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

Good day, everyone, and thank you for standing by. My name is Brilla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Xenon Pharmaceuticals Conference Call. [Operator Instructions] I would now like to turn the call over to Colleen Alabiso, Senior Vice President of Corporate Affairs at Xenon. Please go ahead.

Thank you. Good afternoon. Thank you for joining us on our call and webcast to discuss the azetukalner NDA submission and psychiatry program update. Joining me today are Ian Mortimer, President and Chief Executive Officer; Dr. Chris Kenney, Chief Medical Officer; Darren Cline, Chief Commercial Officer; and Tucker Kelly, Chief Financial Officer. After completing our prepared remarks today, we will open the call up for your questions. Please be advised that during this call, we will make a number of statements that are forward-looking within the meaning of applicable laws and regulations, including statements regarding the timing of and potential results from clinical studies, the potential efficacy, safety profile, future development plans in current and anticipated indications, addressable market, regulatory success and commercial potential of our and our partners' product candidates. The efficacy of our clinical study design, our ability to achieve milestones in our clinical development programs, including the completion of trial enrollment and the timing of top line data readout from any studies, the timing and results of regulatory filings and our interactions with regulators, and our ability to successfully obtain regulatory approvals. Today's press release summarizing Xenon's azetukalner business update will be made available under the Investors section of our website at xenon-pharma.com. I'll now turn the call over to Ian.

Thanks, Colleen, and good afternoon to everyone joining us today. We'll start with brief remarks on the status of our new drug application in epilepsy, and then we'll move on to more detail on the psychiatry program updates. First, we're excited to share that we have submitted the new drug application, or NDA, for azetukalner to the U.S. FDA for the treatment of focal seizures, which is a big step forward to fulfill our goal of becoming a fully integrated neuroscience company. The NDA submission is based on positive clinical data from 2 pivotal randomized, double-blind, placebo-controlled trials for azetukalner in focal seizures, including the Phase IIb X-TOLE study and the Phase III X-TOLE2 study. Across both studies, treatment with all 4 doses of azetukalner, or AZK, demonstrated a statistically significant reduction from baseline in monthly seizure frequency compared with placebo. X-TOLE2 outperformed X-TOLE with a 42.7% placebo-adjusted median percent change, or MPC, which, to our knowledge, is the highest placebo-adjusted MPC ever seen in a pivotal focal seizure study. Azetukalner was generally well tolerated with a consistent safety profile observed in both studies as well as the long-term safety observed in open-label extension, or OLE, studies such that across the entire epilepsy program, we now have more than 1,500 patient years of safety and exposure data. Our NDA submission is a significant milestone for Xenon as we continue to work towards the potential approval and launch of our first product. We also continue to broaden the potential geographic and therapeutic reach of azetukalner in epilepsy as we continue enrollment in our Phase III X-TOLE3 and X-ACKT studies of azetukalner in focal seizures and primary generalized tonic-clonic seizures, respectively. In parallel, we continue to raise awareness and educate HCPs on our X-TOLE2 data across the epilepsy community. For example, our team recently returned from the European Epilepsy Congress meeting in Athens, Greece, where they interacted with hundreds of HCPs and key opinion leaders throughout the meeting. In addition, we had 6 presentations over the course of the Congress. It was incredibly gratifying to hear unsolicited comments during our X-TOLE2 podium data presentation where 2 KOLs shared stories about how their patients' lives were significantly impacted with AZK. Beyond these congresses, our MSLs have been out in the community responding to HCP requests to learn more about our data. Epileptologists and general neurologists consistently provide us with positive feedback and excitement for both the X-TOLE2 results and AZK's differentiated profile, including a novel mechanism of action, rapid onset of effect, durable reductions in seizure frequency, a generally well-tolerated safety profile as well as once-daily dosing without titration and no need for dose adjustments for other antiseizure medicines. We feel increasingly confident in AZK's potential to become a preferred add-on therapy for the significant number of patients who do not achieve seizure control with initial treatment. Now with our NDA submission complete, we continue to focus on building awareness of Xenon as an emerging leader and committed partner to the epilepsy community. Beyond epilepsy, we have been exploring the potential of AZK in psychiatry, where we believe Kv7 modulation may provide a new treatment option for patients with depression, offering a different mechanism of action from the therapeutic options that are available today to help address significant unmet medical needs. We initiated our Phase III program in psychiatry based on the results of our Phase II X-NOVA proof-of-concept study, showing clinically meaningful improvements in depression and anhedonia with early onset to efficacy and a favorable safety profile. We are currently running 2 Phase III studies in MDD, X-NOVA2 and X-NOVA3, as well as a Phase III clinical trial in bipolar depression, the X-CEED study. These 3 studies are evaluating 20 milligrams of azetukalner compared to placebo. As announced today, we have voluntarily initiated a temporary pause in enrollment for new patients in our studies in major depressive disorder and bipolar depression following a recent analysis of neuropsychiatric adverse events in these studies. We initiated this enrollment pause as a precautionary measure in consultation with the Data Safety Monitoring Board, or DSMB, and we expect it to be temporary. All patients currently enrolled in the randomized controlled psychiatry studies and associated OLE studies will continue on study. It's important to note that this voluntary action does not impact our ongoing epilepsy studies where we continue to enroll new patients, and we remain highly confident in the approval and commercial potential for AZK based on its strong efficacy and safety profile in epilepsy. The pause is based on a review of adverse events across the ongoing studies in psychiatry. Specifically, we observed some neuropsychiatric adverse events, which were mostly mild or moderate in nature. The number and severity of the events are consistent with the known profile of azetukalner and what we have seen across over 1,500 patient years in epilepsy. Although these are well-understood adverse events for this mechanism and for azetukalner, they were not observed in our Phase II X-NOVA proof-of-concept study in MDD, where AZK was very well tolerated. Therefore, we have made the decision to temporarily pause new patient enrollments in the MDD and BPD studies to make adjustments to the dosing, which we believe will improve tolerability in psychiatry. We expect to make these adjustments to the studies over the coming months. Given this pause, we have also decided to complete X-NOVA2 enrollment based on the approximately 360 patients enrolled to date, which provides for a well-powered study that will enable us to evaluate the efficacy and safety of azetukalner in MDD in the context of a Phase III program. So we now expect top line results for X-NOVA2 in the first quarter of 2027. So I'm now going to pass the call over to Chris, who can provide some additional perspective.

Okay. Thanks a lot. First, I want to echo Ian's statements about how excited we are to have achieved a major milestone of submitting the AZK NDA in focal onset seizures. Today is an important day as we move closer to bringing this meaningful medication to people living with epilepsy. Now moving to the psychiatry program. It's important to review the scientific hypothesis and support for this clinical development program. Our hypothesis for AZK in depression is based on scientific evidence that Kv7 modulation could offer a novel mechanism to help treat MDD and BPD where innovative treatments are urgently needed, especially those that may also impact anhedonia and that have the potential to offer differentiated tolerability profiles. Evidence includes our own Phase II proof-of-concept X-NOVA study, which showed promising signals of antidepressant effects for the Kv7 mechanism as well as genetic links in BPD with Kv7, including evidence of Kv7 downregulation. As you've heard from me before, the safety profile was benign in our Phase II proof-of-concept X-NOVA study, which had lower incidence of adverse events compared to what we saw in epilepsy. In the X-NOVA study, mild to moderate adverse events were low, and no serious adverse events were observed in the active treatment arms. As we have treated more depression patients in the Phase III studies, both the blinded randomized studies and in OLE, we have seen certain neuropsychiatric adverse events. Those adverse events were mostly mild or moderate in nature and not new safety signals. And based on what we know, the rate and severity of those events are consistent with the mechanism of action and the extensive data we have for approximately 1,500 patient years of exposure in epilepsy. Therefore, what we're seeing in psychiatry, which is consistent with epilepsy, is a small percentage of patients with confusion, aphasia, ataxia, and a very small number of patients we have seen an adverse event captured under the broad preferred term of psychosis. For example, in the epilepsy randomized studies, there was 1 patient in X-TOLE and 1 patient in X-TOLE2 with psychosis. It's important to note that the neuropsychiatric events seen in epilepsy or psychiatry are short in duration and reversible, without any long-term sequelae. Therefore, we're pausing recruitment to institute changes to improve tolerability within these patient populations, MDD and BPD. For example, based on work across the AZK program and consistent with other CNS drugs broadly, dose escalation can often have an impact on improving tolerability, and we are evaluating this as an option in our psychiatry program. We'll be in a position to share our plans in the coming months. Given this pause in enrolling new patients in psychiatry for the X-NOVA2 study, we've decided to close enrollment with the approximately 360 patients who have already been enrolled, and we now anticipate top line data readout in the first quarter of 2027. Completion of X-NOVA2 will give us a good look at the overall clinical benefit in an MDD patient population and a fuller understanding of the adverse event profile. Based on our initial target enrollment of 450 patients, X-NOVA2 was powered at 90% to show a 2-point difference from placebo on the primary endpoint of the HAM-D17. With current enrollment at approximately 360 as well as an analysis of the standard deviation, we believe the study is sufficiently powered at 90% to demonstrate a 2.5-point placebo-corrected difference, which is clinically meaningful. As a reminder, in the Phase II proof-of-concept X-NOVA study, we saw a 3.1 point separation from placebo with 21 milligrams using the HAM-D17 at week 6. Finally, before I conclude my remarks, I want to emphasize that this is a very exciting time for Xenon with the completion of the NDA for azetukalner. I want to congratulate the team for this accomplishment. With more than 1,500 patient years of safety and exposure data, we are confident that AZK's profile is consistent with other well-tolerated antiseizure medications and is indicative of a drug that is potent and active in the central nervous system. AZK has the potential to deliver much-needed innovation to treat focal seizures in epilepsy with strong efficacy, a differentiated mechanism to add on, once-daily dosing with no dose adjustments for other ASMs and a generally well-tolerated safety profile. Ongoing scientific exchange opportunities have affirmed our belief that, if approved, AZK will provide an important therapeutic option with appeal to epilepsy specialists, general neurologists and advanced practice providers alike. With that, I'll turn it back to Ian for closing remarks. Thanks.

Great. Thanks very much, Chris. We remain focused on our mission of delivering innovative medicines to provide a brighter future for people living with neurological and psychiatric disorders. We are making great progress towards the potential launch of AZK as an important new treatment option for patients living with focal seizures, and we're working to make the necessary adjustments in our psychiatry program that we believe will have a positive impact on the adverse event profile in the best interest of patients and the program. So with that, operator, we can now open the call up for questions.

[Operator Instructions] Your first question comes from the line of Paul Matteis with Stifel.

So I think when looking back at some of the data, right, I remember you guys seeing confusional AEs in Phase I healthy studies like we see with a lot of antiepileptic drugs. But can you just expound upon the psychiatric, or I guess, the psychosis AEs? And like how -- I guess, just in the grand scheme of things, like how problematic is this to the risk-benefit overall in MDD if the drug works, like do you actually think you have a registerable and commercially viable profile on this based on what you've seen today? And then maybe just like secondarily, is there any plan here to like engage the agency or any need to engage the agency? Or do you feel comfortable that just in terms of studying the drug, like the risk-benefit here is still overwhelmingly favorable and there's no regulatory issue?

Thanks, Paul. I'll take your second one and then maybe make a couple of comments, and then Chris can go into a little bit more detail on kind of the -- what's really a rare event of psychosis that, as we said in the prepared remarks, we've seen a couple of patients in the epilepsy program. Overall, this was -- just to be clear, and I think we were in the prepared remarks, this was a decision that we made as a company to pause the psychiatry program for new enrollment, and patients that are on study will continue on study, both in the double-blind randomized portions as well as in the open label. In terms of FDA, so we've given notice to FDA on what we're doing, and we've given notice, obviously, to our clinical sites. But we believe that we'll continue to move forward in terms of making the necessary adjustments, making those adjustments to the protocol, and moving forward. Overall, on the adverse event profile, as we said, the profile in epilepsy is obviously incredibly well understood with all of the exposures. And we see, as you know, dose-dependent adverse events, things like dizziness and somnolence. And then to a lesser extent, we see some of these events like confusion or aphasia or ataxia. And then as we said, in a very small number of patients, we've seen something kind of under this broad preferred term of psychosis. And as we mentioned, we saw 1 patient in X-TOLE and 1 patient in X-TOLE2, just to give you a little bit of that background, because I think it's important to note that what we're seeing in psychiatry is consistent with what we're seeing in epilepsy. Chris can give you a little bit more detail.

Yes. Thanks a lot, Ian. So just as a reminder, Paul, we -- when we relayed the X-TOLE data, the Phase IIb study, there was one patient within that study that had psychosis. And then there was a similar pattern in X-TOLE2, whether -- again, we relayed one patient in that study that had psychosis as well. So you can kind of do the numbers. It's hovering around 1% or under. The important point about these is that they're reversible, that they're relatively short-lived, and that none of these patients have had any long-term negative effects from these events. I think those are like the critical points. If you look at other drugs that are used for depression, they do cause serious adverse events in -- sometimes in keeping with this along the lines of psychosis, sometimes other issues. And so we don't think that this is something that prevents this drug moving forward. We view this pause as temporary. We're going to make some adjustments and then go forward.

And maybe, Paul, I'll just have -- Darren is here with us as well. Maybe Darren can just provide his comments on -- I mean, Chris talked about the overall profile and comfort moving forward. Obviously, we need to unblind our Phase III program and determine the efficacy in major depressive disorder [indiscernible] commercial profile as well.

Yes, Paul. Clearly, I think with -- we believe this mechanism is important in this MDD patient population. And any signs of efficacy provides a tremendous -- still a tremendous opportunity because of the unique mechanism and some of the characteristics that AZK will provide for patients. And I do think to Ian's point, when we unblind X-NOVA2, it will be important for us to think about moving forward. But we really remain very optimistic about the commercial opportunity.

And your next question comes from the line of Tessa Romero with JPMorgan.

So just to kind of follow up here, what specifically leads you to think that maybe a dose regimen change might help you alleviate this, though it seems like it's quite rare. And can you talk a little bit about any kind of dosing modifications that you might want to look at here? And final question from us is just to be clear, do you see any read-through to the known profile that you have here in epilepsy based on the over 1,500 patient years of safety and exposure data that you have?

Thanks, Tess. So maybe let's start with your epilepsy question because I think that's critically important. Today was a big step forward for us. This is the first new drug application that we filed as an organization and really starts the clock in getting us closer to being a fully integrated company and commercializing AZK in epilepsy. We have done an incredible amount of drug development on AZK. I think we understand the profile incredibly well, and we know it incredibly well in epilepsy. As we shared for the first time today, we have over 1,500 patient years of exposure in epilepsy. So we understand both in a double-blind randomization -- the randomized period in X-TOLE and X-TOLE2. And then as you know, we now have patients that have been on the drug for more than 5 years. So we have a really good understanding of the profile. And over the last number of months, we've had a chance of writing an NDA. So putting together an ISS really under -- putting together our arguments on benefit-risk, and we're highly confident, obviously, in the application, the approval and how important this medicine is going to be in treating patients with focal seizures. So absolutely nothing has changed there. As we move to psychiatry, today's pause is really about, can we make some adjustments to improve the tolerability profile. And as Chris mentioned in his remarks, this is very common in CNS drug development, and we gave an example of dose escalation to manage around tolerability. And we believe we can make some adjustments that has the potential to have that positive impact on the tolerability profile. So we felt it was the right time to make those adjustments. We're going to have X-NOVA2 at 20 milligrams. And those data are going to be available quicker than we had expected. So those are going to be available in Q1 of next year. That will give us a really good understanding of the benefit-risk, efficacy and safety. And then in X-NOVA3, we'll have the opportunity to make this adjustment where we can see is the adjustment, in dosing that we're still working through, but we have some really good ideas, and we gave the example of dose escalation, the -- what impact will that have, and then we can compare that to the overall profile without the changes in dosing. So I feel like we're in a good spot right now. We can make these adjustments, no read-through to epilepsy, and we're going to learn a lot about this drug in psychiatry over the coming quarters.

Maybe just I'll build on that. We've shared the Phase II and the Phase III epilepsy studies. There's a bunch of work that has to be done with the NDA-enabling studies to enable the submission, which we've done. And in the context of doing that, some of those studies, the details of which have not been shared publicly, have allowed us to use gradual increases in doses. So we do have some data on that front. And then also within the epilepsy program, as patients go from whatever they were randomized to, say, placebo or lower dose or higher dose, and then they go to the open-label study, you can get an idea of whether someone tolerates the drug better if they were started on a lower dose and then transition to a higher dose or not. So it's sort of triangulating all that data is leading us down a path where we think that dose escalation is, at least, one of the options we should seriously consider to improve tolerability.

And your next question comes from the line of Andrew Tsai with Jefferies.

This is Matt Barcus calling in for Andrew Tsai. I just wanted to ask, as you saw these safety signals emerge, did you notice that they came as like -- was it earlier on treatment? Or was it with longer drug exposure? And then with your NDA submission for epilepsy, do you see anything changing with your overall launch strategy there? Do you still -- do you think that with the new safety signals in psychiatry, any impact on general neurologist comfort levels with prescribing AZK?

Thanks, Matt. I'm happy to take your first question, and then I'll pass it to Darren because Darren has been ramping up aggressively and getting ready for launch. And so he can comment there. Overall, I would say -- and this is a general statement, and we're not going to get into kind of specifics here. But as a general statement, most of the adverse events that you see with azetukalner, which is consistent with other drugs that are very active in the CNS, generally show up early, and patients tolerate them over time. And so that's kind of a general rule that we see as well. Obviously, that's not for every single patient. But like I had mentioned earlier, I think we have a really good understanding of the profile of this medicine. But as a general rule of thumb to answer your question, patients that do show adverse events kind of across the board, generally, those are on either changes in dose or initiation of dose. But I think your second question is a really good one. I'll pass it to Darren just to talk about our launch plans.

Yes. With today's NDA submission, as we said, we're one step closer to becoming a fully integrated biopharma company, and nothing changes on our launch plans for AZK in focal onset seizure. Post the X-TOLE2 data, we've been able now to actually do market research, advisory boards, and we referenced most recently last week in Athens with a lot of physicians the profile of AZK with patients with focal, whether it's with epileptologists or general neurologists, they couldn't be more excited about the efficacy that we show, the safety profile, as we point out, generally well tolerated, and really no surprises for them as they treat these patients with focal seizures with other antiseizure medications. And obviously, we've talked a lot about and really rings through which will make us a differentiator in the market as our ease-of-use attributes. So I think that as we think about the read-through of this with epilepsy, I don't see any at all. And so we're super excited and continue to be emboldened every day as we prepare for the launch of AZK in focal seizures.

And then, Matt, just one quick thing. You're going back to your question about the early part. We do see rapidity of onset with this drug, whether you're talking about the depression study or you're talking about the focal onset seizure studies. From an efficacy standpoint, we see efficacy quickly. And then many of these adverse events, particularly the ones that we're talking about right now, tend to happen earlier rather than later. And it's a really important point. I'm glad that you asked it. And it's one of the reasons that ties into why we think that going up more gradually in the dose will improve tolerability in the context of the psychiatry program.

And your next question comes from the line of Brian Skorney with Baird.

Apologies. This is Luke on for Brian. So from your analysis of the epilepsy and neuropsych trials, are there underlying familial or other risk factors for psychosis that the patients may have demonstrated? Does it seem largely stochastic in nature? And with regard to monitoring, do the AEs seem correlated with other AEs such as confusion or others?