Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2022 Xenon Pharmaceuticals, Inc. Earnings Conference Call. I would now like to turn the call over to Sherry Aulin, CFO. Please go ahead.

Good afternoon. Thank you for joining us on our call and webcast to discuss Xenon's fourth quarter and full year 2022 financial and operating results. Joining me are Ian Mortimer, Xenon's President and Chief Executive Officer; Dr. Chris Kenney, Xenon's Chief Medical Officer; and Dr. Chris Von Seggern, Xenon's Chief Commercial Officer. Ian will open today's call with a summary of progress across our pipeline. Chris Kenney will provide an overview of our XEN1101 Phase 3 epilepsy program, as well as a brief summary of additional supporting X-TOLE data we released in December, and I will summarize our financial results, progress within our partnered programs, and our anticipated company milestone events. Chris Von Seggern will be available during our Q&A session to address questions about our commercialization strategies. Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the timing of and potential results from clinical trials; the potential efficacy, safety profile, future development plans, addressable market, regulatory success, and commercial potential of our and our partners' product candidates; the efficacy of our clinical trial designs; our ability to successfully develop and achieve milestones in our XEN1101 and other development programs; the timing and results of our interactions with regulators; our ability to successfully develop and obtain regulatory approval of XEN1101 and our other product candidates, anticipated enrollment in our clinical trials, and the timing thereof; and our expectation that we will have sufficient cash to fund operations into 2026. 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 statement. Today's press release summarizing Xenon's fourth quarter and full year 2022 financial results and the accompanying annual report on Form 10-K 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'd like to turn the call over to Ian.

Thanks Sherry. Good afternoon everyone and thanks for joining us on our call today. As I reflect on our progress in 2022, I'm extremely proud of reaching a number of key milestone events for Xenon and building significant momentum in our XEN1101 program. In particular, we had a successful end of Phase 2 meeting with the FDA and gained alignment on our XEN1101 Phase 3 program as well as the key regulatory elements required for an NDA submission. This was followed by another critical milestone in Q4 with the initiation of our first XEN1101 Phase 3 epilepsy trial. Furthermore, throughout 2022, we presented additional XEN1101 clinical data from X-TOLE and from the X-TOLE open-label extension, supporting our continued confidence in what we believe is a compelling profile for XEN1101, including a novel mechanism of action in what we believe would be the only potassium channel modulator available on the market if approved. Efficacy data generated in our Phase 2b X-TOLE trial, which demonstrated statistically significant reduction in all seizure reduction endpoints at all doses tested. QD dosing requiring no titration, supporting early onset, and statistically significant efficacy at week one and even greater seizure reduction in the open-label extension with greater periods of seizure freedom. Overall, we believe our XEN1101 efficacy data to-date compares favorably to medicines currently available for focal onset epilepsy patients. Our market research strongly suggests that prescribing physicians are seeking new differentiated therapeutic options that improve upon the existing antiseizure medications and we remain committed to improving the lives of patients with epilepsy. We enter 2023 in an enviable and clear leadership position in the KV field, with XEN1101 in a broad Phase 3 program supported by our clinical development and existing cash resources required to execute on our ambitious plans. This year, we are sharply focused on advancing XEN1101 in our Phase 3 X-TOLE2 and X-TOLE3 clinical trials in focal onset seizures, while in parallel, evaluating the efficacy of XEN1101 in primary generalized tonic-clonic seizures or PGTCS in our Phase 3 EXACT clinical trial, as well as generating important data from our Phase 2 X-NOVA study in major depressive disorder. Later in the call today, Chris Kenny will outline some of the highlights of the data we presented at AES 2022 in December that continue to support our belief in XEN1101's highly promising product profile. We have recently received some questions about the slower-than-anticipated patient enrollment and other headwinds faced by company sponsors of other clinical trials, including studies ongoing in focal onset epilepsy. Although we acknowledge that the current environment for clinical development can still be challenging, we remain confident in our ability to execute on our XEN1101 Phase 3 program. This high level of confidence is based on our experience with our X-TOLE Phase 2b study, which was similar in size to our Phase 3 FOS studies, along with our continued relationships with key investigators, many of whom are already have familiarity and experience with XEN1101. Given that we are still in the initial stages of our Phase 3 trials, we have not yet given specific guidance on enrollment or timing of topline data. However, in terms of site initiation and patient screening, we are tracking as expected and consistent with our development plan. Turning briefly to our ongoing Phase 2 X-NOVA clinical trial, you will recall that this study is examining XEN1101 in major depressive disorder, in parallel with an investigator-led Phase 2 MDD study being conducted by our collaborators at Mount Sinai. Our decision to examine XEN1101 in MDD was based on encouraging published clinical results evaluating ezogabine at a 300-milligram TID dose as a treatment for MDD and anhedonia, as well as promising preclinical data with XEN1101. It is also important to note that depression is a common co-morbidity within the epilepsy patient population. We are anticipating topline results from our X-NOVA study in the third quarter of this year and this will help guide our future plans for XEN1101 in MDD. While I am proud of the great progress made by our team in 2022, we are determined to continue to build upon the momentum generated in our XEN1101 program and we look forward to additional clinical inflection points in 2023. I'll now ask Chris to provide some more detailed comments on our XEN1101 Phase 3 epilepsy program and additional supportive data that we have generated. Chris, over to you.

Thank you, Ian. Today, I will provide a brief overview of our plans for the Phase 3 clinical trials of XEN1101 in epilepsy and share some findings presented at the American Epilepsy Society meeting in December. The X-TOLE2 study is currently in progress and will run alongside a similar study named X-TOLE3, which we plan to start soon. Each study aims to enroll around 360 patients, who will be randomly assigned to receive either 15 or 25 milligrams of XEN1101 or a placebo on a once-daily basis. The dosage choice for the Phase 3 studies was guided by safety and efficacy data from X-TOLE, as well as pharmacokinetic and pharmacodynamic modeling completed last year. The main efficacy measure will be the median percentage change in monthly seizure frequency from an eight-week baseline through the 12-week double-blind period of XEN1101 compared to placebo. Based on X-TOLE data, we have over 90% power for achieving the primary endpoint for both doses. To further our objective of exploring another epilepsy indication, we've also launched the Phase 3 EXACT clinical trial, targeting approximately 160 participants with primary generalized tonic-clonic seizures. These subjects will also be randomized to receive either 25 milligrams of XEN1101 or placebo once daily. The primary efficacy measure for this study is similar, comparing the median percentage change in monthly seizure frequency from an eight-week baseline to the 12-week double-blind period. We are looking forward to studying XEN1101 for primary generalized tonic-clonic seizures alongside our focal onset seizure trials. In our Phase 2b X-TOLE trial, XEN1101 demonstrated significant activity across all focal seizure types, including those progressing to bilateral generalized seizures. We believe our dual approach in clinical development for both seizure types is unique to XEN1101 and could enhance its future applications if approved. Our team engaged with numerous physicians and key opinion leaders at the American Epilepsy Society meeting, discussing the growing evidence supporting the advancement of XEN1101, including further analyses of the X-TOLE data and new interim information from the ongoing X-TOLE open-label extension. These findings indicate that XEN1101 shows a rapid efficacy onset at an effective and well-tolerated dose. We observed a statistically significant reduction in median focal onset seizure frequency within one week for all doses in comparison to placebo, demonstrating a dose-dependent decrease. The analysis of interim data from the open-label extension highlights that XEN1101 is generally well-tolerated, producing sustained long-term efficacy at the 20-milligram once daily dose, with patients experiencing ongoing seizure reduction and extended periods of freedom from seizures. During this extension, we saw an 80% to 90% reduction in monthly seizure frequency over 12 to 18 months, along with a significant number of patients achieving seizure freedom for six months or longer. Importantly, the overall safety profile of XEN1101 remains favorable, with adverse events consistent with earlier findings and other antiseizure drugs. We have noted two cases of urinary retention possibly linked to the study drug; however, both participants remained in the trial without needing intervention. We are continuing to monitor for the potential emergence of tissue discoloration associated with prolonged use of ezogabine, although we have not observed this issue so far. We recognize the strong demand for antiseizure medications and are committed to our belief that XEN1101 can greatly enhance the quality of life for those living with epilepsy. I will now hand the call over to Sherry, who will update us on our partnership with Neurocrine and then summarize our financial results for 2022 and key milestones for 2023. Sherry?

Great. Thanks Chris. Within our partnered program with Neurocrine, there are currently two separate Phase 2 clinical trials underway. One study is evaluating NBI-921352 in adult patients with focal onset seizures and another study is examining its use in pediatric patients with SCN8A related epilepsy. We're excited about Neurocrine's progress and look forward to the data readout from the adult focal study anticipated in the second half of this year. I'll touch on some highlights from the financial statements and would refer you to our news release and 10-K report for further details. Cash and cash equivalents and marketable securities were $720.8 million as of December 31, 2022 compared to $551.8 million as of December 31, 2021. The increase was primarily the result of our public offering in June last year. Our strong cash position supported by prudent fiscal management allows us to fund operations, including the completion of our XEN1101 Phase 3 epilepsy studies into 2026. Before concluding our prepared remarks, I'll briefly summarize some important milestone events ahead. With our Phase 3 X-TOLE2 and EXACT clinical trials underway, we expect to initiate X-TOLE3 in the near term. Our X-NOVA trial in MDD is ongoing, and we expect to have topline results in the third quarter of this year, while in parallel, we're supporting an investigator-led study at Mount Sinai. In the second half of this year, our collaborators at Neurocrine expect to have a data readout from their Phase 2 study in adult patients with focal onset seizures. We continue to advance our EPIC Phase 3 clinical trial in pediatric patients with KCNQ2-DEE with study completion anticipated in 2024. In closing, we're grateful to all our employees who are committed to Xenon's mission to deliver new neurology therapeutics to patients in need. I'm excited about our success to date and look forward to reporting our progress through 2023. We will now ask the operator to open the line for any questions. Operator?

The floor is now open for your questions. Our first question comes from Paul Matteis from Stifel. Please proceed.

Hi, this is James on for Paul. Thanks for taking our question. Just as it relates to the recruitment challenges, some others are facing in the focal epilepsy space, as you mentioned, you previously guided for trial completion around two and a half years from initiation based on the Phase 2b, which will put data around mid-2025. I guess is that still how you're thinking about it? Can you speak to the possibility of data coming sooner, if possible? Thanks.

Thanks, James. As I mentioned in the prepared remarks, we haven't provided formal guidance on when we expect topline data for Phase 3, specifically for the X-TOLE2 clinical trial. The data point you mentioned refers to the X-TOLE study, a Phase 2b study that took about two and a half years from initiation to topline data. In comparing it to the X-TOLE2 study, the X-TOLE study was slightly smaller, with 325 subjects. As Chris noted, the Phase 3 studies involve 360 subjects and have a 12-week double-blind period, compared to an eight-week double-blind period in Phase 2. Other than that, the protocols are very similar. We've been working with many of the same investigators and sites that have experience with the drug from the Phase 2 program, and we're prioritizing these in the X-TOLE2 clinical trial. Putting all of this together, I think we feel confident in executing the Phase 3 program. However, we really need to complete a couple of quarters of enrollment before we can provide more specific guidance on the timeline for topline data.

Makes sense. Thanks.

Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Please proceed.

Hi there. Thank you for taking my question. I would like to know your current thoughts on further expansion of the 1101 program, specifically regarding the potential for a pediatric label or an under-18 indication for the drug. What might the timeline look like for that, how significant is it, and are there any other areas you plan to explore beyond generalized and major depressive disorder? Thank you.

Thanks Brian. Chris, I'll give maybe a few high-level comments and then jump in specifically on some of the pediatric plans. So, Brian, as you mentioned, obviously, we've got a broad Phase 3 program going on in focal epilepsy and primary generalized tonic-clonic seizures and a Phase 2 study in major depressive disorder. I think when we think more broadly, there is literature to suggest that the potassium channel mechanism may be broadly applicable to other therapeutic areas, but I would still say epilepsy and depression are the best validated and that's why we started there. In the future, as we generate additional data, we may go into other therapeutic areas. But I would say the priority and where we're focused on is really on epilepsy and depression right now. As we're in a Phase 3 program, we do have obligations to do pediatric work, both in focal epilepsy and primary generalized tonic-clonic seizures and Chris can kind of walk you through the extrapolation rule and how we get into younger patients in both of those indications.

Thank you, Ian. To provide some context, we are already actively pursuing our ambitious program. Typically, focal onset seizures and primary generalized tonic-clonic seizures are addressed sequentially rather than simultaneously, but we are doing both. Additionally, we have a proof of concept for major depressive disorder in progress, indicating a higher level of activity than usual. As Ian mentioned, regulators in the US and Europe will necessitate focused attention on the pediatric population, and discussions in that regard are continuing. This area is heavily regulated, and we have a strong interest in it. If XEN1101 receives approval for the adult population, there is no reason to believe it wouldn't also be effective for children. All our plans are in motion and align with regulatory guidance.

And Brian, maybe lastly, Chris Von Seggern can just give a little bit of perspective at least as it relates to focal epilepsy and primary generalized tonic-clonic seizure, the commercial opportunity. As Chris mentioned, we'll be moving as agreed upon with the regulators, we'll be moving into adolescents and then into younger populations as we move ahead with the development. But there are patients that are diagnosed with focal epilepsy and generalized seizures, much younger. So, Chris can comment about some of the commercial dynamics.

Yes, absolutely. So when you think about the total epilepsy opportunity, you always start with 3 million adults in the US. There are about 300,000 to 400,000 pediatric patients that have durable epilepsy that's going to fall into the same categories with both focal seizures or generalized seizures. And we believe the value attributes that are associated with XEN1101 as they apply to adults being viewed very favorably. What we've heard from our market research in the pediatric populations is those same attributes are actually just as compelling in the pediatric population. So, we're very excited about that opportunity in both focal onset as well as primary generalized tonic-clonic seizures with the opportunity to move the product into those patients when appropriate.

Very helpful. Thanks again.

Our next question comes from the line of Tessa Romero from JPMorgan. Please proceed.

Good afternoon, team. Thank you for taking our questions. I have a question about the Phase 2 X-NOVA data we anticipate in the third quarter. How should we assess the overall importance of the data you collect for your go or no-go decision? Is it primarily about achieving statistical significance on the primary endpoint of the MADRS, or are there specific endpoints you consider more critical for making a no-go decision? Thank you.

Thanks Tessa. I think it's an important question because I think we've used language similar that we believe the totality of not just the data but the analysis of moving into major depressive disorder is multifactorial, and we're doing a lot of that work right now. So, obviously, we're running the X-NOVA study to generate important clinical data on MADRS as the primary endpoint as part of the input to the decision-making. But we're also doing even more commercial work as we think about the opportunity to do registration work, both in epilepsy and depression. We think a lot about the co-morbid population. We know that 30% to 50% of epilepsy patients have the lifetime co-morbidity of depression. And so generating data through X-NOVA could be really important as we continue to think about 1101 also as an epilepsy drug. So, there's lots of inputs. And I think we've been clear that there's a number of different ways that we'd like to think about this and the data just being part of the entire analysis as we think about next steps when we unblind data in Q3 of this year.

Thanks Ian. And just as a quick follow-up. I mean, would you lay out for us kind of what the key scenarios bigger picture are for depression following X-NOVA and kind of what those might be for Xenon?

Sure. Yes. I think there's a couple of big scenarios in terms of where we may take it. I mean I think the one is the work that we do and the data support additional development in the primary indication of MDD. And so then the next steps after this would be additional clinical development in the primary indication of depression. Another option, as I spoke about, is that we're generating important information in the epilepsy space. I talked about in the prepared remarks, we think there's a number of properties of 1101 that are clearly differentiating from other ASMs. This could be another one if we had an ability to show differentiation on mood. So, as we think about the prescriber in epilepsy, in the population, that could be important. And then obviously, the last one that we have spoken to investors about is as a drug discovery organization and deep experience in drug and ion channels and the CNS, we do have other molecules that target KV that have different chemistries and have some different properties than 1101 and those are moving through preclinical studies right now. And so we also have the opportunity to differentiate and maybe a little bit to the earlier question from Brian is I think we're going to have a number of distinct chemistries as we think about how we may want to differentiate therapeutically moving forward.

Great. Thanks so much for taking our question.

Our next question comes from the line of Paul Choi from Goldman Sachs. Please proceed. Your line is open, sir.

Thank you. Good afternoon, team, and thanks for taking my question. My first inquiry is whether you could provide an update on any clinician feedback regarding the X-TOLE extension data, considering the longer follow-up period. Additionally, what are your updated thoughts on the market potential for 1101? My second question pertains to your partner Neurocrine's upcoming results in the second half of this year. From your perspective, what criteria would you consider for opting into that program as opposed to directing more resources towards the development of 1101? Thank you very much.

Thank you, Paul. I'll address your second question regarding the Neurocrine data. Chris Kenny, please share your insights on clinician feedback. We had substantial engagement, with over 50 one-on-one meetings at AES. It would be great if you could discuss the community's feedback on the open-label extension. Chris Von Seggern, I’d also like you to highlight the market's need for us to continue producing long-term data over five years. Specifically speaking about Neurocrine, they are conducting a Phase 2 focal epilepsy study that is set to report results later this year. To clarify what Paul mentioned, we have a licensing agreement that includes milestones and royalty payments as their program progresses. This drug is a selective NAV1.6 inhibitor that we developed and licensed to Neurocrine in 2019 following Phase 1. We have the option to participate in the Phase 3 program, allowing us to co-fund it in exchange for a royalty increase of five percentage points for each tier. Therefore, regarding your question, we need to evaluate the data they produce. They are conducting a smaller Phase 2 study, and we’d like to understand what their future development plans are, whether they intend to proceed directly to Phase 3 or take any additional steps. Importantly, we will have full access to all clinical data they generate, including plans and budgets for Phase 3. We will use all of this information to inform our decision on whether to opt in. Chris Kenny, please provide your update on the OLE data.

Yes, of course. Thank you, Ian. I would say that the response has been consistent with the data shared in the prepared remarks. In the open-label phase, we are observing a significant reduction in MPC for subjects still involved in the open-label study, exceeding 80% after a year, along with impressive seizure freedom data. The feedback we've received from interactions with physicians at investigator meetings, medical conferences, advisory boards, and steering committees aligns with this. There is considerable enthusiasm regarding the individual progress of these patients, and the overall population data is quite compelling in terms of both seizure freedom and MPC. So, everything is progressing well.

What I can add from the market research standpoint and the commercial perspective is just as a reminder, this was a very difficult to treat patient population that was enrolled in X-TOLE. And as those patients extended it into the open-label, you have to consider that they’re still very difficult to treat and very difficult to control. What we hear from our research is that the rates of seizure freedom either as measured at the six-month time point or the 12-month time point are actually quite compelling data in light of the patient population. And this only reinforces the other value attributes that exist with XEN1101, both the potent efficacy, the lack of titration, as well as the rapidity of onset. So, the open-label data from what we’re hearing from a market research standpoint, just reinforced that value proposition, just as Chris had mentioned.

Great. Thanks for taking our questions.

Our next question comes from the line of Joseph Thome from TD Cowen. Please proceed.

Hi there. Good afternoon and thank you for taking our question. Maybe the first one, I know historically, you mentioned that potentially we're seeing some increased use in the field as the generic landscape changes a little bit. And obviously, we're continuing to see increased penetration of X-TOLE3. So, can you comment a little bit on how this might change the baseline population of the pivotal program versus what you saw in the Phase 2 and if you're making any adjustments based on that? And then second, just on the urinary retention adverse events in the randomized portion and the open-label, were these really urinary retention side effects? Talking to key opinion leaders, it seems to be a little tricky to characterize sometimes. So, any thoughts around that would be helpful. Thank you.

Great. Thank you. Maybe I can start a little bit on the Phase 3 patient population and then add in and then specifically, why don’t we get into a few details on urinary retention and at least what we’re seeing with those two patients in open-label extension, which I think is maybe the more relevant data just because they’ve been on the drug a lot longer. So, on the Phase 3 patient population, actually, if we look at Phase 2 and we’ve published this data, we published it initially at the Ascent Neurotherapeutic conference about a year ago where we published tables of the anti-seizure medicines that these patients had either failed or that they were on study. And you’ll see it’s a really long list. So, I don’t think there’s any kind of standard-of-care of these types of patients that are coming into our study. And so I think we will see similar in Phase 3 that patients will be on a wide variety of drugs coming into the study, and there’ll be a wide variety that they would have failed prior to coming into study. But Chris, I don’t know if you have any specific comments around BRIVIACT or XCOPRI and then if you want to move to the urinary retention comments?

You are referencing Chris Von Seggern for the BRIVIACT or XCOPRI I assume?

No, I was passing it to you, Chris, Kenny.

Okay. I misunderstood. Yes. It's still early in the Phase 3 trial, so it's difficult to predict if there will be changes compared to Phase 2. I wouldn't be surprised if there's an increase in XCOPRI usage in our Phase 3 program compared to Phase 2, but we haven't gathered enough data to make any definitive statements. Regarding urinary retention, there were two patients mentioned in the open-label study. It seems that this terminology can be misleading. If someone had complete urinary retention, it would require catheterization or a permanent procedure, and none of the patients experienced issues that warranted such interventions. However, this was how it was classified in Phase 2. In Phase 3, we will closely monitor this adverse event in a systematic manner. If such reports arise, there will be immediate communication between the sponsor and the site to clarify whether it's really urinary retention or possibly urinary hesitancy instead. We are taking a more systematic approach in Phase 3 for this reason.

To add to Chris' point, regarding the two patients coded for urinary retention in the double-blind study and two additional patients in the open-label study, we previously discussed those open-label patients quite some time ago. We have not observed any new coding for urinary retention in our subsequent data analyses. I want to emphasize Chris’ point that none of these patients have required any interventions. Therefore, we believe that even if they experience some urinary symptoms, it is not retention in the sense of being completely unable to void.

Perfect. Thank you very much.

Yes.

Our next question comes from the line of a representative from Bank of America. Please proceed.

Good afternoon. This is Dina filling in for Jason. Congratulations on your progress this quarter and thank you for taking our question. Our first question is about XEN1101IP. Some investors are skeptical about the patents expiring in 2039 to 2040 that cover the polymorph and the method of enhancing food effect. Can you explain why you believe generics will need to replicate the patented polymorph? Additionally, how do you see the food effect patent claims potentially influencing product labeling? Our second question is whether your views on the competitiveness of Biohaven's KV7 have changed after reviewing the Phase 1 data they presented. Does the safety data raise any concerns regarding Biohaven’s ability to differentiate in minimizing GABA-related side effects? Thank you.

Thanks Dina. Sherry will tackle the IP question, and then I’m happy to provide some commentary on your last question around the competitiveness in KV.

Thank you, Dina. Just to provide some background for everyone on the call, we had two significant patents issued to us in late 2021. The first is our polymorph patent, which covers several novel polymorphs of XEN1101 and expires in 2040. A generic competitor would need to discover a completely new polymorph without any traces of our patented versions to be successful. The second patent issued in late 2021 relates to the food effect. The key point is that there is a significant increase in Cmax and AUC when the drug is taken with food, indicating a positive food effect. We believe that this will be included in the label, pending negotiations with the FDA, as we have been administering the drug with food in our clinical studies. This aspect is crucial for ensuring the drug's safety and effectiveness. Therefore, a generic competitor would have to navigate both patents, which strengthens our confidence in our IP strategy. Additionally, the food effect patent is set to expire in 2039.

Thanks Sherry. And then just your question on the competitive space. So, we’re not surprised that the competitive space is heating up and it’s increasing given just the strength of our data in Phase 2b in our X-TOLE study. I mean as we’ve mentioned a number of times, I think we have a clear leadership position. Obviously, this is known pharmacology, but I think we also have a molecule that has properties that are performing extremely well clinically and we haven’t seen that from any other drug yet. So, there hasn’t been any efficacy generated with any of the competitive molecules. So, I think from just a leadership position and a time perspective, we feel very comfortable. Maybe another comment we do get some questions just around adverse events as we think about Phase 1 data for these types of molecules. And every antiseizure medicine that’s being developed that has activity and is active in the CNS has CNS-related adverse events, and we see that with all of these drugs that the drugs that are very active have dose-dependent adverse events in the CNS, things like dizziness, somnolence, fatigue, and headache. So, that’s fully expected. And then when we specifically look at the KV mechanism when we look at drugs like flupirtine, ezogabine in 1101, we see dose dependence and dizziness. And as you push these drugs higher and see significant activity in the CNS, you see the adverse events associated with that. So, those are some of the things that we would be looking for as we’re evaluating competitive molecules and then obviously, the efficacy data when we think about the patient population that we’ve treated, we believe that we potentially have best-in-category efficacy for this molecule. And obviously, nobody else has generated efficacy data to date.

This is Chris. Just to quickly add to that. I mean one thing we're definitely confident with XEN1101 is that it’s penetrating the central nervous system. There’s no doubt about that, right? Preclinical experiments, we have clinical data. We know for sure, there’s penetration of the CNS.

Thanks Chris.

Great. Thank you.

Our next question comes from the line of Andrew Tsai from Jefferies. Please proceed.

Thanks. Good afternoon. Thanks. Congrats on the progress. So, I wanted to ask more on the MDD program because you have data in Q3. We generally have a good understanding of what we want to see on the primary endpoint. You shared some details about it earlier. But I did want to ask about how you’re thinking about kinetics in terms of the efficacy curve over time. I mean my question is, do you think 1101 could show a rapid-acting effect within weeks one or two, for instance, similar to what the drug has shown in epilepsy. I don’t believe ezogabine has shown it in depression or epilepsy, but you’ve seen in epilepsy. So, I thought I’d ask for compression. Thanks.

Thanks, Andrew. I’m happy to start, and Chris Kenny can add in. You did a great job summarizing what we know. We have observed that 1101 shows early onset efficacy and statistically significant seizure reduction in epilepsy at week one. We confirm that we are delivering sufficient medication into the CNS and targeting it effectively to impact seizures early in treatment without a titration process in epilepsy patients. However, we don't yet have similar information regarding its effects on depression. When we examine the clinical data generated so far with ezogabine, particularly from the [Indiscernible] cost publication and the Mount Sinai group, early separation was noted. There is clear differentiation in the data between the active treatment and placebo groups as we analyze MADRS, and this separation appears to grow over time. We will focus on this moving forward. The endpoint we are looking at is week six, but we will have MADRS data weekly until that time, allowing us to observe those trends when we unblind the data and provide a more direct answer to your question as soon as it becomes available. Chris, do you have any additional comments?

I think you covered it. There was a little bit of separation with the ezogabine MDD early on, but it was certainly more pronounced later on. So, it remains to be seen whether what we’re seeing in epilepsy will translate into depression. We’re certainly looking at that information at weeks one and two.

Very good. A second follow-up would be an open-ended question regarding the operational execution of the ongoing study. To the extent you can share, could you discuss what is involved in ensuring the quality of the sites, the quality of patients, and so forth? For example, are you using safer interventions? Are you experiencing high screen failure rates or a balanced distribution of patients across your sites? Thanks.

Chris, would you like to discuss the CRO, the sites, and any additional elements we've incorporated into the study?

I just want to be clear, the question pertaining to MDD, not to epilepsy, correct? I just want to be sure.

Correct, for MDD, yes.

Yes. So, I mean the key steps to try to maintain the quality to the best extent that we can in that trial is several fold. You mentioned one, we’re using the safer evaluation, so that there’s an external group ensuring that we’re enrolling appropriate patients. We have sites that are solely based in the US and in general, the quality of that data tends to be more reliable. Trying to keep the number of sites limited so that there isn’t a huge number that it contributes to the variability of the data and then we’re keeping an eye on the data and the sites in real-time to ensure that there isn’t anything unexpected ongoing at those sites. To your point about performance, I mean, as with all clinical studies, I think there are some sites that are lagging in recruitment and others that are excelling. It’s sort of a typical kind of distribution that I think one would expect. Do you want to add anything to that, Ian?

The only other thing, Andrew, you ask is just about screen failure rate. We see a screen failure rate that’s higher, obviously, in the depression studies than we see in the epilepsy studies.

Very helpful. Thank you, guys.

Yes. This aligns with our expectations and hopes, as we do not want to have a screen failure rate that is too low.

Our next question comes from the line of Marc Goodman from SVB Securities. Please proceed.

Thanks for taking my question. It’s Rudy on the line for Marc. So, I would have a question about the market dynamics for focal onset seizures. So, specifically, can you provide more color or your thoughts on the uptake of both XCOPRI and what feedback you’ve been hearing recently regarding the drug profile versus 1101? Thanks.

Thanks Rudy. Over to you, Chris Von Seggern.

Yes, absolutely. So, from a market dynamic, XCOPRI is obviously the most recent to launch into this space. And they’ve done quite well. I would say from an observation standpoint, they’re seeing continued uptake in the marketplace and growth that is expected with a profile that is offering some level of efficacy in the marketplace. What we hear from our research is that there is a place for XCOPRI. And for the profile, it tends to be a latter line agent in current clinical practice. And this is based on the fact that it does have a quite difficult and lengthy titration period. And as a result, that does limit some earlier adoption and particularly where we’ve heard the primary positioning for XEN1101 being in the mix for that first-branded agent that’s pulled for. That’s the primary area where we see some level of drawback for the product. They do offer meaningful efficacy, and they hang their hat on seizure freedom data that have been well-received in the marketplace. But again, placing the product leader in the treatment paradigm. What we hear from our research is both the rapidity of onset, which simply can’t be seen with a product that requires lengthy titration, as well as the other attributes and use of use associated with 1101 and compelling efficacy as mentioned before, reinforce the open-label experience with the data we’re seeing for a six-month and 12-month seizure freedom data. That pushes 1101 earlier in the treatment paradigm. And often, it’s compared to the impact in its positioning prior to loss of exclusivity, which was really that first product you pull for after you have one or two failures of generic medicine. And that’s really the primary distinction between what we’re hearing from the profile for XCOPRI as well as what we’re hearing for XEN1101.

Got it. Very helpful.

Our next question comes from the line of Laura Chico from Wedbush. Please proceed.

Hey thanks very much and good afternoon. Just two quick ones for me. First, on X-TOLE4, can you remind us the rationale here for this study and I know the data submission package is going to be focused on X-TOLE and X-TOLE2. But how does X-TOLE4 actually fit into a regulatory submission for XEN1101? And then just one question for Sherry on operating expense trajectory into 2023, quite a heavy clinical trial load this year. So, how should we think about the cadence of spend versus 2022? Any further headcount expansion? Thanks very much guys.

Laura, just a point of clarification, X-TOLE4 or X-TOLE23, do you want us to comment on?

X-TOLE4?

Okay. Yes. So, maybe I’ll just take a quick step back and make sure we’re all aligned on the nomenclature. So, our Phase 2 study that we’ve completed, we call X-TOLE, our two Phase 3 clinical trials in focal onset seizures or X-TOLE2 and X-TOLE3, those are identical and very similar to the design of the X-TOLE study. And then we’ve got the EXACT study, which is our primary generalized tonic-clonic seizure. So Laura, you’re asking about X-TOLE4. X-TOLE4 is open-label extension for the Phase 3 program. So, patients that complete the double-blind period for X-TOLE2, X-TOLE3, or EXACT can all go into open-label extension starting at 25 milligrams, and that’s what we call X-TOLE4. So, as you mentioned, what we believe is a critical path to regulatory filing in the US is the X-TOLE data that we’ve already generated and the data from X-TOLE2. And then the data that we generate in X-TOLE3 and X-TOLE4, including all of that open-label data, will be important for the safety database as part of the filing.

Can I apologize?

Yes, yes, go ahead, Chris, and then we’ll pass to Sherry.

I wanted to emphasize that our focus on the regulatory aspect is essential. However, the patients involved in the open-label extension of X-TOLE are performing exceptionally well, and we decided it was best not to discontinue their study drug. Additionally, regarding the regulatory question, the development program for XEN1101 has been highly efficient, moving swiftly from Phase 1 to Phase 2b. Consequently, we need to ensure we have enough unique exposures to comply with ICH guidelines. While there is a regulatory component to consider, we believe it was the right decision. Furthermore, recruitment could pose a significant challenge, as highlighted in the very first question about recruitment rates.

Chris, can I...

Go ahead.

I was also going to ask if X-TOLE4 needs to be complete in order to file for an open-label extension.

Absolutely not.

Okay. That's it.

X-TOLE2 is gating for that point in time.

Got it. Thank you.

Laura, in response to your question about operational expenses for 2023, while we do not provide specific guidance on OpEx, I can give you some general insights. We will see an increase in overall spending compared to 2022, particularly in research and development. This rise is primarily due to our active Phase 3 1101 epilepsy program, which includes three studies running concurrently, along with the ongoing open-label extension for that phase. Additionally, the X-TOLE open-label extension is still in progress, continuing for a five-year duration. Regarding general and administrative costs, we expect those to remain fairly stable compared to the fourth quarter of 2022, so you can use those costs as a baseline for our spending plans in 2023. On the R&D front, we anticipate an increase in personnel costs as we bolster our internal resources to support our ambitious development goals and overall pipeline.

Thanks very much guys.

Our next question comes from the line of Mohit Bansal from Wells Fargo. Please proceed.

Hi, this is Serena on for Mohit. Thanks much for taking our question. I wanted to go back to the development path in MDD. Since you guys have talked about having other opacity modulators and preclinical development, potentially entering Phase 1 in early 2024 and was just wondering like what would give you guys the confidence that 1101 is worth developing for MDD versus the preclinical compounds? And then could you have multiple programs going on in tandem for MDD? Thank you.

Yes, if we decide to advance 1101 in major depressive disorder, as we discussed earlier, there are various factors at play. If we choose to move forward with additional clinical development for 1101, it’s possible that we may also bring another molecule from our KV portfolio into the clinic. It’s important for us to leverage our valuable assets and continue developing our KV pipeline. However, it’s not about necessarily advancing another molecule into major depressive disorder without having two KV drugs in development for this condition. If we determine that we want therapeutic differentiation based on chemistry, we might consider taking one of our preclinical molecules into depression or other therapeutic areas.

Got it. Thank you.

Our next question comes from the line of Rohit Bhasin from Needham & Company.

Can you just talk to us about your expectations from the trial with Neurocrine that’s going to read out later this year? And can you also talk about any remaining milestone payments from the collaboration? Thanks.

Sure, I can address the first part, and then Sherry can provide insights on the upcoming milestones. I believe this question is more suited for Neurocrine. As I mentioned earlier, the Phase 2 study they are conducting on focal onset seizures is significantly smaller than our Phase 2b X-TOLE study. This study appears to be more of a proof-of-concept trial, focused on generating important data across a range of doses. However, at this point, I’m not certain about any specific go-no criteria or how we define success. Ultimately, we will need to wait for Neurocrine to unblind the data, share it publicly, and outline their thoughts on the next steps for the drug.

Yes. And then on the specific study, if it reads out positive, would be eligible for a $15 million milestone payment we are eligible for additional milestone payments through the remainder of clinical development and then obviously, upon certain regulatory-based milestones and the sales-based milestones and royalties.

Thank you.

I would now like to turn the call over to Sherry Aulin for closing remarks.

Thank you, everyone, for joining us on the call today. Operator, you may now end the call.

Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.