Xenon Pharmaceuticals Inc. (XENE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Annual General Meeting of Xenon Pharmaceuticals. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Dr. Simon Pimstone. Thank you. Please go ahead.

Thank you very much, and welcome to Xenon's 2020 Annual General Meeting. As announced, we're webcasting this year's AGM due to the ongoing COVID-19 pandemic, and we appreciate everyone's efforts to avoid a gathering at our office this morning. The Annual Meeting of Shareholders of Xenon Pharmaceuticals, Inc. will now come to order. But please note that a short company presentation will follow the formal part of the meeting. My name is Simon Pimstone. I'm the Chief Executive Officer and a Director of the corporation, and I will be the chair of this meeting. On my invitation, Craig Colosso, of American Trust Company, U.S. has joined the meeting via telephone. Welcome, Craig. I'll ask Ian Mortimer, President, Chief Financial Officer and Corporate Secretary of the corporation, to act as recording secretary for this meeting; and Craig Colosso of American Trust Company U.S. to act as inspector of elections. We will now deal with the formal business of the meeting. Starting with the notice of the meeting, I've received proof of the mailing of the notice calling the meeting together with a copy of the proxy statement and management information circular and form of proxy. I ask that a copy of each of these, including the proof of mailing be retained by the secretary with the records of this meeting. Regarding voting and procedural matters, voting for all matters at this meeting will be conducted by ballot. Any shareholders and proxy holders entitled to vote at and present at this meeting should have been provided with a ballot by the inspector of elections for each of the resolutions to be considered at this meeting. All ballots should have been completed by the shareholders and proxy holders and returned to the inspector of elections already. For shareholders who previously submitted a proxy for use at this meeting and so appointed one of the management representatives as your proxy holder, they will vote your common shares or Series 1 preferred shares as the case may be, as you directed, and you will not have received nor will you need to complete a ballot. Regarding Quorum and constitution of the meeting. The quorum requirements for a meeting of shareholders of the corporation are set out in Section 3.5 of amended and restated Bylaw #1 of the corporation. The Bylaws provide that the presence in person or by proxy of shareholders of the corporation, representing not less than 33.75% of the common shares and Series 1 preferred shares entitled to vote at the meeting shall constitute a quorum for the transaction of business at a meeting. The preliminary report of the inspectors of elections indicates that a quorum is present for the meeting. The final inspector of elections report will be filed with the minutes of this meeting, regarding waiver of reading of minutes of 2019 annual meeting. The minutes of the last annual meeting held on June 3, 2019, are filed in the minute books and are available for inspection. The reading of the minutes of the last annual meeting of the corporation be dispensed with and the minutes shall be taken as read, approved and adopted as tables. Regarding financial statements. The first item of business is the presentation of the financial statements of the corporation and the report of the auditors for the financial year ended December 31, 2019. The financial statements and auditors' report are available on SEDAR and were mailed to shareholders of the corporation, other than those who requested not to receive them. Unless someone specifically requests, the auditor's report will not be read at this meeting. We will pause if there are any questions at this stage concerning the financial statements. I now declare that the financial statements and auditors' reports have been received by the shareholders of the corporation as submitted to this meeting. Regarding election of directors, we will now proceed with the election of directors. The proxy statement and management information circular mailed to shareholders of the corporation contains the names of management's proposed nominees to the Board of Directors. The nominees are Michael Tarnow, Mohammad Azab, Clarissa Desjardins, Steven Gannon, Michael Hayden, Frank Holler, Gary Patou, Simon Pimstone, Dawn Svoronos. I understand that these nominees have consented to act as directors. May I please have a motion that the persons nominated for election be declared duly elected directors of the corporation to hold office until their successors are elected or appointed?

I so move.

Any discussion? The results of the inspectors of elections preliminary report for this matter will be read at the end of this meeting. Regarding compensation of named executive officers. The next item of business is compensation of named executive officers. May I please have a motion that on an advisory basis, the compensation of our named executive officers be hereby approved? The compensation paid to our named executive officers was previously disclosed in the circular for this Annual Meeting of Shareholders.

I so move.

Any discussion? The results of the inspectors of elections preliminary report for this matter will be read at the end of this meeting. Regarding frequency of future shareholder advisory votes on the compensation of named executive officers. The next item of business is the frequency of future shareholder advisory votes on the compensation of named executive officers. May I have a motion to approve future shareholder advisory votes on the compensation of our named executive officers to be held every 1 year?

I so move.

Any discussion? The results of the inspectors of elections preliminary report for this matter will be read at the end of this meeting. Amended and restated 2014 equity incentive plan. The next item of business is the amended and restated 2014 equity incentive plan. May I have a motion to approve the amendment and restatement of the 2014 equity incentive plan?

I so move.

Any discussion? The results of the inspectors of elections preliminary report for this matter will be read at the end of meeting. Appointment of auditor. The next item of business is the appointment of auditors. May I have a motion to appoint KPMG LLP as the corporation's auditors to hold office until the next annual meeting of the corporation or until its successors are duly appointed?

I so move.

Any discussion? The results of the inspectors of elections preliminary report for this matter will be read at the end of this meeting. Remuneration of auditor. The next item of business is the remuneration of the auditors. May I have a motion to authorize the Audit committee of the Board of Directors of the corporation to fix the remuneration to be paid to the auditors of the corporation?

I so move.

Any discussion? The results of the inspectors of elections preliminary report for this matter will be read at the end of this meeting. Voting results without ballot votes. I have the inspectors of election's preliminary report for the election of directors. The preliminary report shows that each of the proposed directors has received the required number of votes in favor, with the result that the resolution to elect each of the proposed directors as the Director of the corporation has been approved. I hereby declare that each of Michael Tarnow, Mohammad Azab, Clarissa Desjardins, Steven Gannon, Michael Hayden, Frank Holler, Gary Patou, Simon Pimstone and Dawn Svoronos have been duly elected as a Director of the corporation to hold office until the next annual meeting or until their successors are elected or appointed. I have the inspectors of election's preliminary report for the compensation of named executive officers. The preliminary report shows that the compensation of our named executive officers' compensation on an advisory basis has been approved. I have the inspectors of elections preliminary report for the frequency of future shareholder advisory votes to approve the named executive officers' compensation. The preliminary report shows that the frequency of shareholder advisory votes to approve the named executive officers' compensation will take place every year. I have the inspector of elections preliminary report for the approval of the amendment and restatement of the 2014 equity incentive plan. The preliminary report shows that the amendment and restatement of the 2014 equity incentive plan is approved. I have the inspectors of elections preliminary report for the appointment of auditor. The preliminary report shows the result that the resolution has been approved. I hereby declare that KPMG LLP have been appointed as auditors of the corporation to hold office until the next annual meeting of the corporation or until its successor is duly appointed. I have the inspectors of elections preliminary report for the remuneration of auditor. The preliminary report shows that the resolution has been approved. I hereby declare that the Audit Committee of the Board of Directors of the corporation is authorized to fix the remuneration to be paid to the auditors of the corporation. The detailed results of each of the votes at this meeting will be publicly available on SEDAR and EDGAR and filed in the minute books of the corporation. The formal agenda for this meeting is now completed. Is there any other business that anyone present wishes to bring to the attention of the meeting? If there is no further business to be brought before the meeting, may I have a motion that the meeting be concluded?

I so move.

All those in favor, please signify in the usual manner by raising your right hand. I declare the motion carried and this meeting to be concluded. With the formal business now completed, we have also prepared a short presentation to provide a brief business update, including an overview of Xenon's clinical development programs for those of you on the webcast. So I'll turn to the slides now. I wanted to firstly draw your attention to the forward-looking statements and safe harbor statement for the company as we are a publicly traded company. So as many of you are aware, we are in the process of building a self-sustaining, fully integrated and what we hope and expect will be a profitable company. That is integrated, discovering, developing, and ultimately we intend to commercialize innovative therapies to treat neurological disorders. I think what's very exciting about the company today is the number of programs now in mid to late-stage of clinical trials with important clinical and regulatory data anticipated over the next 12 to 18 months. The company has in place a number of strong partnerships with collaborators, and we'll talk to some of those today and a very solid financial position with cash at the end of the first quarter, ending March 31, 2020, of just under $230 million. The next slide shows the pipeline of the company. It is broad, it's deep and very much focused as you can see from this extended pipeline, we have in XEN496, a molecule that's soon to be Phase III molecule, pending submission of our protocol to the FDA to initiate a Phase III clinical trial, which we expect to be submitted in the near term. XEN1101, you'll hear more about today in the midst of a large Phase II trial with top line data expected in the first half of 2021 with XEN007 in an open-label Phase II trial with top line data expected in 2020 and a number of other programs, both earlier stage and partnered programs, some of which I'll touch on today. So we're very excited about XEN1101. This is our next-generation KV7 potassium channel modulator. This is a drug that really is the second-generation to an earlier product known as ezogabine, but with significant improvements over ezogabine. We've completed multiple preclinical tox studies, advanced the program through Phase I through a biomarker study, showing good activity in the human brain and the TMS study, transcranial magnetic stimulation. We'll be able to show that this drug significantly inhibited cortical excitation. And on the basis of this extensive Phase I program and our preclinical data, we advanced XEN1101 into a large Phase IIb clinical trial, which we've termed the X-TOLE study currently underway with a target of approximately 300 adult patients with focal epilepsy. We've guided that top line data is expected in the first half of 2021. We've made significant advances to our next product over the last quarter, XEN496. This is our Phase III-ready KV7 channel modulator, the active ingredient is the first generation drug, ezogabine, which acts by opening this muscarinic or m current and enhancing this current through the KV7 to channel complex. Ezogabine was the only anti-seizure medication that had been approved by the FDA for epilepsy that potentiates the KV7 mediated potassium current. Before this drug was removed from the market for commercial reasons, it was being used off-label in children with a rare form of epilepsy known as KCNQ2-DEE, a developmental epilepsy that presents in a very early onset with severe seizures as well as developmental, cognitive and intellectual impairment. And the drug had shown some very interesting promise, albeit in a noncontrolled open-label studies there were a number of publications where this active ingredient, ezogabine, which was being compounded off-label, were shown to be of benefit in reducing seizures and also in improving development in children with this severe form of early onset epilepsy. On the basis of that, we've done an extensive amount of work to essentially reengineer this molecule for use in children with KCNQ2 developmental epilepsy. Very importantly, as part of that work, we developed and presented this quarter a new formulation, a pediatric friendly formulation, where we've developed this molecule in a granular form packaged as single dose sprinkle capsule shown in graphic form on the right. And we've just completed a pharmacokinetic study in 24 adult healthy subjects which essentially show very similar absorption and distribution and elimination of this form of the drug when compared with prior data from the old form of ezogabine when it was on the market in a tablet form, known as Potiga. This together with other data, including a number of meetings we've now held with the FDA in anticipation of a Phase III trial, sets the stage for the Phase III program, which we believe we can initiate this year in 2020. We've had recent engagement with the FDA and minutes received, which appears to report a single, randomized Phase III trial should be sufficient provided that trial shows clinical and statistical efficacy. We anticipate filing a protocol for this Phase III trial as a double-blind, placebo-controlled study in approximately 40 cases, these children with KCNQ2-DEE from infants up to 6 years of age in and around the middle of this year. Our third program, which also is in a clinical development stage at this point is 007, a calcium channel modulator. This is a drug that has the active ingredient flunarizine. It acts as a modulator of T-type and Cav2.1 channels and also has some activity on other important neuronal targets. What's very interesting about this drug is that it's had many decades of clinical use, including a lot of pediatric use, which has shown very good tolerability of this drug, but it's never been developed in the U.S. and we currently are in the midst of a Phase II proof-of-concept study, that's investigator-led in a condition known as childhood absence epilepsy, which is currently underway, and we expect we'll read top line by the end of 2020, of course, guidance dependent on the COVID-19 and recruitment rates given COVID. We are also exploring various other development strategies and potential indications for 007 outside of childhood absence epilepsy. But we really believe this is a very exciting and important indication. It affects about 10% of childhood epilepsies, onset generally between the age of 3 and 13 with a peak of around 6 to 7 years of age. And many people are aware of this disorder characterized by an abrupt impairment of awareness with a rest in behavior, eyelid fluttering in children with automatisms with a very characteristic EEG appearance known as 3 hertz spike wave discharges. Children may be severely affected and some kids may have up to 100 absence seizures today, of course, it's having significant impairment on the scholastic and developmental outcomes. We believe there are about 40,000 to 45,000 children in the United States with childhood absence epilepsy, of which it's quoted about 1/3 are either refractory to the current gold standard drugs, sodium valproates and ethosuximide or intolerant of those drugs. So we believe a very interesting opportunity exists for flunarizine, which has been shown in animal models of childhood absence epilepsy, in particular, the gears animal model to have significant benefits in this form of absence seizure in vivo. We have some exciting partnerships as well. The first shown here is with Neurocrine, where we are developing with Neurocrine selective inhibitors of a number of sodium channels, including the Nav1.6 channel, being developed as a drug known as NBI-921352, formerly known as XEN901 and which is a very selective and potent inhibitor of the channel that's encoded by the SCN8A gene. This is the channel known as Nav1.6 we announced a partnership in December of last year. Neurocrine has exclusive license to this molecule and other preclinical molecules, and we are in the midst of a multiyear research collaboration to discover new inhibitors of the Nav1.6 and Nav1.2 targets, 2 very important targets, we believe in regulating neuronal excitation in the human brain. We expect to initiate a Phase II study in a rare childhood form of epilepsy known as SCN8A-DEE with Neurocrine in the second half of this year. Kids that are born with this condition have gain of function mutations in the sodium channel gene known as SCN8A. They have early onset seizures beginning in the first 18 months of life, with significant cognitive, intellectual and developmental impairment, and there are no approved treatments for this condition. Should the FDA accept the IND submission, which Neurocrine anticipates filing, Xenon would receive a $25 million milestone payment in the form of cash and part of which will be an equity investment upon acceptance of the IND, which is expected in and around the middle of this year. Our next partnership is with Flexion Therapeutics. Flexion is a company that has a long-acting hydrogel technology to increase the pharmacokinetics or the duration of action of drugs, and they acquired global rights to one of our molecules, formerly known as XEN402, a drug that inhibits the Nav1.7 sodium channel significantly. This active ingredient is also known as funapide. Flexion has called this new agent, FX301. This consists of the 402 molecule formulated for extended-release from this Thermo Sensitive hydrogel, and is intended to support administration as a peripheral nerve block for the control of postoperative pain. Some early data, preclinical data from Flexion has been very supportive of this molecule. They've shown that FX301 in an animal model provided sustained postoperative analgesic effect with no impairment in motor function when compared with liposomal bupivacaine and with -- in comparison to placebo. They also were able to measure high local concentrations of funapide at the site of administration consistent with the creation of a depot providing controlled drug release of this molecule over the longer term. This is exciting preclinical data. We expect Flexion to advance this program into clinical testing in 2021. This will trigger further milestone payments to Xenon. So all in all, we're extremely excited about where we are today and about where we intend to go over the next 12 to 18 months. I've talked about these programs today at a high level, to give you an overview. The XEN1101 program is underway in a large Phase II clinical trial in adult focal seizures in Canada, the U.S. and Europe. We expect top line results in the first half of 2021. Evaluating the potential for second indications for 1101, and that work is underway. And depending on what happens with COVID and recruitment in COVID, we do hope to launch a second indication for 1101 in the near term. XEN496, this is the reformulated form of ezogabine, which was the first KV7 channel modulator ever brought to market, removed from the market for adult seizures by GSK a few years ago, which we have now essentially redeveloped, reformulated and rerun through pharmacokinetic studies with recent data from our first PK study showing good PK for the pediatric formulation comparable to what was historically observed with the tablet formulation for Potiga. We've also received feedback recently from the FDA that gives us comfort that we do not believe we have any significant hurdles ahead in advance of a Phase II trial, and we expect to submit in the near-term our protocol into the open IND to support a single Phase III clinical study in children with KCNQ2-DEE, and we anticipate initiating that trial in the second half of this year. Our 007 molecule is in the midst of a physician-led Phase II open-label trial in childhood absence epilepsy, a common form of epilepsy in children. We expect our top line results in 2020. And our partnered programs, again, exciting opportunities in well-structured deals for the company. Neurocrine, we expect to file an IND in and around the middle of this year to initiate a clinical trial in SCN8A developmental encephalopathic epilepsy, the successful IND will trigger a $25 million milestone upon FDA acceptance. And Flexion Therapeutics, who are developing FX301, a Nav1.7 inhibitor for the management of postoperative pain, expects to enter clinical trials in 2021. So that's really an overview of the lead programs, both proprietary and partnered. There are a number of other very exciting earlier-stage programs coming behind us. We feel we're in a terrific position, both in terms of the number of programs we have, the focus of the company as well as our balance sheet to be able to hit some very exciting regulatory and clinical catalysts over the next 12 to 18 months. We have shared a number of those with you today, and we do expect to and look forward to updating shareholders as we continue to make progress in the months ahead. So I really wanted to thank you all thank our colleagues at Xenon, all the staff, thank our Board and thank all of our shareholders for the incredible support that you have continued to provide, enabling us to be in a very, very good position as we go through this COVID challenging time with our programs and with our balance sheet and look forward to presenting exciting data in the months ahead. Thanks, everyone, for your attention today. Thank you, operator. I think that will be all.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.