering if you could comment on the powering specifically, as it relates to a pairwise comparison for 25 mg versus placebo. Thanks so much.

Thanks, Paul. I can take both of those. So, what we know about anti-epileptic drugs is generally for other drugs that we've looked at, including ezogabine, they have a dose response. And so overall, that's our expectation going in. We can take advantage of that in, as you call it, kind of this linear trend test for monotonic dose response where we can take advantage of including all of the patients in the analysis. But that said, if the lower doses are not, as you say, they're subtherapeutic from a clinical perspective, we can still show statistical significance. So as long as one dose is better than placebo, the analysis holds and works to show a positive P value at 0.05. So we still feel comfortable that it's the right analysis - physical analysis to do, and we can still show the differentiation between the high dose and placebo. I think your second question is a good one. As a reminder, and Simon went through this in his remarks, because we have a two to one to one to two randomization, that means we have more subjects in the high dose group than in placebo, and that's really where the power of the study is coming from. Although I don't have the numbers directly in front of me, if we look at the same analysis on a pairwise comparison for MPC, we will have more than 80% power to detect that separation for 25 milligrams and placebo.

Great. Thank you.

Your next question is from Marc Goodman from SVB Leerink. Your line is open.

Yes. Can you give us a sense of how to think about the 50% responder analysis, kind of how you're expecting it, and maybe what some of the competition is at that level, just so we have a sense of when the data comes out, thoughts about it? And second of all, the EPIK study, can you just give us a sense of where you are? You mentioned that you're into it, patient enrollment continues, but are we talking about getting data next year? Or is this probably 2023? Thanks.

Okay, great. Simon, would you like me to share my thoughts on the EPIK study? I can also discuss the 50% responder analysis with both of us offering our perspectives.

Sounds good. Yes.

So why don't I start with EPIK. So Marc, our goal for this year given we were really getting the study up and running during COVID was to get a critical mass of sites up and running. And we continue to work with our collaborators at various academic centers, where we are seeing many of these children with these developmental and epileptic encephalopathies being genotyped in an opportunity for us to identify patients to enter into the study. So this year is about getting sites up and running and additional countries. We started in the U.S., in getting our IND approved and getting to work with sites in the U.S. And then we've already expanded outside of the U.S. In terms of the timeline we set for ourselves, give us till the end of this year when we have a critical mass of sites; we could provide better guidance towards the end of this year for patient enrollment before providing top line data. In terms of where we are directionally, I don't expect top line data in the next 6 to 12 months. Where it is outside of that is really dependent on how aggressively we can get sites and patients into the study over the next number of quarters. So our Q3 results in November would be a great time for us to give you an update there. Simon, I don't know if you want to talk about the 50% responder analysis, and I’m happy to provide my perspective as well.

Yes, Marc, thanks. These studies can vary a bit from one to the next. However, in general, when we look at pooled analysis for the 50% responder rate, it typically falls within the 35% to 40% range. We haven't established a specific threshold yet, and I'm unsure about the expected specificity. As we've stated before, it's crucial that our study demonstrates a certain level of efficacy that remains competitive. Additionally, the unique benefits of this drug, particularly its ease of use, are very significant, as Chris pointed out. When examining other drugs in this area, like Vimpat and others, past experiences with ezogabine suggest that in terms of adjuvant therapy—not monotherapy—alongside existing treatments, you generally see a responder rate in the low to mid-40% range. Placebos typically show responder rates in the high teens to low 20s.

Yes, thanks, Simon. I’d like to add that when we analyze all the ASMs in adult focal epilepsy, we observe a remarkable consistency. In the U.S., we examine the MPC, while in Europe, they focus on the responder analysis. One positive aspect of epilepsy treatments is that we generally see good consistency and concordance across efficacy endpoints. This consistency is also evident across studies; a drug that is effective in Phase 2 tends to show effectiveness in Phase 3, maintaining a consistent range of efficacy across different studies.

Thanks.

Your next question is from Andrew Tsai from Jefferies. Your line is open.

Okay, thanks. Good afternoon. First question is, as investors think about what XEN1101 could show on safety, obviously, CNS-related side effects are naturally expected. But based on the Phase 1, can you talk about if you think vision changes, cardiovascular AEs could happen? And if they were to happen, would that be totally fine with you? Because the big picture thinking is we should be putting XEN1101's overall safety profile in context with what the other existing drugs show. So, basically, my question is, what do you think is relevant for the street to focus on in the safety aspect of this data?

Sure. Simon, do you want to take a first crack at that and I'm happy to add to it?

Ian, why don’t you? And I’ll add.

Okay. Sounds good. Yes, Andrew, I mean, you've touched upon the CNS adverse events, which we will see. Drugs that get into the CNS and have a dampening of electroactivity and have an impact on efficacy and on seizures, you're going to see some CNS adverse events, things like dizziness, somnolence, fatigue, headache, and even things like blurred vision. So we expect to see that likely in a dose-dependent manner as well. We always think about this really in the totality of the data. We need to see where we are in terms of the overall AE profile and where we are from an efficacy point of view. You did mention some other adverse events that would be outside of CNS. Obviously, we would be looking at those and seeing at what rate they are, and whether it's anything concerning. As a reminder, I think we've discussed this previously. We haven't seen any cardiac issues to date and through Phase 1, and we haven't had any concern with any of the other adverse events. We did mention in our remarks earlier, just given the history with ezogabine, we will be looking at urinary adverse events and pigmentation. We will be doing high exams both at baseline and throughout. So all of those we're tracking, and we'll be able to provide information when we have top line data.

Great. As a follow-up second question is, can you just remind us what drives your confidence? It's placebo response will in fact be in line or better than what you've modeled. I guess, in what ways are you trying to control for your placebo response?

Thanks, Andrew. So on placebo, obviously, we've as we said in our remarks, we've modeled a 20% reduction, which we think is kind of a more contemporary placebo rate that we've seen in studies. Obviously, the placebo rate will be an actual rate. So what we're really looking for is the separation between active and placebo, and ensuring that we believe that the efficacy for the active drug is clinically and medically relevant. So we're looking for that separation. In terms of managing placebo rates, or at least doing what we can for the study, there are a few things. One, obviously, the quality of sites that we go to, the jurisdictions we go to. When we analyze that we recognize that placebo rates have gone up in certain non-Western jurisdictions. So we’ve been staying away from those jurisdictions where historically, we’ve seen higher placebo rates. We also know that there is a hypothesis that using an electronic diary for seizure capture has an opportunity to at least ensure that the patient is filling in their diary on a more regular basis. If they have missing data points, we can follow up on that almost through the CRO and the study coordinators, essentially real-time. Whereas with a paper diary, you have a lot less control there. So I think we’re doing what we can to manage the placebo rate as best we can. But I also think that the size of the study, and the powering gives us some confidence there.

Very good. Thank you. Wishing you guys all the best on the top line data.

Thanks, Andrew.

Your next question is from Yatin Suneja from Guggenheim Partners. Your line is open.

Hey, guys. Thank you for taking my question. One clarification question regarding the powering. So for the dose response, it’s about 88% to 90% power, but for the first pairwise it’s about 80% for the 25 milligram dose, just confirming that?

No, I don’t have the powering information right in front of me at the moment. I mentioned earlier that for a pairwise analysis, the 25 milligram dose would have more than 80% power. I can't provide the exact number right now, but I can follow up after the call. The 25 milligram arm shows good power for that separation with placebo.

Okay, very good. Thank you. Do you plan to look for two-sided P values, or is that more like a post hoc analysis for pairwise?

So the first analysis under the statistical analysis plan, as we've talked about is the monotonic dose response. That is done on a one-sided 0.05. If that is positive and we go to the pairwise analysis, we are still finalizing the SAP that will be submitted to the FDA in the near-term. But the current thinking is, then we would move to a one-sided 0.025 since you've now hit your primary statistical analysis, and then you would move to the 0.025 for the subsequent analysis, starting with pairwise 25 milligrams MPC and responder analysis and then moving to the other doses. I didn’t mention this earlier, but I think it’s worth noting that because we have a two to one to one to two randomization, we have really good power in the 25 milligram arm, but we have much less power in the 20 milligrams and 10 milligrams really based on the sample size in those two arms.

Got it. Very helpful. Then, can you also talk about your expectation like, could this be one of the pivotal trials, especially in the U.S., given that that's the endpoint that you're going to be doing in a follow-up study in the future? Just talk about your expectations.

That's a great question. We currently don't have clear thoughts on this matter. It will be a topic for discussion with the FDA during our end of Phase 2 meeting. Naturally, a stronger and more robust signal will improve our position in that discussion with the agency. Based on our interactions with the FDA, if we demonstrate a solid signal and P value, we believe we have a chance. As for whether this can serve as one of the two registration studies or as a confirmatory study with an additional Phase 3 trial, the feedback we've received indicates that Europe will require two additional studies, so it is likely we will conduct two more studies. The key question remains whether we need one of those completed for an NDA filing. There could be a stagger for the second study that would be necessary in Europe.

Got it. One more question. And I probably know how you feel about this. I think one question that we have recently gotten from investors is regarding the protein binding properties of XEN1101, which might be a little bit different than ezogabine. Can you just help us understand if there are any implications of that and what they might be?

Sure. Yes, we’ve had some questions recently. I mean, every drug has different protein binding. Quite frankly, every drug has a whole bunch of different pharmaceutical properties. When we’re designing a drug, preclinically in our discovery group, we’re tracking a number of different attributes of a drug, not just target engagement and tolerability, but also how we may predict what the metabolic fate may be in the PK and other things. Every drug is a little bit different. We do know that XEN1101 has a higher protein binding than ezogabine. We also know that likely provides better PK for the drug as we have higher protein binding and it’s metabolized more slowly than in comparison to ezogabine. Obviously, we feel super comfortable with all of the data that we've generated. Focusing on protein binding is just one piece of information and not something that we pay particularly a lot of attention to as a single data point. We’re getting drug to target, we have very robust activity preclinically in a number of different in vivo models. We’re seeing a very robust effect in the TMS PD assay in healthy volunteers in humans. We’re seeing an AE profile that’s consistent with drug getting into the CNS. Overall, the profile and the attributes, the pharmaceutical properties of XEN1101 we think are very, very good.

Very good. Thank you so much, Ian. Good luck with the results.

Thank you.

Your next question is from Tim Lugo from William Blair. Your line is open.

Thanks for taking the question. Can you comment on the baseline characteristics that you know of as of now, or the background is across all arms relatively well-balanced? And can you also maybe talk about how much X-TOLE influenced the company led MDD study and maybe how many doses you're looking at in that study?

Sure. Yes, I can go through the baseline characteristics or at least give you a little bit more detail there. In terms of the baseline characteristics, as a reminder, patients are on background therapy. They need to be on stable background drugs; they’ll be on one to three anti-seizure medicines coming in, but that needs to be stable as they come into screening and into baseline. Then they go through a baseline period where they need to have a minimum of four seizures on a monthly basis. They can’t have any 3-week period of seizure freedom. We have an 8-week baseline, we look at the total number of seizures, and they fill it in via electronic diary on how many seizures they have during that time period, then we normalize it to a 28-day number, and it has to be more than four. When we've looked at the literature, what we expect from this study is the medians are going to be obviously higher than that, and the medians for the baseline characteristics coming in will be high single digits to low double digits. So think it could be upwards of 10, or just above 10 in terms of the median monthly seizures coming into the study before randomization. In terms of what ASMs they’re on, they’ll be on a variety of different anti-seizure medicines. We haven’t gone or I haven’t gone and kind of looked at the blinded data, but we expect again that we’ll see a lot of the drugs that are highly prescribed would be the types of drugs that these patients will be on coming into the study. So maybe I’ll pass it to Simon on the MDD. If you had any more detailed questions on baseline, we can come back to that.

Yes, thanks, Tim. I mean, the MDD study, obviously will be a completely distinct design and a very different patient population. I think probably where it will be most helpful in ultimately setting dose for our sponsored study will be waiting to see what the effect size is at different doses and what the tolerability looks like from the study at different doses. So while we are making very good progress on the sponsored study design, we will wait until we've got that important top line data to finalize key elements of the MDD trial in terms of the sponsored study. So I think that's probably going to be where it has its greatest effect. Other than that, I think we’ll employ a pretty standard MDD design to ensure that there is an ability to benchmark this against other agents in this control study. So I hope that answers your question.

Sure. That’s fine. I understand MDD is kind of a work in progress. And I guess going back to the baselines, remind me, I thought there were in the preclinical data suggesting synergistic responses depending on the ASMs. Can you just refresh us on that?

Yes. We’ve done a battery of in vivo pharmacology studies where we’ve looked at the combination of XEN1101 with other and what we would consider highly prescribed or well-used ASMs with different mechanisms. We’ve looked at combination of XEN1101 as the only potassium channel modulator being combined with a sodium channel blocker or an SV2A drug like levetiracetam. In all circumstances, when you combine XEN1101 with another drug, you get what looks like at least additive efficacy. So when you dose subtherapeutically for both and then you add them together, you get a very, very robust signal. And that’s not explained by changes in plasma concentrations of the drugs. So it’s not like one drug, at least in these preclinical models, is changing the concentration of the other drug either way to XEN1101 or the drug that we combined it with. We haven’t designed those preclinical experiments to show synergy per se, but there were no drugs, I think maybe this is more of a point, that didn’t have this beneficial effect when combining them with XEN1101.

Okay, great to hear. Thanks.

Your next question is from David Hoang from SMBC. Your line is open.

Hey, thanks for taking the questions. So I was just refreshing myself with the slides from your R&D day. And I'm just looking at the current therapeutic landscape. I get where XEN1101 fits in, or where do you think it fits in, but I do see a few other branded products in third line slots. So I think I understand well, but I also see Aptiom and Briviact here. I'm a little less familiar with the profile of those agents. So, I guess my question is what gives you confidence that you'd be able to differentiate against these other branded products?

Yes, thanks, David. That's a good question. I'll turn it over to Chris for his perspective. Chris, perhaps we could discuss not only today's context but also look ahead to when XEN1101 might be launched and how the branded market could appear at that time.

Absolutely. It's a great question. When we look at the marketplace, there are clearly products that are used early in lines of therapy, and levetiracetam and lamotrigine are commonly used as first line therapies. However, the majority of patients actually pass through what that would be a first or a second line agent and then end up in this broader paradigm that requires additional ASMs to manage the seizure burden. The key component within this consideration is that clinicians are looking for alternative mechanisms to add to the backbone of therapy to provide additional seizure benefit. When you think about Briviact, Briviact is a second generation of levetiracetam. Patients who do well with that product, but have mood-related issues tend to move on to Briviact as an example because they want to keep the same mechanism of action. Aptiom is a different mechanism of action, and often is added as part of the management profile to provide additional seizure control. We feel that XEN1101 fits in nicely in this future paradigm where clinicians are looking for additional medicines to add to the backbone to provide greater seizure control for the patients, and typically what they're looking for is easy-to-use products that offer alternative mechanisms of action. If you haven't responded to one mechanism of action, or you’re maintaining therapy on a different mechanism of action, rather than switching, the ideal approach is to go to a different product. One of the real key components of this marketplace is this landscape will evolve. Vimpat is commonly used in this marketplace. Today, it is one of the leading branded agents available. If that product loses exclusivity, it likely will continue to be used quite widely, but it doesn’t provide sufficient benefit that all patients will end up being seizure-free. We imagine that actually opens up a space for another branded agent as patients continue to require additional anti-seizure medications.

Great. Thanks so much. That’s really helpful. And then just a follow-up. With the new IP that you're pursuing, can you just talk a little bit about the current, I guess, prior or current IP, what the assumptions are there in terms of length of exclusivity, and then with new IP, how much of an expansion space that would give you?

Thanks, David. Just as a reminder, we brought XEN1101 in from another company. We weren't the company that did the original composition of matter filings that took place in the late 2000s. With the median Hatch-Waxman under the original IP that we had acquired with the asset, it took us illustratively that we will get the patent issued, which would take us out to 2040. Behind that, we’ve talked about often with investors, we’ve filed additional intellectual property around other methods of manufacturing and methods of use. We’ve also filed around the food effect, which was something that was not predicted before we got into humans and was identified in Phase 1. We’re continuing to layer on intellectual property that pushes out that exclusivity quite materially.

Got it. Thanks for taking the questions.

Yes.

Your next question is from Serge Belanger from Needham & Company. Your line is open.

Hi, good afternoon. First question is related to the open-label study post X-TOLE. Just curious if you have any updates on the rollover rate if it has changed. And I think during the investor webinar last month, you mentioned that it has been extended from 12 months to 3 years. Just curious about the thinking behind that. Secondly, I'm jumping ahead here, but assuming we get positive actual results over the next 60-ish days, when you think about the Phase 3 trial, either a single one or two, do you expect to have just one dose or you'll still be evaluating multiple doses in the next Phase 3 trials? Thanks.

Thanks, Serge. So we haven’t given kind of specific numbers on OLE rollover. What we’ve said is that for those patients that get to the end of the double-blind portion, we have a very high rollover rate, much higher than we had predicted or expected going into the study, and that’s been consistent throughout the study. Earlier this year, we had patients that were coming up against; I think it’s towards the end of last year, early this year, patients that were coming up to the 12 months, so they’d been on the drug for the entire open-label extension, and we were getting requests to extend it. We decided to extend it from 12 months to 3 years, as you mentioned. One of the reasons we’ve done that, obviously, we want to continue to generate long-term data, both from an efficacy perspective and a safety and tolerability perspective. We still get questions around pigmentation given the liability with ezogabine that we don’t believe has any extrapolation to XEN1101. The more data we can collect there, and continue to share publicly with the medical community and with Wall Street is important. So that was the thinking behind the extension of the OLE. In terms of Phase 3 and trial design, the Phase 3 studies would look very similar to this study in terms of the endpoints. In terms of the number of doses, I think it’s too early to say today until we unblind X-TOLE. Generally, we see companies take more than one dose into Phase 3. That would be the working hypothesis based on what we know today. Generally, there’s more than one dose on label when you look at anti-seizure medicines.

Thank you.

Your next question is from Antonia Borovina from Bloom Burton. Your line is open.

Hi. Hello. Thanks for taking my question. So I just have one regarding X-TOLE. I know that they’re not formal outcome measures, but just wondering, in the electronic diary, if you’re also recording seizure severity or seizure duration?

So, regarding the types of seizures, focal seizures can present in different ways, with or without awareness and varying motor components. We are collecting data on the specific type of focal seizure each patient experiences. However, I don't think we are gathering information about the duration of individual seizures since it may be difficult for patients to accurately estimate that. Therefore, I don't believe that question is included in the electronic diary.

Yes, I think we should follow up. I’m not certain. I know there are challenges. It’s important from a patient perspective and a caregiver perspective. Interestingly, Antonia, it’s not often even reported in randomized clinical studies. There are many measures that are relevant that probably are not generally reported on, but seizure frequency, obviously, is key, but severity and duration of seizures are important. I think the point Ian made is given the subjectivity around this, it’s actually quite hard to measure. Typically patients do not time their seizures. They’ll tell you if they had a seizure or not, but they wouldn’t time it.

I'm showing no further questions at this time. I would now like to turn the conference back to Jodi Regts.

Thank you on behalf of the Xenon leadership team. We look forward to updating you on our progress over the coming months. Operator, we will now end the call.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect.