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

Ladies and gentlemen, the program is about to begin. [Operator Instructions] At this time, it is my pleasure to turn the program over to your host, Jason Gerberry.

Good day, everybody. Thanks so much for joining us at the BofA Biotech conference that's being conducted virtually. My name is Jason Gerberry. I'm one of the biotech analysts, and I'm pleased to be introducing Xenon Pharmaceuticals and CEO, Ian Mortimer; and CFO, Sherry Aulin. So thanks so much to both of you for first all for joining us at the event.

Thanks, Jason.

So obviously, the first place that most of these conversations for you, I imagine, start is with your lead drug 1101, your potassium channel opener for focal-onset epilepsy and potentially for other indications and applications. So I think perhaps maybe a logical place to start would just be coming out of the AES meeting, if you can just give us the latest in terms of anything you'd want to highlight from the meeting? From our vantage point, it looks like from the open label, this largely supports the safety and efficacy profile as we've understood with just more longer duration follow-up, I'm curious if you want to add anything to that.

Yes. Well, first, I just want to say thanks for hosting us today. It's great. And actually, perfect timing, as you said, we just came off the AES meeting. So for those that don't know this weekend was the American Epilepsy Society Meeting. It's the largest global medical conference in epilepsy. Before maybe a few comments on AES, maybe I'll just take a quick step back just for those that maybe don't know the company quite as well. So we're a neurology company with deep expertise in drug and ion channels in the CNS. We have a portfolio of assets with deep clinical experience in epilepsy and depression and the drug, Jason, that you're referring to, that we'll spend most of the time on today, XEN1101. So this is a potassium channel modulator, so it activates potassium channels in the CNS to treat epilepsy. About a year ago, we had really strong Phase IIb data. We call that the X-TOLE study, where it was 3 active doses and placebo 10, 20 and 25 milligrams and placebo, and we were statistically significant on every seizure reduction endpoint across all of the doses. And a really, I think a really compelling data set, but a very consistent data set as well, clear dose response as we pushed up in dose from 10, 20 to 25. We see an increase in efficacy as measured by the MPC, which are the primary endpoints in these studies and also consistent across other seizure reduction endpoints, including the responder analysis. And then your specific question around AES, the opportunity for us this year at AES was to talk about open-label extension data. So those in the X-TOLE study that finished the double-blind portion, 97% of them went on to open-label extension. That's a 20 milligram. So everybody was on the same dose in OLE. And we're continuing to generate that data. And so every day people are going through an additional day of dosing. And the cut of the data that we presented at AES was our 18-month cut. So a couple of comments overall in open-label extension, which I think has been very consistent with earlier cuts of the data, which is that we see continued reduction in seizures in open-label extension. One of the reminders in the double blind is we saw statistically significant efficacy at week 1. So it's a unique molecule where we see very early onset of efficacy, but it looks like it even gets better over time, and we see continued seizure reduction in open label. We also are talking an open label about the seizure freedom rate. And so we look at patients over periods of time, and we're seeing increasing number of patients that are going 6 months with no seizures, 12 months with no seizures or even 18 months with no seizures. And just to put that into context, the baseline patient demographics going into the X-TOLE study, the median seizure burden was 13.5 seizures per month. So think about the average patient had a seizure every other day coming into study and now we're getting these patients that are going longer periods with no seizures at all. On the safety side and tolerability side, everything consistent that we saw in double-blind, we see in terms of the adverse event profile in open label. We now have more than 50 patients at 2 years of dosing and well over 150 patients at 12 months of dosing. So we're starting to generate very good long-term exposure to the drug. AES for us was an opportunity to connect with the community. So on Sunday afternoon, we did a scientific exhibit. We had more than 200 people come through and learn about our programs and we were able to present our data, both from the double-blind, the open label as well as our Phase III program. We had a huge number of one-on-one meetings with KOLs and investigators that we'll be using in Phase III and a great opportunity for us just to highlight all of the work we're doing in epilepsy across the portfolio.

Great. I appreciate that. Maybe we can just kind of talk a little bit about how you ultimately see the value proposition of 1101, if you can replicate the findings of X-TOLE. It's a bit of a crowded treatment space, a lot of approved drugs, the number of different approved MOA alternatives. But as you think about this, I think in the past, you've talked about this, hopefully, becoming maybe a preferred third-line option after the patients have kind of gone through a few lines. And so maybe what ultimately, in your view, kind of underpins that based on the profile as you understand it today?

Yes. I think it's a really important question to really understand how these patients are treated and then where 1101 could fit in. So Sherry will walk through epi and just so we can kind of see where the patients are and maybe a little bit about the treatment landscape, and then I'm happy to put 1101 into context in that landscape.

Great. So when we think about the adult epilepsy market in the U.S., there's about 3 million adults with epilepsy. And the largest subset there is focal-onset seizures. So about 60% of patients have experienced focal-onset seizures and about half of those are not well controlled. So that's roughly about 1 million patients are adults in the U.S. Second biggest segment there is about 30% of adults experience generalized epilepsy. So I'm sure, we'll talk about this more, Jason. But as you know, we are also launching a Phase III program in PGTCS or primary generalized tonic-clonic seizures where we have agreement with the FDA on a single-Phase III program. So that makes up the other 30% of the adult population and about 80% of those experience PGTCS. So that roughly works out to about 700,000 patients. When we think broadly about the general treatment landscape, there's still a lot of patients that are not well managed with the initial lines of therapy, as I mentioned. And then those harder-to-treat patients are going to cycle through multiple therapies and ultimately with the goal of reducing their seizure burden. So when we think about the commercial landscape, typically, patients will be put on a generic to start, generally levetiracetam or lamotrigine. And we'll probably see more use of Vimpat in earlier lines of therapies or lacosamide as the generic version. And that will probably get moved up the treatment algorithm now that Vimpat has gone generic earlier this year. But typically, patients will be put through 1 or 2 generics and depending on the tolerability and if they're continuing to experience breakthrough seizures, then via trial and error they would be either moved through different therapies or see polypharmacy, where essentially 1101 would fit in, would be in those later lines of therapy once the patient has been through 1 or 2 generics. And there's still really an unmet need given even though there's numerous ASMs in the market, there's still patients who are experiencing breakthrough seizures. And we actually saw this in our X-TOLE study where in our patient population the median patient had failed 6 previous ASMs and was on a combination of 2 or other 3 background medications. So by the time they got to our X-TOLE study, the median patient was on their 9th of 10th drug. Ian?

Thanks, Sherry. Yes. So just to build on that, as Sherry mentioned, I think it was a very tough population that we had in our clinical study, as Sherry mentioned, by measuring the number of drugs they failed, the number they're on and the baseline seizure burden. We've done some subgroup analysis that if you look at less severe patients, based on those attributes, the data is even stronger. And so our expectation is that when this drug is available commercially, it really has the opportunity to be used as a first branded drug, polypharmacy in combination with other drugs. And the feedback we're getting from our primary market research and well and definitely reinforced this weekend at the epilepsy meeting and what are the attributes on 1101 that people like. So this will be the only potassium channel modulator available. So an opportunity to combine a new mechanism with other mechanisms that are already available in polypharmacy. The drug doesn't need to be titrated. And so I think that's unique. It's a QD drug with no titration. And with the no titration, we see early onset to efficacies. So these patients are having breakthrough seizures, and we see statistically significant efficacy at week 1 and overall, just the compelling efficacy profile of the drug and the safety profile that we would expect based on a very active CNS drug. So I think we have a lot of attributes of 1101 that it should be used in that first branded spot.

You talked about the tough population, right? And when you ran X-TOLE, there was an element of the COVID-19 backdrop. And that might have been a factor as to why you ended up ultimately enrolling this tougher to treat patient group. And I realize, I think the expectation that you're setting with investors is that the population will look very similar. But if it isn't as severe, right, and if it looks more like that subgroup and your efficacy looks more like the subgroup data in an all-comer easier to treat patient population, how big of a commercial upside variable is that to you?

I'm not sure. So I'll give you a little bit of our perspective on what happened in X-TOLE and what may or may not happen in X-TOLE2, and then we can talk about maybe the commercial perspective. So yes, as you said, this -- so when we look at the literature, this was the most difficult population ever trial by the measures that we talked about. We don't know exactly why, but I think it is -- I think it's a reasonable hypothesis is that during COVID, it was really the much more difficult patients that were enrolled in clinical development. To your point, in X-TOLE2 in the Phase III, in the first Phase III study in X-TOLE3, the inclusion/exclusion criteria are exactly the same. So we're not changing the criteria. Given the success we had in X-TOLE, we're keeping everything the same for the Phase III program in terms of inclusion/exclusion criteria. But yes, now that we're all learning to live in a new environment, then there may be an opportunity that some of the less severe patients may be enrolled. I don't think it's really going to have a big impact from a commercial perspective. When we talk to physicians, I think they understand when we talk about how refractory these patients were, and they understand everything we've talked about in terms of a novel mechanism and no titration and early onset to efficacy that I don't think at the end of the day, it changes a lot if we get a less severe population. We fully believe the commercial utilization will be in a population that's not as refractory. You just seem to get that more in a clinical trial population that's different than the real world.

Okay. And then one question that I've gotten from the field is just why is the 20 mg your OLE dose, but your Phase III doses are different and then your Phase II/III X-TOLE1, you've got the 3 doses. So maybe walk us through, I guess, the dosing strategy and from a regulatory perspective, just like safety exposure for follow-up, is the dosing -- how that all comes together?

Sure. There's a fair bit to unpack there. I think it's a great question, just to understand a little bit on our thought process. So when we were going into the Phase II study, we had -- we didn't have any efficacy with the drug, right? We had our preclinical models which we believe are good predictors if you can get to a certain concentration in some of the preclinical in vivo pharmacology models that can predict what exposure you need to see an effect in a human. We also had a pharmacodynamic readout called transcranial magnetic stimulation. And then we also had our tox data and our safety data. And when we took all of that together, we designed X-TOLE to have 3 doses in placebo; 10, 20 and 25. When we chose -- we had to choose the open-label dose at that time. And based on all of the previous work with ezogabine and then all of the steps that I said that we just went through, we felt comfortable making 20 milligrams, the open -- the mid-dose, the open-label dose for open-label extension for the X-TOLE Phase II study. So that was a decision that was made prior to unblinding the data and seeing the efficacy. Now that we've seen the efficacy -- and so that's continued. We haven't made an amendment to the open label, so we're continuing to treat patients at 20 milligrams. When we started planning the Phase III trial, all epilepsy drugs have multiple doses in Phase III and multiple doses on label. That's very common. Part of it is because a lot of these drugs need to be titrated. But also we know there's differential tolerability across different individuals. And so you want dose options for the physician to go up and down. And so we chose 25 milligrams as one of the Phase III doses. That was the most efficacious dose in Phase II, it was the top dose that was for us an obvious one to move forward. The second dose, the FDA would like to see some separation and usually about a 2x separation and so we chose 15 milligrams. In our PK/PD analysis of exposure to efficacy, and we've built that model out, we have a linear dose response within the range we looked at. So we believe the 15-milligram dose will perform somewhere between the 10 and 20 based on the work that we've done. So we have over 90% power at 15 milligrams, and we have over 99% power at 25 milligrams. In open label for Phase III, given the efficacy of the drug, we've chosen 25 milligrams to be the open-label starting dose in Phase III. We are going to -- when we go to the FDA at the time of NDA, you kind of had a question around exposures at different doses?

Yes.

Yes, we're going to have a package where we're going to request multiple doses on label. We're going to have a large amount of data at 25 milligrams, a large amount of data at 20 milligrams, a large amount of data at 15 milligrams and less data at 10. That will be the package that we'll provide to FDA. We'll have a lot of long-term exposure, both at 25 and 20, which will cover all of the lower doses. So we'll have actually a lot more long-term exposure data that is required through ICH guidelines, which I think is important in terms of launching. But we'll have lots of coverage and long-term exposure, and we expect multiple doses on label.

Would you be pursuing 10 or 20 or is the 15 and 25 like sufficient dose optionality? Or is it somewhere to TBD on a discussion with regulators?

Yes. I mean, ultimately, it will be a review issue. But no, we're going to move -- we're going to present to the FDA to have more than just 2 doses on label. So that's why I get the example of actually all 4 doses because, again, I think we want multiple options for physicians. So it's not just the 2 doses from Phase III that we will propose to the FDA. It will be broader than that.

Okay. And your success that clinically you've seen with 1101 ion is inviting competition. And I'm curious how you ultimately see the relative pharmacologic profiles of your drug versus the closest competitive fuel, a lot of focus on Biohaven at the moment and just kind of curious relevant attributes and what you think is important to be kind of best-in-class here.

Yes. A couple of comments. We're absolutely in the leadership position. We're the only KV drug in clinical development that has shown efficacy. So I think there's a big gap between us and the rest of the field, but no surprise on the strength of our data, it's going to encourage competition. And I think that that's what we would expect and what we would expect going in. I think we know that this targeting KV7 in the brain is pharmacologically active. We've shown that. So I think other drugs of a similar mechanism, I think, have the opportunity to be active. That all said, I think there's something really special around 1101. Even when we did all of our predictive modeling using the ezogabine data, our animal data and even our PD data in Phase I, the drug performed much better than we expected. I think the very long half-life, I think some of the other attributes of the drug, some of those pharmaceutical properties really matter. Actually interesting, when we look at 1101 on what to solve in terms of what would a different drug look like, there's no obvious weakness in the 1101 profile right now. So I think we feel very, very comfortable with it. Specifically on Biohaven, we're a much more potent drug on target. They have disclosed very little data publicly. I mean, I think to make a true comparison, they should be showing their EC50s in an animal concentration data. Their no ELS and their Phase I exposures and Phase I PK data. I think those are all really important data points to be able to try to compare these drugs right now.

Okay. From a timeline perspective, for 1101, just is there any chance to expedite timeline to readout. I know you have 2025, I'm not sure if that's something that would perhaps if enrollment goes a little quicker, you can expedite or is that a pretty firm timeline from your perspective?

So maybe just a little bit of background here. When we think about the Phase III program, we're running 2 Phase III studies in FOS that we're calling X-TOLE2 and X-TOLE3 because they're really closely aligned or designed after our Phase IIb study X-TOLE. So we know that, Jason, a few weeks back that we initiated X-TOLE2 and X-TOLE3 should be up and running shortly, really what's gating or critical path to an NDA is X-TOLE2. So we're really focused on getting to X-TOLE2 data. And the reason for that is in our end of Phase II interaction with the FDA. We discussed, including the X-TOLE efficacy data within our NDA package. And so the expectation is that we'll file NDA with efficacy from X-TOLE2 and our Phase IIb X-TOLE study. So when we know about timing, really, our best proxy is the X-TOLE study, which took about 2.5 years from start to finish. And so that's where sort of the late '24 early '25 timeframe comes from. Obviously, we're doing everything that we can to expedite both site initiation as well as enrollment. And there's a multitude of things that we're doing, including leveraging a lot of the same sites that we used in X-TOLE, where we can have some operational efficiencies but ultimately, we're going to have to see how quickly we can get sites up and running and what that enrollment curve will look like, and we'll look to refine guidance, this time next year, we'll know for sure in a narrower -- we'll provide narrower guidance on X-TOLE 2 timing.

Okay. Well, I don't want to give generalize the short trip, but we only have 9 minutes. I definitely want to get to my MDD question. So I'm going to jump to that. And if we have time permitting, I'll come back to generalize. But your first -- I mean, I guess, you have a study reading out next year, X-NOVA. And just kind of curious, we've talked about this in the past, perhaps the tolerability profiles in MDD setting versus an epilepsy just maybe perhaps a little bit of a greater sensitivity. This is a nighttime dosing regimen, similar to epilepsy, I believe, so that should, I presume, help. But curious like your thinking around dosing strategy there. Are these AEs mainly Cmax events, so you feel like perhaps this can have a pretty acceptable tolerability profile of the doses that you've selected and then we can kind of jump into some of the efficacy related topics.

Sure. Sherry, do you want to run through the trial design and then I can address the questions just on kind of AEs and tolerability and how we think about the population.

Yes, absolutely. So there's 2 studies that are ongoing. Maybe first to talk about our company-sponsored study. So that study is being run in the U.S. and we're running it in 160 patients. It's going to be at quite a number of sites, somewhere between 15 and 18 sites. And we're looking at 2 doses in that study. So we're looking at 10 milligrams and 20 milligrams versus placebo. And we often get questions around kind of the study design and the powering assumptions. So there was a study, a placebo-controlled study run with a predecessor molecule called ezogabine. And there was a -- we saw a 7.9-point separation in MADRS at week 5. So we've designed our study closely after that and looking for actually about half the effect size. So our study is well powered to show a 4-point separation at week 6 with MADRS and then there's also an investigator-sponsored study that's ongoing. That's a smaller study, 60 patients out of 2 sites. Their primary endpoint is a functional MRI end point, but they are also looking at MADRS.

Jason, I think we would generally agree with your comment that the adverse event profile in an MDD patient would likely need to differ than the epilepsy patient. I think it's a little bit of an apples-to-oranges comparison here. The epilepsy patients are highly refractory. They're on adjunctive therapy. As we talked about earlier, 50% of the patients in our X-TOLE study were already on 3 anti-seizure meds and we were adding a force to it, whereas an MDD will be doing it as monotherapy. So I think it's a little bit difficult to make that comparison. I will say, though, we're looking at 20 milligrams. And the study that Sherry had mentioned a minute ago, looked at ezogabine at its mid-dose, which was 900 milligrams. So we're looking at 20, which is a more active dose in epilepsy than ezogabine at 900. So we've chosen that dose. But we've also chosen 10 milligrams. And when we look in the epilepsy patients, the AE profile for 10 milligrams was very much like placebo. So although it had drug activity had statistically significant efficacy on seizure reduction, it was much more like placebo from an AE profile. So that was the reason we chose those 2 doses. So I think as we get -- when we can unblind the data, we can look at the adverse event profile, but that's a little bit of a background in the context.

Yes. Okay. And what do you think about sort of the stage gates, so to speak, for advancing into Phase III in some shape or form here? Is it really just about hitting that 4-point separation on the MADRS scale in a stat sig manner? Do you need that coupled with proof of mechanism on the FMRI endpoint? Or I guess, with imaging and MDD, it's not like totally that conclusive, but maybe the focus might be more on the clinical measures. So just curious if you can kind of talk us through what would want to see to kind of advance the program in MDD further?

Yes, to us, it's even a broader question than that, right? I think what are our options, not just in advancing in MDD, but where else, how else do we think about it more broadly, and I'll go through a few of those details. To answer your specific question, the imaging work that Mount Sinai is doing is not going to impact our decision-making. I think that's an interesting academic exercise, but we're interested in the clinical scales of depression and anhedonia as part of our decision process. I think we have some flexibility here. One of the things that I think many people know, but it's worth stating is that 30% to 50% of epilepsy patients have the lifetime comorbidity of depression. So it's the most common comorbidity in the epilepsy population. So there is a need for drugs that treat epilepsy and the profile of 1101 that could have benefit on mood as well. I think that could be a game changer and clearly differentiate in the epilepsy space. So that is an opportunity that we really use 1101 differentiated in the epilepsy space. Your point, I think, is a good one. If we see good data, the opportunity to develop 1101 in future development in MDD, we're absolutely evaluating that and thinking about that. And that would come down to the overall profile of the drug, right? I think we need to see the data, but it's not just about efficacy, it's about tolerability and it's where do we think it would fit into that population. The other flexibility that we have, just to bring a different angle at this is we're an ion channel drug discovery company. We've done it for 15 years. We do have other molecules that are preclinical, late-stage preclinical that target potassium channel modulation in the brain as well. So we also have flexibility and optionality from a chemistry point of view.

If you were to do Phase III comorbid, right, there's a thought out there if you talk to psychiatrists that perhaps the depression is sort of secondary to the epilepsy. If you solve for the epilepsy, the depression may improve and go away. So is this effectively kind of an expanded subgroup study, so to speak? And I guess I'm just wondering what that could look like.

Yes. And we may not need to do specific label work, right? I mean this could be an opportunity just to continue to generate data and to educate the epileptology community and the epileptologists. So yes, we have different ways to do that. I've heard the same comment you've made. One of the things that we're doing in the X-TOLE trial, we're not stratifying by this, and it's not in the statistical hierarchy of the SAP, but we are going to have baseline measures of depression and anxiety and we believe we'll have a subpopulation of patients that will have elevated depression coming into our Phase III trial. So it is an opportunity to maybe better answer your question, which is, is the reduction in seizures driving an impact on mood or could there be other things that are having that impact on mood as well? And can you separate those 2 things?

Yes. But to be clear, it sounds like there could be a scenario depending on the data that you are a dedicated MD traditional MDD pivotal trial if the data were compelling.

Yes. I think that's an option. Yes, we're going through all of that analysis internally. I think there's lots of inputs. We've talked about some of them today. And then there's other commercial inputs as well that we're gathering to make that decision.

Okay. And just, I guess, the point to clarify, you wouldn't think that the anhedonia inclusion criteria really fundamentally in excess a different MDD trial than maybe more of the classical studies that we've seen clinic anhedonia is like 80% of a common symptom amongst these patients. So it's really not altering the composition of enrollees.

Correct, yes. We would -- yes, I think you've said it really well, we would agree with your statement.

Okay. Maybe just one last question. Just commercially, XCOPRI, coming back to epilepsy, just your general thoughts, right? Because this is the brand that people kind of focus on a little bit and say, all right, look, is this kind of indicative of what a launch in the space looks like? And I imagine like the titration issues with this drug comes up as sort of, hey, maybe this isn't an appropriate analog. It certainly comes up with physician KOLs we talk to. So just kind of curious, if you put any more context around that launch for investors and how they think about the space?

Sure. Sherry, do you want to just talk about the launch and then I can maybe give a little bit of where we think 1101 may fit against cenobamate?

Yes. I mean, Jason, from our perspective, I mean, we think the launch is going pretty well just given the fact that they launched during COVID, and they've been marketing a drug for roughly about 2 years. We might see more -- we might see sales ramp a bit more now as well, given that have Vimpat on generic earlier this year. So we'll see Vimpat be used earlier in lines of therapy, and that may boost some of the branded agents. But as we talked about before, with respect to the general treatment paradigm, we expect sales in epilepsy to ramp more gradually just given the treatment paradigm and the generic options that are on the table. So patients will have to cycle through medications, and that's why you see kind of that slower ramp in sales rather than the immediate pickup that you see on our treatment areas.

And then really quick because I know we're bumping up against time. I think cenobamate, as Sherry has said, I think it's doing fine commercially. As you mentioned, it's a long titration. It can be 12 to 16 weeks. I think that can be cumbersome. And as you push the dose high, they do see quite significant adverse events. That said, I think there's a role for that drug, absolutely, and we're seeing uptake in usage. It likely has mixed pharmacology, but it is a sodium channel inhibitor. And so we've seen lots of sodium channel drugs, and most of these patients will have sodium channel exposure before they get to branded agents. So again, I think 1101 with no titration and the novel mechanism and the compelling efficacy and that early onset of efficacy, we think will fit really well even when we compare it to cenobamate.

Okay. Well, thank you both for joining us and looking forward to the progress and the updates early next year.

Thanks so much.

Thank you, Jason.

All right. Thanks. Goodbye, everybody.

Bye.