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

Welcome, everyone, to the 42nd Annual JPMorgan Healthcare Conference. My name is Tessa Romero and I'm one of the senior biotech analysts here at JPMorgan. Our next presenting company is Xenon Pharmaceuticals, and presenting on behalf of the company, we have CEO, Ian Mortimer. Ian?

Thanks, Tess. Good morning, everyone. Always great to be here. Thanks for you for hosting us. Always great to see everyone and a nice time to reflect on the year that's been and the year that's coming up. I am joined by some colleagues this morning. So we have Sherry Aulin, our Chief Financial Officer; Chris Kenney, our Chief Medical Officer, will join us for Q&A after the presentation; and Andrea DiFabio our Chief Legal Officer is here as well. So let's jump right in. So I will be making some forward-looking statements, if you can refer to our SEC filings for a full list of our risk factors. All right. So in terms of a Xenon overview, many of you do know the company. Obviously, we're a small-molecule ion channel drug developer. Had some real success over the last couple of years in terms of advancing our neurology pipeline into late-stage development. There's kind of really 3 key messages that we'll talk about today, 2 of them relate to XEN1101. This is our potassium channel modulator in late-stage clinical development. So number one, we'll talk about our epilepsy program. We had really strong epilepsy data couple of years ago in a Phase IIb clinical trial called our X-TOLE study. We're now in a broad and ambitious Phase III program. So we'll walk you through those details and provide some updates. The most recent update for XEN1101 is the second thing we'll talk about, which is the X-NOVA program, and the work and the data that we've generated in major depressive disorder. Some really important data in November of last year, and now we're planning for a late-stage clinical program in MDD. And what we announced this morning is that we'll initiate a Phase III clinical trial in MDD later this year. And then the last thing that I'll talk about on the next slide is about drug discovery. So we spent a lot of time over the last couple of years talking about XEN1101 and the work we're doing in epilepsy and in depression. But we've been doing a lot of work in our drug discovery portfolio, and that's maturing nicely. So I want to make a couple of comments on some of the early-stage programs that you'll see transition into human clinical development over the next couple of years. Obviously, a strong financial position. We had almost $640 million at the end of Q3. That doesn't include a recent raise of $345 million in Q4. So we do have a financial and a balance sheet to fully support our Phase III epilepsy program and a Phase III depression program. At our Q4 results at the end of February, we'll update cash runway and cash guidance as we move forward. So in terms of the pipeline, obviously, I'll spend a fair bit of time today, almost the entire presentation, on XEN1101. This is our potassium channel modulator in development for epilepsy and depression. I'll walk you through the epilepsy data, the depression data and the Phase III program. So on this slide, I'll focus a little bit on the middle part of the slide, which is the maturity of our drug discovery portfolio. So there's kind of 3 targets. There's a number of things that we're interested from a drug discovery point of view. As many of you know, we've been drugging ion channels in the CNS for about 15 years. I would say we have the deepest capability globally in this target class in the brain. And there's really 3 targets that were -- that are most advanced right now. It's a Kv7 program, Nav1.1 and Nav1.7. So obviously, on Kv7 XEN1101 is a potassium channel modulator. So we have quite a significant backup program supporting that. Different chemistries that we are at development track candidates that will move into IND-enabling studies. Newer information is on Nav1.1 and Nav1.7. So on Nav1.1, this is a sodium channel opener. So if you look -- if you -- for many of you know a therapeutic indication of Dravet syndrome. So the kids that have Dravet or haploinsufficient in Nav1.1, so they have a genetic loss of function of 50% of the protein. And what we have is small molecule openers of Nav1.1. We showed some recent data at the epilepsy meeting last month at the AES meeting, which I think is really impressive in those moving forward. You may know another company that is developing intrathecal antisense oligonucleotides for this. The difference that we're taking is the approach is these are going to be orally available small molecules that we can titrate. And then our Nav1.7 program is something that we haven't spent any time talking about publicly. So we were the first to clone the SCN9A gene about 15 years ago, and this encodes for the protein Nav1.7. So Nav1.7 is a target for pain, and patients that are homozygous loss of function in Nav1.7 feel no pain regardless of noxious stimuli. So it's extremely well validated from a genetics point of view. And what we're seeing is selective sodium channel inhibition is really providing some very important clinical data. I think everybody has seen the Nav1.8 data from Vertex. We think Nav1.7 is a better target in terms of genetic validation. And we have some really interesting molecules on Nav1.7. This has been a target we've been interested in for some time, and you'll see molecules transition into IND-enabling studies and into the clinic over the next couple of years. So that's the time I would spend on the drug discovery portfolio, and we'll move now to more detail on the lead program, XEN1101. So I'll start in epilepsy and then I'll move to depression. So just to set the stage before I get into some of the clinical data and the Phase III program. So we still believe there's a significant unmet need in patients with adult epilepsy. And we do get questions from time to time just about what the addressable market is. So let's set the stage in terms of the epidemiology and then we can also think about what the market opportunity is. So there's about 3 million Americans that have epilepsy, 60% of them have what we call FOS or focal onset seizures. And what you'll see on the next slide is about half of them do not get good seizure control. So that's almost 1 million patients. And when you include the pediatric patients in that, it's about 1 million patients overall. The second most common form of adult epilepsy are adults with generalized sures and the vast majority of them, 80%, have primary generalized tonic-clonic seizures, and we have a Phase III clinical trial ongoing in PGTCS as well. So our Phase III program covers the adults with focal epilepsy as well as with primary generalized tonic-clonic seizures, the vast majority of the market. The most recent branded epilepsy drug to go generic was a UCB drug called Vimpat in 2021. Had $1.8 billion in global sales. And as you'll see through the presentation, I think XEN1101 stacks up really well in terms of the overall profile properties and data. So this is just digging a little deeper, specifically into the focal epilepsy market. So as I mentioned, 60% of the overall market are patients with focal epilepsy, 1.8 million. As you'll see from this slide, about 50% of them are well controlled or easier to control, and about 50% of these patients are more challenging to control. At first and second line, these patients are generally getting a monotherapy. We see a lot of use of levetiracetam and lamotrigine and we're seeing more and more use of lacosamide now that Vimpat is generic. As you get through those first 2 lines of monotherapy, both we get reimbursement and the payer environment, but that's where we also see polypharmacy and the use of branded medications. And where we believe XEN1101 will fit is in this polypharmacy where you could compare it -- where you could combine it with drugs of different mechanism of action, the SV2As like levetiracetam or BRIVIACT; or the sodium channel inhibitors, drugs like lamotrigine and lacosamide. Just as a little bit of a reminder, but I won't spend too much time on the next couple of slides because it's data that we've presented a number of different times. This was our X-TOLE Phase IIb study that we read out at the end of 2021. But really important is we're continuing to follow these patients in open-label extension. And at every American Epilepsy Society meeting, we have updated OLE data, and I'm going to show you some of that OLE data that we presented last month that is really compelling. In this study, we looked at 3 different doses. So this was a Phase IIb dose range finding study and really set us up for the Phase III program that we're currently in. So just as a reminder of the data that we presented a couple of years ago, what you'll see here is 2 representations of the key endpoints in the study. The primary endpoint is the MPC. That's what's seen on the left. That is the primary endpoint that's required for U.S. regulators. If you look on the right, it's the responder analysis or the RR 50, which is the key endpoint for European regulators. Obviously, we see remarkable consistency in the data and a clear dose response here. We were statistically significant at every dose on every seizure reduction endpoint and a clear dose response. This is a pretty busy slide, but I'll really point you to a couple of key messages. When we unblinded the X-TOLE data, what we didn't recognize going in, it was one of the most severe populations ever trialed. Actually, when we look at the literature, we've never seen another clinical trial looking at a severity group as significant as this. And there's 3 ways we look at disease severity. One is the number of seizures that these patients have at baseline. Two is the number of antiseizure medications that these patients have failed before coming on to study. And the third is the number of drugs they are on coming into study or the con-meds. And although this, as I said, is a very busy slide. What we found is when you look at subgroups, so those patients that had less disease burden at baseline, so fewer seizures, had failed fewer drugs or were on fewer drugs, the data is even better. So again, a remarkable consistency. So at the highest level, on a placebo-adjusted basis, this is the best data ever seen in patients with focal onset seizures and then the data is even better as you look at the subgroups of patients with less severe disease, which is more likely the use population when the drug is commercially available. One other thing that we didn't expect going in but was absolutely really nice to see and we've gotten tremendous feedback from physicians was the rapid onset of efficacy. So for every dose in our Phase IIb X-TOLE study, we saw statistical significance at week 1. So these are patients that are having breakthrough seizures. The population is having, on average, the median was 13.5 seizures per month. If you think about that, that's approximately a seizure every other day. And we're seeing statistical significance at week 1. So now we're combining this really nice profile of 1101, compelling efficacy, rapid onset to efficacy. It will be an only-in-class mechanism and a tolerability profile that's really appropriate. This is the new data that we presented last month at the American Epilepsy Society meeting in Orlando. So this is our OLE data. So what's really unique about what we're doing with XEN1101 is we're following these patients for a significant period of time. We now have over 500 patient years of exposure of XEN1101, and we have our first patients going out more than 4 years of dosing. Actually, we announced today that we've extended the open-label extension from 5 years to 7 years to continue to generate long-term data. We often get questions about other competitors in the market. Obviously, this is another way where we clearly differentiate from anyone else, not only with the efficacy data, but the long-term safety data that we're having follow-up as well. So if you -- I'll just point you to the left side of the slide right now. We kept the patients in there during the double-blind period, which was the first 2 months. What we do is we kept the patients within the dose groups that they were at that time. And what you see as patients go into open label, which was at a single dose of 20 milligrams, even those patients that were on placebo or 10 milligrams get a better response. And then we see this as almost triphasic. So you get this initial quite significant reduction in seizures over the first couple of months of treatment. And then a few months later, you're getting even a greater reduction. And now we have the cut of the 30-month data at AES last month, and you see that the population is having more than a 90% reduction in their seizure burden. It's quite remarkable data for how significant their disease burden and how refractory they were at baseline. What we've done on the right-hand side, as I mentioned a couple of slides ago, that patients that were on fewer drugs do even better. We see that in open-label extension as well. So on the right-hand side, what we've done is we've just taken that population graph from the left, and we broke it into 2 groups. We broke it into the group that were on 3 con-meds, we broke it into the group that we're on 1 or 2. And as you see, the population that we're on 1 or 2 con-meds coming in, so a less severe patient population is getting close to 100% reduction in their seizures from baseline. It's quite remarkable given the seizure burden they had coming into the study. In terms of kind of 2 key messages on this slide. One, any -- in terms of adverse events that we're seeing very consistent, whether it's in healthy volunteers and epilepsy patients, depression patients are in open-label extension. We're seeing adverse events that are consistent with a very active drug in the CNS. And then the other thing is we're starting to look at periods of seizure freedom. And kind of the key message here is the patients that stay on drug for longer periods of time are getting these extended periods of seizure freedom. And now with patients out if we do the cut of the data, which is the fourth bullet on this slide, for patients that had been on the open-label extension at least 24 months, almost 1/4 of these patients have at least 12 months of seizure freedom with no seizures at all. That's a massive improvement in quality of life for these patients. They can start driving again. They have a considerable increase in independence considering the baseline characteristics. So we've taken all of these data. We've shared them with regulators, FDA and in Europe. And we're now in a broad Phase III program. We've got 2 Phase III clinical trials going on in focal onset seizures, what we call X-TOLE2 and X-TOLE3. That's very purposeful in the nomenclature. These are trying to replicate the X-TOLE study, 2 active doses versus placebo. These studies are ongoing. They mirror each other. They're exactly the same. In terms of our interaction with FDA at our end of Phase II meeting, the critical path to filing an NDA and getting the drug approved in the U.S. is X-TOLE2. So we feel with the X-TOLE data and with X-TOLE2, we can file for approval. We have now also guided that in X-TOLE2 that we expect to complete patient enrollment in the second half of this year. So the study is going very well. As I mentioned, we're also interested in primary generalized tonic-clonic seizure or the second largest epilepsy indication for adult patients. And so we have a Phase III clinical trial called our X-ACKT study that's also ongoing in primary generalized tonic-clonic seizure. We have also discussed this with regulators. So it's going to be a single Phase III clinical trial that will either form the basis of the NDA or an sNDA depending on timing. So that's an overview of the epilepsy program. I think we have best-in-category and compelling efficacy data, a novel mechanism, rapidity of onset, no titration once-daily pill for this drug. We're really excited that we're in a broad and ambitious Phase III program. So I'll move now to major depressive disorder where we had some recent data. So we ran a proof-of-concept study called the X-NOVA study that read out in November of last year, so just a couple of months ago. So this was 2 active doses versus placebo, approximately 50 patients per arm. Primary endpoint was the MADRS score changed through week 6, and we had a number of key secondary endpoints that I'll walk you through as well. So this is the primary efficacy endpoint at the top. So this was the change in MADRS to week 6 in the mITT population. And what we found was clinically meaningful separation between the 20-milligram dose and placebo. We just missed statistical significance with a p-value of 0.135. But we had a 17-point -- almost 17-point reduction in the 20-milligram arm. And we actually had quite a significant placebo rate in the study of close to 14 points. But we can see from the graph is a clear dose response between 10 and 20 milligrams in separation from placebo. And with that 3-point separation between active and placebo at 20 milligrams, that's clinically meaningful when we speak with psychiatrists. What we've done at -- on the bottom graph is we've just shown the 20-milligram arm. You can see that separation at every endpoint. And consistent with our epilepsy data, we're seeing statistical significance at week 1. So now both in depression and in epilepsy, we're seeing rapidity of onset, and we were stat sig at week 1 on MADRS. So looking at some of the other important end points in the study, one was the 2 key regulatory endpoints in terms of guidance for clinical scales of depression is either the MADRS that we chose as the primary endpoint in our X-NOVA study or the Hamilton scale or the HAM-D17, which was a prespecified endpoint in the study. What you'll see again about a 3-point separation on Hamilton or HAM-D17, which was statistically significant. So we're starting to see, again, this remarkable consistency across different endpoints and different therapeutic indications. One of the key secondary endpoints was a measure of anhedonia, which is the SHAPS scale, and I won't go through some of the biologic and mechanistic rationale on why this mechanism could have an improvement in anhedonia, but we did see that. We were looking for it and a key secondary endpoint was this change in SHAPS at week 6. We saw almost a 2.5 point difference between 20 milligrams and placebo, which was also statistically significant. And you can see the clear dose response there between the 10 milligrams and the 20 milligrams. In terms of safety and tolerability, we had a lot of discussions with investors going into the X-NOVA study with the question on whether we would see tolerability that would be similar to epilepsy, potentially even worse than epilepsy. And it was surprising to us in a very good way that we're seeing a safety and tolerability profile that's more benign in major depressive disorder than we saw in epilepsy. This is a monotherapy study. Obviously, it's very difficult to compare across therapeutic indications and the epilepsy patients are on a number of different background medications. But the important messages from this slide is, one, we're seeing the same types of adverse events. So we're seeing a consistency in the tolerability, but we're seeing a softer or more benign safety profile in depression when we compare that. Obviously, it's a cross-trial comparison with those caveats. But when we compare it to the epilepsy data, rates of discontinuation were low and no SAEs in any of the -- in either of the 2 drug arms. So again, a very good safety profile overall. No notable weight gain or sexual dysfunction as well. Just after the X-NOVA data, we did a pulse survey of about 130 psychiatrists right after the data, and the feedback that we're getting from the prescribing community is seeing these types of data with this differentiated safety profile would be really important in terms of them treating their patients with major depressive disorder. So this is a busy slide that I'll just summarize quickly. Obviously, we saw clinically meaningful dose-dependent drug activity in depression. When we look across all of the endpoints, we saw a clear separation on the primary endpoint of MADRS. We saw a statistical significance at week 1, and we saw statistical significance on a number of the other endpoints, including HAM-D17 as well as SHAPS. And as I just mentioned on the last slide, we had a tolerability profile which we thought was reasonably benign overall and clearly differentiated from the SSRIs and the other drugs that are used to treat depression. So we think there's a significant opportunity in depression, really for 2 reasons. One, in the major -- in the primary indication of major depressive disorder, but we also know that the most common comorbidity in epilepsy is depression. And so when we've spoken with epileptologists to have the type of anti -- the seizure reduction results that we're seeing with XEN1101 and also have some mood benefit is clearly a differentiator for the epilepsy population, but we're also excited about taking XEN1101 forward in late-stage clinical development in the primary indication of MDD as well. And as I mentioned, we'll initiate our first Phase III clinical trial in MDD later this year. So just to wrap up before we get into Q&A, this is a list of the milestones that are upcoming. Obviously, we're well into our broad and ambitious Phase III epilepsy program. For X-TOLE2, we expect patient enrollment to be completed later this year. We are expanding into MDD and potentially other neurological conditions as well. And we've guided now that we'll start our first Phase III clinical trial in major depressive disorder later this year. And as I mentioned, I think you'll really see this maturity of our discovery pipeline and portfolio over the next couple of years, where we're very interested in continuing to prosecute potassium channel modulation in the brain, but also interested in Nav1.1 and Nav1.7 as well. So Tess, with that, happy to start Q&A.

Great. I'd like to welcome Sherry and Chris on to the stage, please. So the X-TOLE2 trial randomized its first patient in the first quarter of 2023. And you have recently guided to enrollment completion in the second half of 2024, which you reiterated today. I've asked this question before, but I think it's a good one to ask again. How do you think about the pushes and the pulls of arriving at the front end or the back end of that guidance? And how long should we be thinking about a top line result at the end of that completion?

Thanks, Tessa. I can take this one. So yes, I think the X-TOLE2 study has gone really well. I mean, we have such a compelling profile of the drug. We've used a lot of the same medical institutions and physicians, investigators that we used in X-TOLE so we can leverage all of that in terms of moving forward, and we had a really great reception at the epilepsy meeting last month. So we're not going to narrow the guidance from the first part of the second half of the year or towards the end of the year. We'll narrow that as we move forward in our quarterly updates. I think people do need to recognize, and we mentioned this on our quarterly call last year, is that even when the last patient is screened, we go through a screening period, and then there's a 2-month baseline period even before randomization. And that's because you need to count those seizures at baseline in order to do the statistical analysis for these studies. And so with a 2-month baseline period, a 3-month double-blind period and then 1 month of follow-up, and then you include screening, it's usually about 6 to 8 months from that last patient screened till the top line data is available.

And do you have visibility on the patient demographics that have been coming into X-TOLE and X-TOLE3? And how do they compare to what you saw in X-TOLE?

Yes. So the first thing to really kind of point out is that following baseline characteristics is extremely important as you sort of follow the study because if you're seeing something unexpected you want to be able to transition, perhaps implement a protocol amendment. We don't provide guidance on baseline demographics, mainly because it will -- it's going to change, right, as you go over time. I mean what we noticed, Ian pointed out that in X-TOLE, what we noticed was that the disease severity was quite a bit more than what we had seen in other studies. And I think what remains to be seen is whether there will be less impaired, and it was an effect of COVID, in which case perhaps that would work in our favor or whether this is kind of the new environment in epilepsy where patients are simply just going to be more impaired at baseline from study to study. So that all remains to be seen, but we're keeping a close eye on it.

And what specifically would you like to see in terms of safety, tolerability and efficacy? Are you looking for similar reductions in seizure frequency and responder rates that you observed in X-TOLE? Or could it be something better if the patients are less refractory to current antiseizure medications?

Well, I mean, the X-TOLE results were pretty darn good, right? I mean, Ian just pointed out that the separation between the high dose and placebo was better than any other focal onset seizure study. So if we can replicate those results, I think everybody would be quite happy. The results are strong enough that we're positioning it as the first of 2 pivotal trials to get approved in focal onset seizures. So it remains to be seen what would happen. If the baseline characteristics ended up being less impaired in X-TOLE2 or X-TOLE3 relative to X-TOLE, one could imagine a scenario where the results were even more favorable, assuming what we saw in X-TOLE2 was true and not just an aberrant finding. It seems to be real. Also, we've extended the double-blind period from 2 months out to 3 months. And as you look at the open-label study, you can see that there's further improvement in those patients in that third month. And so perhaps that's something that could also work in our favor. But that remains to be seen.

And then Tess the other part of your question was just on tolerability. I mean I think, I said in the presentation as well, we have this real comfort around the drug now, right? We've had over 500 patient years of exposure. We've had -- our patients have more than 4 years of dosing. So we really know a lot about it. We're seeing a consistency in the adverse event profile. So we wouldn't expect to see anything different in the Phase III program.

One thing I did want to ask about on the epilepsy side here is considering the pediatric patient population, Ian, you've made comments on moves in that forward there in both generalized and focal epilepsy. How should we think about the size of the U.S. adult market in epilepsy versus what it might look like if we also include those addressable pediatric populations.

Yes. So as Ian mentioned earlier, when he covered the epi data, there's about 3 million adults with focal onset seizures in the U.S. When we look at the pediatric patient population, there's close to 0.5 million in the U.S. So there is an increase there, Tess, with respect to the pediatric population. When we think about then the FOS patients, that's about 60% of the total, and about half of those patients are not well controlled on current therapies. So if you look at the adult and pediatrics in FOS alone, that's close to 1 million patients that could potentially be on 1101. And then obviously, we're also pursuing PGTCS which I would broadly think about as a 30% increase in the total addressable market. We are making progress with respect to our pediatric plan. So as we've mentioned before, we have had regulatory interaction and agreement on our pediatric plan, and that's progressing. We have reduced -- and that's what -- this has already taken place, we've reduced the age range in the PGTCS study down to 12 years of age. So we are actually including within our Phase III trial, that's ongoing, patients down to the age of 12. With respect to FOS, we're going to take advantage of the extrapolation rule that the FDA has and what that means is that over time, we will reduce into cohorts, younger and younger cohorts over time in an open-label setting. And we're looking forward to making progress on that. In conjunction with this, we're still working on a pediatric formulation. And important to note that, that formulation is really critical or important for the younger children. So we can get into kids as young as potentially 6 years of age with the current tablet formulation and the pediatric formulation would really be for those younger kids who can't take a pill.

Our team has made some estimates, and I'm sure everybody out there has as well. But we wondered if we could get your latest thinking on how you think about the shape of the launch curve for 1101 versus maybe some of the more recent branded launches that we've seen in the space.

Yes. I think Ian made some of these comments around just recent branded drugs and how well we've seen drugs like Vimpat do, for example, which sold $1.8 billion in its last year of sales before it went generic. So there's very much still an opportunity for big drugs in this space. We've seen recent drugs like XCOPRI do quite well. There is a slower launch curve within epilepsy, and that's really just a result of the treatment paradigm. If we think about how patients are treated in the space, it's really kind of patients cycling through drugs based on safety and tolerability. And so there's not this sort of initial uptick, and it does take some time for patients to cycle on and off drugs and for physicians to get comfortable with medications. But we have seen strong sales curves or strong launches such as XCOPRI. And I think given the profile of that drug, it does point to the fact that there's still really an unmet need despite the fact that there's 20-plus ASMs on the market. And then when we think about the profile of 1101 and the totality of the data that we've generated from a very compelling efficacy profile, rapid onset, no titration, ease of use, good tolerability as well as now the potential for 1101 to be efficacious in depression, which we know is an important comorbidity with epilepsy patients or one of the key comorbidities, really there is an opportunity for 1101 to potentially be the first branded agent of choice. And that could significantly also drive physicians wanting to utilize the drug earlier, Tess, is the addition of the PGTCS indication or label potentially if that study is successful earlier in the product's life cycle vis-a-vis some of the other drugs that have actually pursued that indication much later in the life cycle. Vimpat and XCOPRI are good examples of that where cenobamate, for example, does not yet have that label, their study has not yet read out.