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

My name is Jason Gerberry. I'm one of the SMID cap biotech analysts at BofA. So guys, thanks for joining us.

Thank you, Jason. Nice to be here.

Yes. So maybe this first question is more of a recap, right? As we look ahead to XEN10 or XEN1101?

1101, yes.

I should know that. The goals into the follow-on confirmatory trial, how important is it to replicate what was seen in the first pivotal trial? Is there some room to lose? You've seen really great results. You've got a solid profile. So what are just some of the goals that you have to accomplish with it? Is it just purely replicating the results that you've seen and moving on to filing?

Sure. Why don't I start and just give -- I'll give a little bit of overview, just provide a bit of context to your question, and then Sherry can give some specifics on that kind of translatability of your question from Phase II to Phase III. So yes, lead molecule, XEN1101. We're actually starting to call it azetukalner. So that's the USAN or the INN name which has been approved now. So you'll start to hear more of that from us as we move forward, but...

It's really hard to pronounce.

I think we'll get used to it over time. We have -- all of us have used XEN1101 hundreds, if not thousands of times. So we'll transition to azetukalner, but we can use them interchangeably this afternoon. So we're obviously in a broad Phase III program in epilepsy, that's where you're talking about the reproducibility. We have 3 Phase III clinical trials ongoing, 2 in focal onset seizures, 1 in primary generalized tonic-clonic seizures. And then kind of the big update from us over the last couple of months is we had our Phase II data in major depressive disorder towards the end of last year. We've now interacted with FDA from an end of Phase II perspective, and we're ready to get into a large Phase III program in major depressive disorder the same molecule and we'll talk about that. And then the third thing that I think we're starting to talk a little bit more about and give a bit more profile to is just some of the early stuff we're doing from a drug discovery perspective. We can talk about some of those targets and molecules as well. Then, let's get to your specific question on just the reproducibility from Phase II to Phase III.

Yes. So as we think about our strategy for X-TOLE2 and X-TOLE3. X-TOLE, we had the best placebo-adjusted efficacy seen in a trial population in focal onset seizures, and we're really trying to replicate those data. So we've really designed X-TOLE2 and X-TOLE3 to mirror our X-TOLE study in order to be successful. And those studies have been powered based on the data that we generated in X-TOLE. So as we look at the 15 and the 25-milligram dose, both of those arms have more than 90% power. In fact, maybe more than 99% power at the 25-milligram dose. And there's really very few elements that we've changed moving from Phase II to Phase III. So the studies are just slightly larger. We are moving to a 12-week double-blind period from 8 weeks. But as you all probably know, we did continue to follow patients in X-TOLE after 8 weeks, most of our patients did rollover into our open-label extension where we continue to follow patients, and we saw that there was continued seizure reduction from that 8- to 12-week period. So we're really confident going into the Phase III program that we'll be able to reproduce those results. And just broadly speaking, we know that in epilepsy there's good reproducibility or translatability from Phase II to Phase III. So again, we're feeling confident about our ability to hopefully replicate those results, Jason.

And you guys have been pretty clear on enrollment trends and reiterated on the earnings call. As competitors come into the field and are starting to run trials with aggressive time lines, does this present a variable at all for you? Or are you just kind of close to the finish line, and it's really less of an issue as we think about any possible variables that could come into play from enrollment, which is always a sensitive topic in the world of epilepsy since [ Cerevel ] had some challenges maybe a year ago.

Yes. So let's maybe take a step back, we'll provide some broad commentary. I can talk about the competitive space as well. I think in any therapeutic area, it's rare that you're the only molecule ever in a certain therapeutic indication, right? So we see kind of the ups and downs of competitiveness over time. And I think there's enough patients out there for multiple drugs to be developed in parallel. And as certain molecules or companies have had challenges often not very specific to them. So we're -- the benefit that Xenon has, I think when we compare to some of the competitors that you're referring to, is that we do have the experience, right? I think we ran a very successful program in the Phase II study. We're trying to replicate that. The size of Phase III is not materially different from Phase II, a little bit larger but approximately the same number of medical centers, the same jurisdictions. We're leveraging a lot of the learnings that we had from Phase II. And if we just think about the overall competitive space, there's actually not a ton going on in focal onset seizures right now. Some of the competitive molecules are just starting in terms of their efficacy studies but we definitely haven't seen any other drug that has shown the efficacy results that we have and the type of experience we have in running epilepsy studies.

Okay. And then once the data in hand, I imagine you can file the NDA pretty seamlessly. Can you talk a little bit about sort of what you talked about with the FDA in terms of safety follow-up and any interrogation of ophthalmic assessments were part of sort of NAE of interest given predecessor molecule to sort of what do you agree upon with the FDA to submit and just how timely you'll be able to submit that NDA post the data?

Sure. I'm happy to give a little bit of perspective on kind of the package and what we expect and Sherry can walk through the time lines. So yes, we had -- I mean, our end of Phase II meeting in epilepsy was a couple of years ago, but I think we have clear alignment from FDA on what the requirements are, both on the efficacy and the safety side. So on the efficacy side, we've really talked about using X-TOLE. This was a large, well-run study, 3 active doses and placebo, statistically significant in every seizure reduction endpoint. We're going to use that X-TOLE study. And that's why we often talk about this first Phase III study X-TOLE2 as being on the critical path because those are the 2 studies that we're going to file on in focal onset seizures. And then in terms of the safety data, I mean there's a lot there. Obviously, we have all of the toxicology work that we need to do, a huge amount of that is already in hand. Clinical pharmacology. So we know exactly what studies we need to run from a DDI, renal, hepatic impairment, all of those again. Again, we have clear understanding of what we need to do. And then just the overall size of the safety database. So because this is a large market opportunity, we really think about ICH guidelines in terms of 1,500 subjects of unique exposure and then the longer-term exposure. With taking our X-TOLE Phase II study and going on to open-label extension, I think we've mentioned this a couple of times on different calls, but we now have over 600 patient years of exposure. We have patients that have been dosed more than 4 years. So we have a huge amount of long-term safety data. So in terms of those ICH guidelines of 6 and 12 months exposures, we're going to have a huge amount of that safety data available.

Yes. So based on the fact that really critical path here is X-TOLE2 timing. We've done a lot of the work that Ian has described in parallel, and a lot of the work has been completed to date as we think about building out safety database, we should be able to get quite quickly to an NDA. And we haven't guided on any of this. So I'll just give you some rough time lines. But we probably expect some time -- somewhere in the time frame of about 6 months from the time we have our X-TOLE2 data to be able to submit an NDA. And then this will be a standard review period from an FDA's perspective, and that typically will take about 12 months. We are doing a lot of the work on the NDA as we speak, just given the fact that we have already completed one of our registrational studies, X-TOLE, we can -- we've already started -- our team internally started to put together that package. And so that would be the rough time lines that we would expect.

Okay. And where does the OUS partnership effort kind of fall within the sequencing of events? Is this sort of a post data consideration for you guys versus go it alone? Can you maybe just...

Yes, that's a great question. I think we've been pretty consistent with communicating our strategic objective, which is that we would like to commercialize azetukalner ourselves in the U.S. at this stage, we've been consistent in saying that we're not looking to build that commercial infrastructure ex U.S., just given the capital requirements and some of the complexities that come with that. We feel that those markets would be better served by an experienced partner and whether that is regional partners or one ex U.S. partner is to be determined. But something that we're continuing to evaluate. We are talking about time lines as well. Obviously, we don't guide on this. But we don't currently need the capital or the capabilities to be able to do the development that we have committed to. And so we don't really see this as a near-term need for the company, but definitely something that we'll continue to evaluate and probably delve into more extensively post Phase III data.

Got it. And then maybe then thinking ahead to launch, right? As you, I think, have talked about with us in the past, this is a space where payers are typically covering one brand. I think you want to win in third line plus setting. That kind of puts you squarely against maybe XCOPRI. So is that the right way to think about sort of you want to operate kind of mainly in that third, fourth line kind of setting and get the dominant share there? And how you think your profile stacks up against XCOPRI?

Yes, absolutely. Look, I think you hit it on the head here with the fact that patients have to go through one or 2 generics before they're going to be covered for a branded agent. So as we think about that future branded space, it will likely be azetukalner and XCOPRI that are competing for patients in that third line plus stage. Look, I think XCOPRI relative to its profile, we think, is doing well. SK Life Sciences who markets that drug has guided to $300 million to $320 million in sales this year, and they're about 3 years post launch. They did launch during the pandemic. They've also guided to reach $1 billion in sales before the end of the decade. So we think for the profile of the drug, the fact that XCOPRI is not a novel mechanism. It has a fairly involved titration schedule of 12 to 16 weeks to manage the rare DRESS. And that drug hasn't seen a mood benefit per se. We think our profile stacks up really well against XCOPRI. So as we go across all of the different elements and we've confirmed this through various market research, Jason, as we, again, look at the novel mechanism of the azetukalner, which is really important in this space as you get to third line beyond where you're really thinking about polypharmacy and layering additional mechanisms onto a backbone of probably sodium channel inhibitors. And you look at the ease-of-use attributes, the QD dosing, no titration, rapidity of onset, we had best-in-class efficacy, the OLE data that we've generated with very high rates of seizure freedom in a difficult-to-treat patient population. And now the added element of a positive mood effect with the X-NOVA data, we really feel that in a jump ball scenario, azetukalner has a very high chance of winning against XCOPRI.

Okay. Yes. And so I think you in the past have generally talked about this as something that you view as a blockbuster drug -- to be a blockbuster drug, you need about 25% share of the treatment resistant space in XCOPRI, but for you ever launching, it seems like they're on a trend to getting there. So like you said, a drug with your profile [ may need ] to have mood benefit on there. I'm not looking for guidance, but maybe if you can just sort of frame how you're thinking about sort of maybe the peak sales potential of the drug.

Yes. I'm happy to make some comments. A couple of things. One, if you look at a drug like Vimpat, which I think is an interesting comp as well. Last full year of branded sales in 2021, $1.8 billion in sales. I think again, Sherry walked through all of the attributes of azetukalner and I think the drug stacks up really well against Vimpat as well. And Vimpat, based on our calculations, probably had less than a 10% share. So I think you can have a very large commercial opportunity without having to have a significant amount of penetration into the market, just given the number of patients there are. I mean, it was at the end of last year that we had the data for azetukalner in major depressive disorder. And then what we've done more recently over the last couple of months is, we've now updated our TPP and tested that with epileptologist and neurologists and the commercial opportunity in terms of our modeling based on that new TPP has gone up with all of the things that Sherry went through, from mechanism, to efficacy data, to long-term extension, rapidity of onset, all of those things. We had antidepressant properties to the drug. We think it's going to have a significant impact in -- to the commercial opportunity, and a good comp for that is Lamictal, right? Lamotrigine was a drug that physicians believe had a mood benefit and that had a significant impact on the commercial opportunity.

Can you remind me the numbers involved here? I think in the past, there's some literature that suggests 40% of the focal onset patients have unipolar depression. Do they have a diagnosis for unipolar depression or is it just, I don't know, a discussion with their clinician that they're suffering from depression, but maybe not a formal diagnosis and they're not seeing a psychiatrist? I'm just wondering if you can maybe unpack that a little bit.

Yes, we can give you some perspective, but I still think this is an opportunity where we can provide a real leadership role in medical communications to the field as well. So if you go back to the literature, the literature would suggest it's a little bit all over the map that somewhere between 15% and 50% of patients with epilepsy will have comorbid depression. If you talk to epileptologists, especially those that are treating those patients that are later in line, they will talk about the percentage of their patients that have comorbid depression being much higher than that. We did a burden of illness study, which we present in those data at the American Epilepsy Society meeting last December. So this was a poster that people can go and take a look at. And based on the work that we've done, it suggests that likely many of these patients are underdiagnosed for their depression as well. And so I think all of that provides us an opportunity to continue to educate the epilepsy community about comorbid depression, the risks associated with that and maybe some tools that can help physicians in that area.