Xenon Pharmaceuticals Inc. Q3 FY2023 Earnings Call

Hello, thank you for standing by. And welcome to Xenon Pharmaceuticals Incorporated Third Quarter 2023 Earnings Conference Call. I would now like to turn the call over to Sherry Aulin, our CFO. You may now begin the conference.

Thank you. Good afternoon, everyone. Thank you for joining us on our call and webcast to discuss Xenon's third quarter 2023 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 our progress; Kenney will provide an overview of our ongoing XEN1101 clinical program; and Chris Von Seggern will summarize key findings from our market research around the potential of 1101 in the major depressive disorder or MDD treatment landscape. I will summarize our financial results, progress within our partnered programs, and anticipated company milestone events before opening the call to your questions. 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 our and our collaborators’ 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 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 statements. Today's press release summarizing Xenon's third quarter financial results and the accompanying report on Form 10-Q will be made available under the Investors section of our website. Now, I'd like to turn the call over to Ian.

Thanks, Sherry. And good afternoon, everyone and thanks for joining our call today. I'm excited to share with you the progress that we have made this past quarter across our neurology pipeline. To begin, we remain confident in our ability to execute on our ambitious XEN1101 Phase 3 program, and this includes our X-TOLE2 and X-TOLE3 clinical trials in patients with focal onset seizures or FOS, and our X-ACKT clinical trial in patients with primary generalized tonic-clonic seizures or PGTCS. We believe our experience with our Phase 2b X-TOLE study, which was similar in design to our ongoing X-TOLE2 and X-TOLE3 trials, provides us with a solid foundation of operational experience and strong existing relationships with leading clinical investigators in the epilepsy space. As a reminder, we aligned with the FDA on key elements of our Phase 3 program, including plans to submit an NDA upon the successful completion of X-TOLE2, our first XEN1101 Phase 3 clinical trial, along with the existing data package from our Phase 2b X-TOLE clinical trial and additional safety data from other clinical trials to meet regulatory requirements. In X-TOLE, we screened patients over a period of 26 months from the first quarter of 2019 through the first quarter of 2021. And in X-TOLE2, we initiated our first clinical site late last year with our first patient being randomized in Q1 of this year. We expect patient enrollment to complete in the second half of 2024. So this would be in line or faster than X-TOLE based on our current assumptions and expectations. And as a reminder, X-TOLE2 will recruit more patients than X-TOLE. So overall, we are pleased with the progress our team has made so far this year. In addition to ongoing execution in our Phase 3 epilepsy program, we also continue to showcase XEN1101 and connect with leading epileptologists and neurologists, including at the 35th International Epilepsy Congress, or IEC, that took place in Dublin in early September. We presented data from the ongoing open-label extension study from our Phase 2b X-TOLE trial showing the long-term efficacy of XEN1101 has been demonstrated by patients experiencing continued seizure reduction during the open-label extension and extended periods of seizure freedom. This is translating into overall improvements in patients' quality of life. Chris Kenney will provide more details around the significance of these findings later in the call today. We are also pleased to report that the peer-reviewed results from our Phase 2b X-TOLE study of XEN1101 in adults with focal epilepsy were recently published in the prestigious JAMA Neurology Journal. Turning now to our program in major depressive disorder. We remain on track to see top-line results from our XEN1101 Phase 2 X-NOVA study in late November to mid-December. Given the high unmet need in MDD and the fact that depression is the most common comorbidity in epilepsy, we are keenly interested in these data. In September, we hosted a well-received webinar with leading MDD clinicians, Dr. James Murrow and Dr. Sanjay Mathew, who provided their commentary on the mechanistic rationale supporting potassium channel modulation as a potential treatment for MDD. Before turning the call over to Chris Kenney, I would also like to remind everyone that we have planned for a significant presence at the annual American Epilepsy Society Meeting, or AES, next month with multiple posters and presentations alongside our booth and scientific exhibits. For those of you who are planning to attend, we look forward to connecting with you in Orlando next month. So I'll now pass the call over to Chris.

Thanks a lot, Ian. Let me begin by echoing Ian's acknowledgment of the publication of the Phase 2b X-TOLE data in JAMA Neurology. The compelling efficacy and safety data from this clinical trial supported further clinical development of XEN1101 in epilepsy and the ambitious Phase 3 program that we're pursuing today. We also continue to gather data from our ongoing X-TOLE open-label extension study with a cohort of patients now on XEN1101 for more than four years. To date, we have amassed several hundreds of patient years of safety and efficacy data, further supporting XEN1101's compelling profile and differentiating it from other molecules in development for epilepsy. We look forward to presenting additional long-term data from the X-TOLE open-label extension at the American Epilepsy Society next month. As noted by Ian, we recently hosted posters and presentations at the International Epilepsy Congress in Dublin that included interim results from the X-TOLE open-label extension study. Newly compiled interim data focused on quality of life measures as assessed using a validated tool called the Quality of Life in Epilepsy Inventory-31, in the overall open-label extension group as well as the subgroup that was seizure-free for at least 12 consecutive months at the time of the interim data analysis. Clinically important improvements in the QOLIE-31 subscales of seizure worry, social functioning, and medication effects were seen across all patients, with even greater improvements in the seizure-free group, which saw clinically important improvements in all quality of life subscales assessed by the QOLIE-31. As a clinician, it is encouraging to see these quality of life data, which are consistent with compelling clinical results generated to date and contribute further to the growing evidence that support the promise of XEN1101 as a novel differentiated potential treatment for patients with epilepsy. Turning to our work in major depressive disorder. As noted by Ian, we remain on track to report X-NOVA top-line results in late November to mid-December. While our original trial design planned for 150 subjects with 50 subjects per arm of 10 milligrams XEN1101, 20 milligrams XEN1101, or placebo based on patient randomization rates, the X-NOVA top-line results will include data for more than 160 patients. As a reminder, within the top-line results, we expect to report out on the primary endpoint, which is to assess the efficacy of 10 milligrams and 20 milligrams of XEN1101 compared to placebo on improvement of depressive symptoms using the MADRS score change from baseline to week 6. We also intend to report on the secondary objective, which is to assess the efficacy of 10 milligrams and 20 milligrams of XEN1101 compared to placebo on improvement of anhedonia symptoms using the SHAPS score change from baseline to week 6. In addition, we will provide data on the overall safety and tolerability seen with XEN1101 in these patients diagnosed with MDD. With that summary of our near-term data announcement, I'd like to turn the call over to Chris Von Seggern, who will share some of the primary market research conducted by Xenon in support of our MDD program.

Thanks, Chris. I'm pleased to share information from our market research efforts that helped us better understand the drivers of clinical decision-making, the unmet medical need in MDD, and key attributes desired by clinicians in future treatments. Our research efforts involved US key opinion leaders and high-volume prescribing psychiatrists with the intended goal of understanding how XEN1101 would fit into a future treatment paradigm. We tested the potential product profile consistent with the adverse event profile seen in X-TOLE to understand physicians' perspectives pertaining to various product attributes, including efficacy, tolerability, mechanism of action, and ease of use attributes. Given that antidepressant medications are generally perceived as having non-differentiated efficacy, we learned that there are several other key unmet needs that create an opportunity for future products in the MDD space. First and foremost, physicians are interested in new agents with novel mechanisms of action. Given the heterogeneity of depression, products with novel mechanisms of action could be used in patients who do not respond initially to generic therapies. And while the first and second line therapies of choice, SSRIs and SNRIs, were seen to offer reasonable efficacy, certain safety liabilities were identified as a concern for many patients. Physicians consistently pointed out challenges with common adverse events, such as sexual dysfunction and significant weight gain when treating patients with MDD. In testing the adverse event profile of XEN1101 seen in X-TOLE, we gathered feedback that CNS adverse events, such as dizziness, would be acceptable at levels observed in X-TOLE. We also heard interest from physicians about the potential for products that can deliver more rapid relief of symptoms, given the delayed therapeutic response with the current standard of care. Because currently approved therapies do not address anhedonia, which represents a common comorbidity of depression, this was another dimension of interest. Given that there is preclinical support for the Kv7 mechanism, that plays a role in addressing anhedonia, the unique mechanism of action of XEN1101 could be viewed as an important differentiator in the eyes of these prescribing physicians. Finally, the ease of use attributes identified in our epilepsy market research, such as once-daily dosing with food and no titration, are also important to psychiatrists. In summary, we believe that if approved, XEN1101 can play a significant role within the MDD treatment landscape. Its novel Kv7 mechanism of action, coupled with a differentiated adverse event profile that lacks the same liabilities as other MDD therapeutics, such as sexual dysfunction or significant weight gain, ease of use attributes and the potential to address anhedonia results in a compelling product profile. Importantly, if XEN1101 shows efficacy in MDD, this could be a striking differentiator in epilepsy, given that certain anti-seizure medications are associated with unwanted mood symptoms and depression as a common comorbidity in epilepsy patients. I would now like to turn the call over to Sherry, who will give us a brief update on our partner program with Neurocrine before summarizing our third quarter financial results and upcoming milestones.

Thanks very much, Chris. Beginning with our partner programs, our collaborators at Neurocrine are conducting two separate Phase 2 clinical trials evaluating NBI-921352. One study is focused on adult patients with focal onset seizures and the other study is examining the use of NBI-921352 in patients with SCN8A-related epilepsy. Notably, Neurocrine has guided that data from its adult focal study are anticipated to be released later this month. As a reminder, NBI-921352 is a highly selective inhibitor of a sodium channel called Nav1.6, which we discovered at Xenon and licensed to Neurocrine, and we're excited to have this hypothesis of selective sodium channel inhibition be tested. We look forward to working with Neurocrine on this upcoming data release and the next steps in the program. I'll now touch on some highlights from the financial statements and would refer you to our news release and 10-Q report for further details. Cash and cash equivalents and marketable securities were $639.1 million as of September 30, 2023, compared to $720.8 million as of December 31, 2022. Based on current operating plans, including the completion of the XEN1101 Phase 3 epilepsy studies, we anticipate having sufficient cash to fund operations into 2026. Looking ahead to some important milestone events for Xenon, we expect two important clinical data readouts in the near term. First, our top-line X-NOVA MDD results are anticipated in late November to mid-December. We also expect data from the adult focal onset study conducted by our partner Neurocrine in November. We look forward to presenting longer-term X-TOLE open label extension data, including rates of seizure reduction and seizure freedom at the upcoming AES meeting in December. Importantly, we continue to make progress on advancing our XEN1101 Phase 3 epilepsy program, including our X-TOLE2 and X-TOLE3 clinical trials in focal onset seizures and our X-ACKT clinical trial in PGTCS with patient enrollment in X-TOLE2 expected to complete in the second half of 2024. Our team believes we can make a difference in the lives of patients living with epilepsy and other neurological disorders. We remain focused on executing our clinical development plans and look forward to our near-term milestones and reporting on our progress in the months ahead. I'll now ask the operator to open the line for any questions.

Our first question comes from Paul Matteis from Stifel.

I had two questions, if you don't mind, one on X-TOLE2. Ian, thanks for the color on timing, and congrats on the execution. Can you just give some clarity on once you get to full enrollment, what would be the timing to top-line data? And then second, I had a question for Chris or really the broader team on X-NOVA. I thought some of the commentary, Chris, you mentioned on the unacceptable adverse event profile to clinicians was pretty interesting, especially related the CNS side effects. Ahead of these data, how would you draw that line as it relates to a dizziness rate or discontinuations due to AEs, where the profile still remains commercially competitive versus a profile where you think it actually might be more problematic in this population?

I'll tackle the first. On the second one, maybe Chris, you can just start and I know we did it in the prepared remarks, but just ensuring that we're all kind of aligned on what we think about in terms of the AE profile and then Chris Kenney provide perspective on what's acceptable there as we think about a differentiated AE profile. So in terms of X-TOLE2, Paul, we've guided today that we think patient enrollment will be completed in the second half of next year. So when the last patient gets screened into the program, there's a two-month baseline period. We need to count the number of patients or the patients need to count their number of seizures for a baseline number before those patients are randomized. Then it's a three-month double-blind period, so that's five in total, and then there's some follow-up before we can be in a position to unblind data and provide top-line results. It's kind of in that six to eight month range from the last patient enrolled to top-line data, again, just depending on the timing of follow-up and database lock and data analysis, but in that range. So hopefully, that's helpful. And Chris, over to you on the AE profile.

Yes, happy to address the AE profile. As we indicated in the prepared remarks, what we've done from a profile testing with US prescribers is present them with an AE profile that's consistent with what we've seen coming from X-TOLE with both the 10 milligram profile and the 20 milligram profile across the dimensions of AEs that were common from the epilepsy study. So that specific profile, in the context of offering efficacy that is consistent with what we've seen with other products in the space and then the overarching profile of XEN1101 in terms of once-daily dosing, the ease of use attributes that we mentioned in epilepsy as well. So that's specifically what's been tested. What we've heard very clearly from physicians is that there's a role for a product that looks like the XEN1101 profile in the future treatment paradigm of MDD, assuming the product gets approved. There's an appreciation for every product has a risk-benefit that's different and the lack of very concerning AEs that are seen with SSRIs and SNRIs, specifically sexual dysfunction, was viewed to be compelling from a clinician's point of view as a potential driver for utilization.

I would like to emphasize the concept of risk-benefit that Chris mentioned. I understand the question relates to safety and acceptable adverse events, but the overall safety data is important. Even if there is a certain rate of dizziness, if serious sexual side effects aren’t present, that is a positive aspect. Similarly, if there are no major safety concerns like DRESS or serious rashes, that also helps put the safety profile in perspective. While the question mainly addresses safety, it should really be viewed in light of the overall risk-benefit of the drug. For instance, considering the ezogabine controlled trial that had a significant separation of 7.9 points between the active and placebo groups, a greater willingness to accept certain adverse events is reasonable compared to a scenario with only a slight separation.

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

On the efficacy side for MDD, now that you've done the market research and we're getting closer to data, could you talk a little bit more about the scenarios, for both MADRS and SHAPS that might prompt you to explore a registrational program focused on MDD, to focus more on anhedonia, or to focus more on building out the mood signal in the epilepsy indication? And then just secondarily, since you gave the timeline update on X-TOLE2. Can you just clarify, I guess, how far behind X-TOLE3 is timeline-wise and how much of a rate limiter that study is for future filing or could those safety data just be submitted as a safety update during the review?

Yes, I'll tackle these and then if anyone has anything to add on our side, please jump in. Yes, we've kind of really talked about the different outcomes in MDD if there's potentially multiple paths forward, right? Obviously, if we don't see separation and activity, then I think that's clear. And then the two paths in terms of seeing activity, I think if we see a separation and we believe that we are seeing an antidepressive effect but we think there's still risk in terms of a registration program, then I think that's a good opportunity for us to continue to differentiate XEN1101 in the epilepsy space. And we didn't focus on it in our remarks today, but I think everybody knows and I'll remind everyone on the call that not only do we have very compelling efficacy in epilepsy, but with a novel mechanism, QD, no titration and we're seeing early onset to efficacy at week one are all things that we think is a very compelling product profile in epilepsy. If we can add mood to that in terms of medical communication and education, I think that could be even stronger. That's obviously an option. Although we're not going to put specific numbers around it, and I think risk-benefit that we just spoke about in the previous question is important. If we think that the risk-benefit overall is compelling in depression then we are comfortable moving ahead with registration work in the primary indication of major depressive disorder. There has to really be a clear bar there that we believe we can replicate the data in larger studies in Phase 3. In terms of your second question on X-TOLE2 and then X-TOLE3, so X-TOLE2 is on the critical path that's filing an NDA. So it's not X-TOLE3 or X-ACKT. Obviously, any patient that goes through X-TOLE2, X-TOLE3 or X-ACKT can go into open-label extension. We can use the safety data from those other studies as part of the requirements in terms of the overall safety database. We're really focused on X-TOLE2 on the critical path to filing because as we discussed with the FDA at our end of Phase 2 meeting, we'll be filing on the X-TOLE2 data combined with the X-TOLE data that we've obviously previously published and we've shared with the FDA as well. At some point in the future, we'll give guidance on X-TOLE3 and X-ACKT, but to answer your specific question, not on the critical path in terms of registration and filings.

The next question comes from Tessa Romero from JPMorgan.

So with enrollment expected to complete in the second half of next year in X-TOLE2, what are the key levers to being on this sooner versus the later end of that enrollment guidance? And it was a little bit alluded to in the prior question, but what is the latest thinking on the cadence of the pivotal data sets for X-TOLE2, X-TOLE3, and X-ACKT? Should we expect X-ACKT before X-TOLE3 or how should we really think about that?

I'll start. Chris Kenney, provide your perspective as well. Tess, I don't think there's any, from my perspective, specific lever to pull for patient enrollment to be completed earlier in the second half of 2024 versus later in the second half of 2024. We are executing well against the plan of site initiations and patient screenings and patient randomization. So we feel confident where we are. We do our best to predict. As we have guidance that is out a year or so, we're going to put some error bars there based on our best assumptions and expectations. As we get closer we'll be able to narrow those. But I don't think there's any specific lever in terms of trying to make that go faster. I think we have, from the very beginning, we want to run a good study, and we'll go as quickly as we can while maintaining the integrity and conduct of the study. Chris, I don't know if you have anything to add specifically there, and then I'm happy to jump in on the second question on the cadence of data events.

No, I don't have anything to add. For every patient that's enrolled in any clinical trial, there are so many different variables and variables at each site and each country. So it's just complicated to the extent that it's hard to sort of put my finger on one or two things and say this is what's going to drive the timeline one way or another.

And then your second question in terms of cadence. So obviously X-TOLE2 has been our focus, and we've talked often with investors that we've tried to leverage in X-TOLE2 as many of those relationships that we had in X-TOLE, so investigators that have experience with the drug and clinical sites that we've worked with in the past. Quite frankly, investigators that still have patients that are being treated with XEN1101 in open-label extension from the X-TOLE study. We're doing all of that in X-TOLE2. When we have guidance on X-TOLE3 and X-ACKT, then Tess, we can come back to the guidance on which one's going to read out first of those two separate Phase 3 clinical trials. It's premature to do that today.

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

We have one question regarding the MDD reading. We recognize that the adverse event profile of 1101 might differ between MDD and epilepsy. You've mentioned before that you are tracking blinded safety. How are the blinded adverse events and the rates of adverse events related to discontinuation comparing to your internal expectations? Is there anything surprising relative to your assumptions for the study? In a different way of asking, are you observing lower adverse event rates in the MDD study compared to the epilepsy study?

I'm sure this may be the first of other questions just on some of the details of the MDD study. I'm sure you can appreciate and others can as well. The study is now complete. We're very close to unblinding the data, and we'll have data in the coming weeks as we've guided in late November to mid-December. We're not going to make any specific comments around what we're seeing in the data. We have said previously that, obviously, as we run any clinical study, we're going to monitor it along the way and we're going to do safety review committees that are required. Based on those previous safety review committees, there hasn't needed to be any adjustments in the study. But we're not going to talk about specifics on the blinded data, and we're looking forward to sharing the full data set in the near term.

The next question comes from the line of Jason Gerbery from Bank of America.

This is Dina on for Jason. Congrats on the progress this quarter and thank you for taking our question. So I just had a question on the X-NOVA top-line that we'll be seeing very shortly. I guess, if we don't see a positive trial, does that add any risk or uncertainty in your view to being able to generate additional data for 1101 antidepressant effect in epilepsy patients? And then just wanted to sort of follow up on the MDD market research on 1101 safety profile, kind of given that safety is kind of a major driving force in the MDD space besides the lack of serious AEs that come with the SSRIs and SNRIs that you mentioned earlier, did KOLs point out any part about 1101’s AE profile that could be sort of a positive differentiator in MDD patients? Thank you so much.

We've covered a lot of ground, so I think we've addressed everything, but feel free to jump in if we've overlooked anything. I want to make a general comment on the X-NOVA study before handing it over to Chris Kenney to discuss the population of epilepsy patients who also have comorbid depression, which differs from those with major depressive disorder. Chris, please share your insights on this. We're looking at some of that data in Phase 3, not stratifying but analyzing. Also, regarding the 1101 adverse event profile in major depressive disorder, you mentioned the concern if XEN1101 doesn't perform well in X-NOVA. If we don't observe a separation, we can confidently state that it won’t impact our epilepsy program. I want to emphasize this point clearly. We are confident in the consistency and reliability of results across epilepsy studies, based on the strong profile from X-TOLE and our ability to execute in X-TOLE2 and X-TOLE3. The upcoming results from X-NOVA will be significant and interesting, but I don't believe the results will affect our epilepsy program. Chris Kenney, could you delve deeper into the profile of patients with comorbid depression who also have epilepsy?

I mean, what I would say is that the underlying pathophysiology of the depressive symptoms can be different depending on whether you're looking at a patient who has a different psychiatric issue or neurodegenerative issue or epilepsy. Just because a drug is behaving a certain way in one of those populations doesn't mean it's going to behave exactly the same in the other. To be a little more concrete, in the Phase 3 program, our epilepsy patients, we're obviously focused on developing an anti-seizure drug and that's the focus. But we are looking at mood using scales in that population. Once those Phase 3 studies are done, we're going to have this enormous body of information about how those patients respond to the drug from the standpoint of their depressive symptoms. The downside is we're not purposely enriching for depressive symptoms the way we are in X-NOVA, and there are some limitations. But we're going to let the data guide us for both studies and just acknowledge the fact that depression isn't the same as epilepsy.

So just to remind folks, if we take a step back and think about the profile that emerged from X-TOLE with the 20 milligram and the 10 milligram profile, the majority of the AEs that reported were mild. When you think about the difference between 20 milligrams and 10 milligrams, the 10 milligram dose was highly comparable, if not indistinguishable from placebo as it pertains to the AE profile. The 20 milligram profile was highly consistent with other CNS active anti-seizure medication with dose limiting very AEs that emerge at the high end of the dose paradigm, but still appropriate for that patient population. There's the specific question around are there other AEs that can be seen as a positive differentiator. I think the cleaner the profile looks, the better XEN1101 emerges in the eyes of clinicians. That very well could be a positive differentiator if one sees an AE profile that is similar to the 10 milligram profile that emerged from X-TOLE. But we also spend time in our market research diving deep into the perspective on an AE, such as dizziness, which is a little less common in the current standard of care. But in the context of it being a mild and potentially transient AE was something that clinicians viewed in the totality of the risk-benefit profile to be certainly within reason and would ultimately result in the product being used in their armamentarium.

And maybe I would just add one other point to Chris' comment. We have a huge body of data on XEN1101 now. Just as a reminder in Chris Kenney's comments earlier, we have our first patients out more than four years of dosing. We have hundreds and hundreds of patient years of exposure now, and we're seeing this consistency in profile. We know that not all patients are going to tolerate these drugs the same. So in our epilepsy experience, as we move an X-TOLE from 10 to 20 to 25 milligrams, you get a step up in efficacy, and you get a step up in some of the CNS adverse events based on the potency and activity of this drug. We know that when we think about epilepsy or depression, there would be multiple dosages available. If you don't tolerate a certain dose, there's an opportunity for you to move to a lower dose, which can address some of the tolerability. We think about XEN1101; we know a tremendous amount about it and have that flexibility because we know patients will tolerate the drug differently from patient to patient.

Our next question comes from the line of Paul Choi from Goldman Sachs.

I have two, first for the team. With regard to the pace of enrollment in X-TOLE2, I appreciate your comment that it's tracking faster than X-TOLE. But could you maybe just comment on it, if you're seeing any competition for recruiting patients and whether any of your clinical trial sites overlap with others developing potassium channel drugs for epilepsy? And my second question is under a scenario where X-NOVA reads out positively. Can you maybe comment on how the recent FDA rejection of zuranolone has or hasn't affected your thinking on potential future development in MDD?

So maybe I'll make a couple of comments first on X-TOLE2, and Chris Kenney, you're very close to the investigators on the site, so please add your perspective as well. We have a lot of experience in running global epilepsy studies. If we look back over the next few years, we have run the largest number of significant epilepsy studies compared to any other sponsor. There's a huge amount of experience that we're gathering. We don't find that a clinical site will take on two competing studies to focus on one, but I'll let Chris provide his perspective there. When we look at the recruitment rates in X-TOLE2, we believe that our recruitment rate and our ability to complete these studies have outperformed others. We feel proud of the work that the team has done. But Chris, any other specific comments that you're seeing at individual sites on competition?

The challenges that have come up, probably the number one challenge at the sites is more about making sure that each site has the appropriate resources to be able to support the study. The issue of competition with other anti-seizure medications hasn't slowed down, to my knowledge, even a single site. If you think about the timing in terms of, I believe, when you say Kv7 drugs, I believe you're alluding to the public information that Biohaven is going to start Phase 3 by the end of this year. We were going out to sites quite a while ago. And so we've locked in those sites already that we were most focused on. Competition with other Kv7 has not had any rule in terms of slowing us down to date.

Your other question on X-NOVA and maybe the regulatory environment. We haven't had regulatory interaction with the psychiatry division. Obviously, if X-NOVA is positive and we move into late-stage clinical development, we do an end of Phase 2 meeting. We'll pause on that question until we have more interaction. When we look at the zuranolone summary basis of approval and we've looked at the regulatory information that's publicly available, we don't see any read-through to the work that we're doing with XEN1101 in major depressive disorder with the caveat that we still need to have detailed regulatory interaction as we think about the late-stage program.

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

Maybe the first one on the upcoming Neurocrine data. How are you thinking about potentially moving forward with that co-fund option, what are some considerations you have? Can you remind us when you have to make that decision? Is it immediately after data, is it after an end of Phase 2 with the FDA, or is there time on that? And then for the 1101 NDA filing, can you just remind us what kind of safety database is required to initiate that? Is having patients through that 12-week double-blind period sufficient or will you need some additional time after the data readout before you could start the filing?

As a reminder for our collaboration with Neurocrine, we have a tiered royalty structure. If the drug progresses, we will be eligible for royalties based on sales. The co-fund option allows us to opt-in to pay for or fund 50% of the Stage 3 development costs. In return, we would get an incremental step up in the royalty, which at the highest tier would amount to a 20% royalty. We will have the benefit of having a lot more information in hand before we have to make the decision around co-fund. We will have data from this upcoming Phase 2 study, alongside the information around the Phase 3 development program and an agreed-upon protocol with the FDA. Neurocrine is driving the development next steps of the 352 program. It is possible that from this Phase 2 signal-finding study, they may decide to proceed into a larger Phase 2b study rather than directly into Phase 3, in which case the timelines around that will be longer. I wouldn't expect that it's a decision that we need to make in the near term. I'd say at the fastest, if they are going straight into Phase 3, probably, I'd say at least 12 months, maybe more like 18 months until they have regulatory interaction and all the information I discussed.

Sherry, do you want to tackle the second one on NDA and safety database?

So this is a large market opportunity. We think about ICH guidelines in terms of exposures, the long-term exposures that are required, there's 300 subjects, so this guidance requires 300 subjects of six months of exposure and 100 subjects of 12 months of exposure. We have a significant amount of long-term data. This is something that is continuing to differentiate us versus even those in the competitive space, we now have so much experience with this molecule that long-term safety is not going to be gating to an NDA filing by any means.

Our next question comes from the line of Danielle Brill from Raymond James.

I was wondering if you could talk about the decision to permit enrollment of patients with PTSD in X-NOVA. We ask this since PTSD can be associated with lower treatment response rates to more traditional antidepressants. Specifically curious if you stratified enrollment and if you plan to break out treatment response rates with inpatients with or without PTSD or other comorbid anxiety disorders?

Chris Kenney, can you provide perspective there?

The top-line analysis of X-NOVA is going to focus on the MADRS and the SHAPS top-line safety, etc. So it's not part of the top-line. In the second round of data, we can look at those sorts of things, but that isn't a major focus. The numbers of those patients are relatively small. I think that in the context of a study this size, even doing that may have limited utility.

Our next question comes from the line of Marc Goodman from Leerink Partners.

This is Madhu on the line for Marc. Could you just give us an update on your pediatric formulation of XEN1101 and also your second-gen molecules that are in preclinical development? Could we expect to see any data from these candidates in the near term?

Yes, we have, as we stated in previous calls, got alignment from regulators on what the pediatric plan is for XEN1101. So there's some layers to this in terms of focal onset seizures, we have an ability in the US to take advantage of the, what's called, the PK extrapolation rule where we can do open-label work in younger cohorts of patients. We'll start with adolescents and then move into children. For our exact study or our primary generalized tonic-clonic seizure study, we have, based on feedback from regulators, moved the lower bound of age to 12 and above for that study. We'll be enrolling some of those patients in the Phase 3 program. In terms specifically on a pediatric formulation, an oral capsule can cover a certain age group. When we get into much younger age groups, we're going to need to work on a pediatric formulation. That work is ongoing internally. For next-generation Kv drugs, we have communicated that we have a number of different chemistries and different molecules that we're interested in preclinically, targeting the potassium channels in the CNS. We don't talk a lot about the stage of development publicly for those. We would expect, over the next year or two, to have molecules transitioning into clinical development, and that's probably an appropriate time to start sharing some of the preclinical data publicly as well.

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

This is Ingrid on for Laura Chico. Wondering if you could speak at all to any efforts to coformulate 1101 with another ASM? Would this be something that could be explored in the focal epilepsy space? I realize this may be challenging to dose-optimization. But would there be any advantages to this type of approach?

Yes, really interesting question. Chris Von Seggern, I know you've done some time thinking about this and obviously the types of anesthesia medicines that have been developed over time. So maybe you can start and then, Chris Kenney, if you have anything to add as well.

Yes, what I can say is and what we expect from a commercial use standpoint in the focal onset seizure market is most certainly combination use with other commonly used anti-seizure medications. There are a handful of products used quite frequently early in lines of therapy; Levetiracetam, lamotrigine, and increasingly lacosamide are products that would be potentially ideal candidates for co-formulation opportunities. It's something that's been on our radar for consideration. There are technical complexities to consider when you think about the range of doses that exist as well as the requirement for other products to be titrated to full efficacy. One of the key advantages of XEN1101 and the treatment of FOS is that we don't require titration and that gets us to a therapeutic dose with the initial dose selected. There's a little bit more technical complexity to that question than the obvious desire to think about co-formulation with other commonly used anti-seizure medication and something that still needs to be explored.

Nothing to add, Ian.

Yes, I think, as Chris said, there's a real challenge there as you have a lot of these drugs that are titrated, and not everyone gets to the same dose. That provides some inherent technical challenges on co-formulation.

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

This is Serena on for Mohit. Thanks for taking our question. So I have two, the first is that if the monotherapy study in MDD doesn't work or even if it does, is there a possibility of studying the 1101 as an adjunctive and MDD to see if there's any synergistic effects? And then my second question is if you can help us understand why there are no treatments specifically approved for anhedonia when it looks like some antidepressants have shown a benefit on anhedonia scores?

Chris Kenney, would you like to begin? I'll start with a general comment, and then perhaps you can share your insights on monotherapy and future developments in the adjunctive setting as well. I believe it would be valuable for both you and Chris to contribute. If the X-NOVA results are not positive, it seems unlikely that we would conduct a separate adjunctive study. However, if we detect a positive signal in this study, it's definitely something we've considered. The decision will also depend on regulatory interactions in different jurisdictions. Chris, please share your thoughts on this, and then we can address the question on anhedonia.

I think you covered it, Ian. I don't have anything to add to that.

So to add another point, if we see positive results in X-NOVA and proceed to registration studies, we would consider both monotherapy and adjunctive studies for future development. Regarding anhedonia, either Chris or Chris, can you share your thoughts on why it hasn't been used as a primary endpoint in development, even though it is appearing more frequently as an endpoint in many studies now?

I mean, if you take a look at the patients who meet the criteria for having moderate to severe depression, which is the case in the X-NOVA study, then it's very difficult to find a complete lack of anhedonia. In fact, that's a key feature of getting the diagnosis of MDD. They tend to lock together closely. As Ian just said, there’s been this increasing interest in anhedonia. I think your observation is more driven by people not focusing on it in the past, and now it's become clear that it's something worthy of treatment.

The only thing I can add is that when we go out and do market research, there's a consistent focus on primary efficacy endpoints around MADRS in this space. One can only assume that's in order to avoid deviating from a regulatory perspective on what gets ultimate FDA approval. We've seen increased interest on anhedonia as a component of the efficacy profile for these products, given that it's a comorbidity associated with depression, and we're eager to see how this unfolds in the coming years.

And our last question will come from Tim Lugo from William Blair.

For X-TOLE2 and 3, I know they're designed very similarly to X-TOLE. However, I think one of the defining features of X-TOLE was how many therapies those patients have failed. Now 1101 is an unknown asset as Xenon is a very well-known company within the community. Can you just talk maybe how the baseline profiles of X-TOLE2 and 3 are lining up versus X-TOLE and maybe how that could swing what will eventually be the results coming from the study?

That's a really interesting question that we're absolutely monitoring. I don't think we have a lot to fan in today, but something that we'll be tracking. I'll get my perspective and then Chris Kenney, provide yours as well. X-TOLE2 and X-TOLE3 are designed after X-TOLE, obviously, the naming convention there was very deliberate. So it is the same inclusion-exclusion criteria for X-TOLE2 and 3 as compared to X-TOLE. But as you suggest, during X-TOLE, 1101 was an unknown molecule at that time. X-TOLE was run during the pandemic, and we got quite a severe patient population. When we look at the literature, we can't find another study where it was as severe a population as we trialed in X-TOLE. We look at three different measures: the number of drugs that patients had failed prior to the study, the number of background therapies they were on coming into the study, and the baseline seizure burden. There is a hypothesis that maybe X-TOLE2 and 3 will get a less severe patient population. We'll look at that, but we're not at a point right now to be able to comment on that. It's always difficult when you're running a study because those baseline characteristics are changing every day as you're enrolling more patients. But as we get closer to completing these studies, I think that would be something relevant for us to comment on. Chris, anything to add to that?

I just want to emphasize the importance of keeping an eye on the baseline characteristics of these studies as we go forward. That's something we always do because we want to make sure that the population is somewhat in keeping with what we're expecting. If not, then we want to be able to pivot and not wait till the end of the study to realize that.

Thank you. With that, this concludes today's conference call. Thank you for joining. You may now disconnect.