Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q1 2024 Earnings Call Transcript

Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q1 2024 Earnings Call Transcript May 9, 2024

Xenon Pharmaceuticals Inc. beats earnings expectations. Reported EPS is $-0.61771, expectations were $-0.69. Xenon Pharmaceuticals Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by. My name is Liz, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the First Quarter 2024 Xenon Pharmaceuticals Incorporated Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I’d now like to turn the call over to Chad Fugere, VP, Investor Relations. Please go ahead.

Chad Fugere: Thank you, Operator, and good afternoon. Thank you for joining us on our call and webcast to discuss Xenon’s first quarter 2024 financial and operating results. Joining me today are Ian Mortimer, Xenon’s President and Chief Executive Officer; Dr. Chris Kenney, Xenon’s Chief Medical Officer; Dr. Chris Von Seggern, Xenon’s Chief Commercial Officer; and Sherry Aulin, Xenon’s Chief Financial Officer. Ian will begin with a summary of our recent progress, Chris Kenney will provide an overview of our ongoing clinical stage program, including our plans and major depressive disorder or MDD, Chris Von Seggern will summarize key findings from recently completed market research, and Sherry Aulin will close with a summary of our financial results and anticipated milestone events before opening the call up to your questions.

Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the timing of and potential results from clinical trials, the potential efficacy, safety profile, future development plans and current and anticipated indications, addressable market, regulatory success and commercial potential of our and our partners’ product candidates, the efficacy of our clinical trial design, our ability to successfully develop and achieve milestones in our clinical development program, the timing and results of our interactions with regulators, our ability to successfully develop and obtain regulatory approvals, anticipated enrollment in our clinical trials and the timing thereof, and our expectation that we will have sufficient cash to fund operations into 2027.

Today’s press release summarizing Xenon’s first quarter 2024 financial results and the accompanying quarterly report on Form 10-Q will be made available under the Investor Section of our website at xenon-pharma.com and filed with the SEC and on SEDAR+. Now, I would like to turn the call over to Ian. Ian?

Ian Mortimer: Thank you, Chad, and good afternoon, everyone, and thanks for joining us on our call today. Before I provide an update on our pipeline, I’m excited to announce that we have received approvals from the United States Adopted Names, or USAN Council and the World Health Organization International Nonproprietary Names, or INN Expert Committee for the use of azetukalner as the nonproprietary or generic name for XEN1101. Notably, the kalner suffix refers to the molecule’s novel Kv7mechanism of action. If ultimately approved for use in patients, azetukalner would become the first medicine with a kalner suffix to be launched commercially. This is an important milestone for Xenon and represents another step forward as we advance azetukalner towards commercialization.

Moving now to our pipeline, this past quarter, we continue to make strong progress. Our team remains focused on three key areas. Number one, the continued execution of our azetukalner Phase 3 epilepsy program. Number two, the expansion of azetukalner beyond epilepsy with our MDD program. And three, the continued advancement of our discovery portfolio. First, in our epilepsy program, patient enrollment continues to progress in our X-TOLE2 and X-TOLE3 clinical trials in focal onset seizures, or FOS, and our X-ACKT clinical trial in primary generalized tonic-clonic seizures or PGTCS. We continue to anticipate the patient enrollment for the first of these trials, X-TOLE2, will complete in late 2024 to early 2025. Second, we made important advancements in our azetukalner MDD program over this past quarter, including reaching alignment with the FDA through end of Phase 2 interactions on key components of our Phase 3 program, which we look forward to initiating in the second half of this year.

We are also continuing to evaluate additional opportunities for azetukalner, focusing specifically on other potential neuropsychiatric indications where a scientific rationale exists, as well as a commercial fit with epilepsy and MDD. Later in the call, Chris Kenney will provide additional details on next steps in our MDD program. And third, we are continuing to progress our early stage discovery efforts. As a reminder, azetukalner is the most clinically validated and advanced Kv7 therapeutic in development across multiple indications and we see the mechanism as having broad potential applicability. The breadth and depth of potential therapeutic indications for the mechanism provides a compelling strategic rationale for the development of additional Kv7 product candidates that are chemically diverse from a azetukalner and could provide additional development opportunities.

For that reason, we are excited to continue to leverage our ion channel expertise with the goal of progressing multiple Kv7 molecules forward into clinical development in order to extend the reach of this promising and differentiated mechanism to more patients in need. Beyond our robust potassium channel development efforts, we continue to evaluate and advance development candidates targeting sodium channels, including Nav1.1 and Nav1.7, which may have utility in treating seizure disorders and pain, respectively. We expect multiple candidates to move through GLP toxicology studies and into clinical development over the next few years. During the first quarter, we also continued our outreach efforts to key opinion leaders and leading physicians.

At the recent annual meeting of the American Academy of Neurology or AAN, we hosted two oral presentations related to our X-TOLE epilepsy program and we engaged with neurologists and epileptologists who continue to express significant excitement about azetukalner’s unique and compelling profile in both epilepsy and MDD. We look forward to continuing to showcase azetukalner at upcoming medical conferences throughout the remainder of this year, and Chris will note some of the near-term conferences where Xenon will have a presence. So we’re off to a great start to the year and I’m proud of the continued progress across Xenon’s pipeline, including both clinical and preclinical efforts. So now, I’ll turn the call over to Chris Kenney, who will provide some additional details on the progress within our azetukalner clinical programs.

Chris, over to you.

Dr. Chris Kenney: Okay. Thanks a lot, Ian. Before summarizing our clinical development programs, I’d like to touch on our recent presence at AAN in March. Importantly, our abstracts focused on the azetukalner and epilepsy. We’re selected for two oral presentations and we’re grateful to our epilepsy opinion leaders, both Drs. Jackie French and Dr. Dr. Roger Porter, for presenting data on our behalf. In particular, we highlighted results from our ongoing X‑TOLE open-label extension study, which demonstrated impressive seizure freedom rates, including one in four patients who were on treatment for two years or more, achieving at least 12 months of consecutive seizure freedom. In addition, we have now generated more than 600 patient years of safety data, with some patients having been on a azetukalner for more than four years, supportive of a well-tolerated drug profile.

Turning to an update on our clinical development efforts within our Phase 3 epilepsy program, our three clinical trials, X-TOLE2 and X-TOLE3 in focal onset seizures and X-ACKT in primary generalized tonic-clonic seizures continue to progress. As Ian mentioned, we continue to anticipate completion of X-TOLE2 patient enrollment later this year or early 2025. As a reminder, we intend to submit an NDA upon the successful completion of X-TOLE2, our first Phase 3 clinical trial, along with the existing data package from our Phase 2b X-TOLE clinical trial and additional safety data from other clinical trials to meet regulatory requirements. Within our MDD program, we’ve made significant progress towards advancing our Phase 3 development plans based on the encouraging topline data generated from our Phase 2 proof-of-concept X-NOVA study.

Earlier this year, we submitted to the FDA our end-of-Phase 2 briefing package, which included our draft Phase 3 protocol synopses in preparation for an April in-person meeting. Prior to the meeting, we received preliminary written feedback from the FDA in response to our briefing package. The feedback was comprehensive and fully addressed our questions to FDA. As a result, the in-person portion was determined not to be necessary. We’re pleased to have been able to efficiently achieve alignment with FDA, enabling us to continue progressing our MDD program into late-stage development. Broadly, our development plans include three Phase 3 clinical trials in MDD, each with one active drug on them or 20 milligrams versus placebo, using the Hamilton Depression Rating Scale or HAM-D17, as the primary endpoint, assessing efficacy in depression and continuing to assess the efficacy of the azetukalner on improvements in anhedonia, as well as HAM-D17 at week one, with hopes to confirm the compelling data we generated around the rapidity of onset in the X-NOVA study.

Having now reached alignment with FDA on key design elements of the Phase 3 program, we’ve all selected our CRO and are working to finalize our protocols. Once the final protocols are filed, we intend to provide additional details around the design of our MDD studies and look forward to initiating the first of these Phase 3 clinical trials in the second half of this year. As Ian noted, we recognize the importance of continuing to educate the healthcare community about the potential benefits of the azetukalner. This week, the Xenon team attended the Annual Meeting of the American Psychiatric Association or APA in New York. We’re also pleased to announce that we will present the X-NOVA topline data at the Annual Meeting of the American Society of Clinical Psychopharmacology or ASCP, taking place in Miami from May 28th to 31st.

This will be the first time these promising results are presented at a major medical meeting and will represent yet another opportunity to raise awareness of the azetukalner’s differentiated profile and potential impact within the MDD population. I’ll now turn the call over to Chris Von Seggern, who will summarize findings from recent market research outlining the azetukalner value proposition. Chris?

Dr. Chris Von Seggern: Thanks, Chris. On last quarter’s call, we discussed our market research findings that have informed our clinical development and commercial plans in depression. To recap, we conducted primary research with 150 high-volume prescribing physicians who expressed interest in the azetukalner’s potential profile with ease-of-use properties, such as once-daily dosing without the need for titration, rapid onset of effects, novel mechanism of action, differentiated safety profile compared to standard-of-care agents like SSRIs and SNRIs, and ability to address anhedonia, a common comorbidity of depression. These findings suggest there could be a compelling product fit for azetukalner in the MDD treatment landscape, particularly for patients where the remaining unmet medical need resulting from inadequate response to initial therapies or those that experience common adverse events such as significant weight gain or sexual dysfunction.

This past quarter, we conducted further market research with practicing epileptologists and neurologists in the U.S. to better understand the unmet medical need associated with depression in epilepsy patients. As we have mentioned previously, we believe the data generated in major depressive disorder to-date adds to our already clearly differentiated profile in epilepsy. Our past research has indicated that depression is a common comorbidity in epilepsy and that the condition is often underappreciated and potentially undiagnosed, particularly in more difficult-to-treat patient populations. We also know that comorbid depression is associated with worse compliance and poorer outcomes for patients suffering from epilepsy. Our recent research supports a clear need for novel medicine that offers potent seizure reduction while potentially addressing mood-related conditions.

Past research has reinforced the value proposition of a azetukalner in FOS, with physicians indicating significant interest in a novel Kv7 mechanism that will require titration and demonstration of rapid efficacy at one week. A potential benefit in depression further enhances the profile of azetukalner in epilepsy and physicians cited lamotrigine is an analog that offers mood benefit in this patient population. Our recent research serves to strengthen our conviction around the highly differentiated profile that is emerging for a azetukalner in FOS and we believe that if approved, azetukalner will be a mainstay of treatment for patients with vocal onset seizures. I will now turn the call over to Sherry to summarize our financial results and upcoming milestones.

Sherry?

Sherry Aulin: Thanks, Chris. Beginning briefly with our financial results, Xenon is well-positioned with a strong balance sheet to support our plans for azetukalner and other earlier stage programs in our pipeline. As of March 31, 2024, cash and cash equivalents in marketable securities were $885.4 million, compared to $930.9 million as of December 31, 2023. Based on current operating plans, including the completion of the azetukalner Phase 3 epilepsy studies and fully supporting late-stage clinical development of azetukalner and MDD, we anticipate having sufficient cash to fund operations into 2027. I would refer you to our news release and 10-Q report for further details around our financial results. We remain focused on our goal to improve outcomes for patients in areas of high unmet medical need.

Looking ahead, we anticipate a number of important milestones and events — and goals. We will continue to advance our azetukalner Phase 3 epilepsy program, including our X-TOLE2 and X-TOLE3 clinical trials in FOS and our X-ACKT clinical trial in PGTCS, with patient enrollment in X-TOLE2 expected to complete in late 2024 to early 2025. We expect to initiate the first of three Phase 3 clinical trials in MDD in the second half of 2024. We will continue to explore other development opportunities for azetukalner and we will continue to advance our early stage preclinical ion channel programs with the goal of advancing multiple candidates into IND-enabling studies in 2024 and 2025. Our strong belief in a azetukalner’s potential to play a role in epilepsy, major depressive disorder and potentially other indications is centered around its unique mechanism of action and attractive product profile supported by the clinical data generated to-date.

We look forward to keeping you updated on our progress. I’ll now ask the Operator to open the line for any questions. Operator?

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Q&A Session

Operator: Thank you. [Operator Instructions] And your first question comes from the line of Paul Matteis from Stifel. Please go ahead.

Paul Matteis: Thank you so much. I have an X-TOLE question and just one quick Nav1.7 question. On X-TOLE2, Ian, I was wondering if you could just give a little bit more granularity on where you are with enrollment, how things are tracking relative to the last quarter and sort of your comfort that the guidance is intact. I know you reiterated it today. And then on 1.7, in doing a little bit more digging around the target, we came across an example of another compound in this space running to issues with syncope and hypotension. And there had been some question around the expression of this target in the autonomic nervous system. And so I was just kind of curious, people always talk about selectivity with 1.7, but how do you think about the on-target margin and sort of where are you with the compounds that you’re working on right now? Thank you.

Ian Mortimer: Great. Thanks, Paul. Yeah. So I can answer your question on X-TOLE2, and I can give some comments on 1.7, and then if anyone else wants to jump in as well on our side. So, yeah, as you mentioned on X-TOLE2, we reiterated guidance today. I think I’ll use some comments that we’ve used with investors and on previous calls as well. We’re targeting 360 subjects randomized in these Phase 3 studies, so a little bit larger than the Phase 2 program. We need to go to about 80 to 100 medical centers to get the studies complete. And so you can just kind of do the math. There’s a handful of patients on average you get per center and so we do naturally see some ups and downs and ebbs and flows of screening and enrollment.

We reiterated guidance today. It’s the best information we have based on where we are. So we’ve made good progress since our last update, and guidance remains the same that we expect to complete patient enrollment later this year, early next year. On 1.7, obviously in any target that we work on, whether it be potassium channels or sodium channels, whether it be 1.1 or 1.7, we’re always looking at potential on-target or off-target effects. We’re doing a lot of screening in panels and then, obviously, we’re looking at safety margins in non-GLP and then we will be as these move into GLP toxicology studies. So often when we think about some of the potential risks of these targets, they can be hitting other targets, or as you say, potentially even on-target.

I mean, we do know that the genetic population that are the homozygous loss of function, so you kind of think about that as very difficult to recapitulate in a human, but 100% receptor occupancy. These people, other than not feeling pain, regardless of noxious stimuli, other than that are normal. Sometimes there is a sense of smell based on some 1.7 expression in the olfactory, but for the most, other than that, we don’t see other concerns when they have — when — in that genetic population that is a complete loss of function. So I do think, overall, when we compare 1.7 to some of the sodium and potassium channels that we look at in the CNS, that we do have — we believe we’re going to have larger margins and we see that pre-clinically, but whether, as you mentioned, things like syncope, we would continue to look at those in all of our preclinical work, as well as in healthy volunteers.

But right now, we believe that these molecules should have really good therapeutic indices. Chris, do you have anything to add on either of those points?

Dr. Chris Kenney: I mean, there are literature mentions of hypotension and the Nav1.7 loss of function. So, I mean, fortunately, that’s pretty easy to keep track of in the clinic in terms of following vital signs, following blood pressure and seeing if it’s dropping as patients change position from lying to standing. So it’s something we’ll keep a close eye on, but it’s easy to follow.

Paul Matteis: All right. Thank you, guys.

Operator: Thank you. [Operator Instructions] And next question comes from the line of Brian Abrahams from RBC Capital Markets.

Leo Timashev: Hi, guys. This is Leo on for Brian and thanks for taking our question. I want to ask one maybe just on the nature of the discussions with the FDA you had. I mean, it sounded like those were very positive, but I’m curious if you can maybe talk about some of the key questions you had and the answers you received. In particular, curious if you’ve got any more clarity on whether you can leverage the safety database across the indications and maybe how you’re thinking about study enrollment split across U.S. versus ex-U.S. geographies? Thanks.

Ian Mortimer: Thanks, Leo. Yeah. I can start and Chris can jump in. Yeah. I think really good progress for the team. So I do want to, when you go from topline Phase 2 data late in Q4 and then have an end of Phase 2 meeting booked in April and not have to go ahead with the meeting. I mean, that’s actually incredible progress in that period of time. So that’s kudos to the internal team at Xenon moving that very quickly. So we had mentioned before we had a number of questions in front of the agencies in front of FDA in terms of the overall clinical program. As Chris mentioned, we share our Phase 3 protocol synopses with FDA and also, as you say, kind of leveraging the safety database. So I think the nice thing is we can leverage a huge amount of the work that we’ve done in epilepsy.

So that’s clinical pharmacology, CMC toxicology that we can leverage into the MDD program. In MDD, we are going to run, as we mentioned, three Phase 3 clinical trials. Your question did ask about jurisdiction. We haven’t nailed all of that down in terms of all of the clinical trial sites. So as we said, there’s kind of more details to come on the Phase 3 program. We’ll have more details there. And obviously, we’re going to have a lot of safety data from epilepsy that we can leverage, and then specifically, we’re going to have a lot of data in MDD, given that we’re going to be running the three Phase 3 clinical trials. Then there’s the X-NOVA data, and as you know, there’s an IST ongoing as well. So I think we’re going to have lots of information that’s available for FDA.

So I think we feel really comfortable there. As we mentioned, we got everything we needed in the written response and so the meeting wasn’t required. Chris, any other details you want to add?

Dr. Chris Kenney: Sure. Thanks, Ian. Yeah. I mean, in terms of the clarity that we were seeking with FDA, we wanted to make sure that the development program on a high level was acceptable, so the — particularly the number of studies that needed to be done. We’ve already done an amazing amount of or a large amount of work pre-clinically in terms of clinical pharmacology and so we just wanted to make sure — from the time of the last end of Phase 2 meeting a couple of years ago for epilepsy, make sure that all of that was still addressing everything that they wanted us to and so we confirmed that. And then getting into more detail, Ian’s already alluded to this, but you kind of get into the design elements, making sure that there’s agreement on the primary endpoint and the statistical hierarchy.

We’ve been very clear with what we think will be differentiating features for azetukalner and MDD, and we want to make sure that that’s included in the statistical hierarchy so we have a chance to actually promote on it if this drug is approved. Make sure the size of the study is appropriate, those sorts of things. As far as leveraging the safety database question? Absolutely, yes. We have — if you look at ICH guidelines in terms of the exposures that you need, we’re going to be well over that with this compound. So we’re going to definitely leverage the work done in epilepsy and then continue to address all the safety data that FDA has asked for us specifically in the major depressive disorder population. And then as far as the only thing I’ll say about geography is that, we don’t think that we can pull off three large studies in MDD solely in the U.S. and so we’re looking into all those options.

But to Ian’s point, we haven’t drilled it down completely just yet.

Operator: Thank you. And your next question comes from the line of Jason Gerberry from Bank of America. Please go ahead.

Jason Gerberry: Hey. Good evening. Thanks for taking my question. I’m just curious, in your FDA meeting on MDD, to the extent that you’re willing to talk about this, any feedback that gives you confidence that perhaps you could interrogate the impact on anhedonia in a unique way versus how studies have been done in the past or to potentially generate a unique and differentiated label claim around anhedonia? So that’s my question.

Ian Mortimer: Thanks, Jason. Chris, do you want to address? Maybe we should go through a little bit of the rationale and the mechanism and what we saw in X-NOVA, and obviously, we’ll be looking at that in Phase 3 as well.

Dr. Chris Kenney: Yeah. I mean, the anhedonia story is such an interesting one and such an unmet need, because not only is it an issue in terms of on the surface, people are unable to enjoy the things in life that they normally would have. Anhedonia is closely linked with suicidality as well and so this is a meaningful thing to go after. To answer your question more specifically about, leveraging anhedonia in a unique way in the label, I sort of already alluded to that. I guess I was a bit cryptic in the last answer. But just to be clear, we’re really interested in anhedonia. There was the earlier study with the Kv7 compound that showed improvements in anhedonia. Azetukalner has done the same. We believe that this may be a real signal that needs to be confirmed in Phase 3.

And so the manner in which we’re assessing anhedonia will be included within the statistical hierarchy. And if it works at the end of the day and we check a couple of other boxes, we’re hoping to be able to have that, in the label and to have the sales reps speaking with physicians about that as soon as the drug’s approved.

Ian Mortimer: Yeah. Thanks, Chris. And maybe, yeah, and maybe, Jason, we can even expand this a little bit. Chris Von Seggern can talk about when we’ve done, I know the market research that Chris was referring to in the prepared remarks was actually looking at the opportunity of addressing comorbid depression and epilepsy. But we had done previously a lot of work with psychiatrists as well. I think, the opportunity as a differentiating feature, as you mentioned, of azetukalner with anhedonia is important. Chris, maybe you want to provide your perspective there.

Dr. Chris Von Seggern: Yeah. Ian, I was going to jump in and say exactly that. When we’ve conducted market research in the past, thinking about the profile of azetukalner, physicians clearly latch on to a number of elements, the novel mechanism of action, the lack of sexual dysfunction or weight gain. But we hear very clearly the unmet medical need that exists with anhedonia and really the desperation for alternatives that offer a compelling efficacy profile in this component of the disease. And that’s driven because SSRIs and SNRIs don’t offer benefit along that dimension. So we view it as a really important component of the commercial differentiation for azetukalner and MDD, and we’re hopeful, as Chris and Ian have both mentioned, that this is something ultimately will be incorporated in the label as we move forward.

Jason Gerberry: Great. Thanks, guys.

Ian Mortimer: Thank you.

Operator: Thank you. And your next question comes from the line of Brian Skorney from Baird. Please go ahead.

Luke Hermann: Hi. This is Luke on for Brian. We were just wondering, were there any notable changes that FDA suggested for the Phase 3 MDD program, endpoints, enrollment criteria or any other aspects, or were they largely on board with your proposed design?

Ian Mortimer: Yeah. Thanks, Luke. Yeah. They were largely on board with our design. Actually, if you go back to our Q4 results script of a couple of months ago and the prepared remarks there, we kind of walked through at least the high level, how we were thinking about it. And Chris did it again today in terms of the design, the primary endpoint, other things that we would be looking at. So no, you’ll have seen in today’s remarks when you compare to our remarks last time, nothing’s changed there. So, as we mentioned, we have good alignment with the agency and no major adjustments needed as we move forward.

Luke Hermann: Okay. Thank you.

Operator: Thank you. And your next question comes from the line of Tess Romero from JPMorgan. Please go ahead.

Tess Romero: Hey. Good afternoon, Ian and team. Thanks for taking our questions. So first one is probably a fairly quick one. Just wanted a little bit of clarity on, is the ASCP presentation more of an encore of what we’ve already seen or are there new analyses that we should be preparing for? And then second one is, when you might think you will be able to come and more definitively outline where you might like to take XEN1101 and what types of internal work you are doing to decide on where the most derisked or compelling potential opportunities might be? Thanks. I” Tess, just for clarification, so there’s a second question on indication expansion outside of epilepsy and MDD?

Tess Romero: That’s right. Exactly.

Ian Mortimer: Okay. Great. Chris, do you want to answer the first question on the data that we’re going to be presenting from X-NOVA later this month? And then I’m happy to just talk about indication expansion.

Dr. Chris Kenney: Yeah. Hi, Tess. Yeah. So regarding ASCP, if you’re referring to the poster that was shared in the scientific exhibit at AES, it will be largely an encore. There will be one set of new analyses in there.

Ian Mortimer: Thanks, Chris. And then, Tess, in terms of indication expansion, I mean, we did, and we’ve talked about it in prior calls, we did a really significant lifecycle management project between our medical team and our commercial team last year, a lot of really great ideas on where we could potentially take both azetukalner, but also other Kv molecules, and we’ve made really good progress on some of those preclinical assets, as we’ve talked about. So you’ll hear from us later this year. So, obviously, we’re committed to the Phase 3 program in epilepsy and the Phase 3 program in major depressive disorder. We think there is an opportunity to expand additionally for azetukalner in other neuropsych areas. And so I’m sure you can kind of think about the ones that bubble up to the top of that list. But we’ve done a fair bit of work, we want to do a little bit more and then we’ll come back with a plan that’s more fully fleshed out.

Tess Romero: Thank you.

Operator: And your next question comes from the line of Paul Choi from Goldman Sachs.

Khalil Fenina: Hi, team. Thanks for taking our question. This is Khalil calling in for Paul. I guess a quick one for me, if you could just provide a little bit of color on your Phase 3 X-ACKT study in PGTC, sorry, excuse me, PGTCS. Has that study completed enrollment and do you have any color on the timing of when you expect that to read out? Thank you so much.

Ian Mortimer: Thanks, Khalil. Sherry, do you want to address milestones for the X-ACKT study?

Sherry Aulin: Yeah. Absolutely. So the X-ACKT study is ongoing. We started it last year and we’re actively recruiting patients in that study. As a reminder, we’re actually leveraging the sites from X-TOLE2 and XTOL-3 for the X-ACKT study. So investigators can actually, epileptologists or neurologists who have patients who have the primary diagnosis of PGTCS can be directed into the X-ACKT study. PGTCS, just to take a step back, is less prevalent than FOS. So the patient population overall is smaller and just has a different phenotype, right? Patients have more severe seizures, but generally a lower seizure burden. So in general, if you think about just fewer patients in this PGTCS population versus FOS, these studies do take a little bit longer to recruit and enroll and that’s very consistent with what we’ve seen historically with PGTCS studies from other study sponsors.

So, we’re continuing to make progress, again, leveraging the sites from X-TOLE2 and X-TOLE3. X-ACKT is continuing to actively recruit patients. We will absolutely give guidance on this study. We’re just not quite there yet today.

Dr. Chris Kenney: And Sherry, just…

Ian Mortimer: Okay.

Dr. Chris Kenney: … just to add, this was already stated, in the prepared remarks. But, yeah, I think, it’s really important to keep in mind that we’re positioning X-TOLE as the first pivotal trial in focal onset seizures and it’s really the completion of X-TOLE2 that will drive the initial NDA submission. So not to be dismissive of the PGTCS question, but I just want to be clear that we’re — where the priority is in the short-term. Thanks.

Sherry Aulin: Absolutely. Thanks, Chris.

Operator: And your next question comes from the line of Danielle Brill from Raymond James. Please go ahead.

Alex Nackenoff: Hey, guys. This is Alex on for Danielle. Just another question on MDD. Could you walk us through your rationale for running three distinct Phase 3 trials as opposed to, say, two potentially larger, more well-powered trials? And is it your intention that these trials will be philosophically identical in trial design? Thanks.

Ian Mortimer: Thanks, Alex. Chris, I can start. You can add in. So we haven’t given — Alex, we haven’t given sample size numbers for the Phase 3 program yet. That’s to come. But I think when you — when we do have those numbers out, you’ll see that we believe each of these Phase 3 studies is well-powered. So they’re going to be significantly larger than the X-NOVA in terms of number of patients per arm. The real reason to do three studies, I think we all know the subjectivity and variability that you can see in depression studies and so we believe this is the right thing to do from a risk mitigation point of view to run three studies. They’ll be — yes, they’ll be very similar, I think, as we get into the more granular details.

If there’s any real differences or nuances, we can communicate at that time. But, yeah, essentially, you can think about them as similar studies, three ongoing, first one to start later this year. And as Chris mentioned in his remarks, we’ve kind of mapped out already for you the primary endpoint, the trial design, and some of the other details, including sample size to come over the next number of months as we just finalize the protocol. Obviously, we need to submit it to the IND and then get ready to get sites initiated and patients enrolled. Chris, anything else to add in terms of some details there?

Dr. Chris Kenney: Sure. I mean, obviously, the question about how many studies we should do is something that we’ve intensely thought about. Over the past several months, really over the past few years, and it wasn’t like we were weighing two scenarios, like, oh, let’s, partially power three studies versus really power two studies. We were going into it with the mindset that every study we conduct will be meticulously conducted to the extent that we can control variables. And then it’s just a question of, okay, we’re going to do that how many times? And so, as Ian’s already said, I think when you see the size of these studies coming out, I think, you’re going to see that we’re not taking any shortcuts here. Thanks.

Alex Nackenoff: Great. Thanks so much.

Ian Mortimer: Thank you.

Operator: Thank you. And your next question comes from the line of Marc Goodman from Leerink.

Basma Radwan: Hi. Hi. Good afternoon. This is Basma for Marc. Can you remind us again of the food effect of XEN1101 and what kind of food is it? Like, fatty food or just any type of food? Also, we have another question. So, even though XEN1101 is being developed as monotherapy for MDD, there’s a high likelihood that it’s going to be used in combination with other antidepressants in later lines if the drug is successful in the indication. So, are you planning to run any DDI studies just to confirm the safety of the combination of XEN1101 with other antidepressants? Thank you. That’s it for us.

Ian Mortimer: Thank you. I can — I’ll do the first one, Chris, on maybe a little bit of that background on food effect and what we’re doing in all of the efficacy studies. And then, if you want to comment just on some comments on DDI and monotherapy versus adjunctive and MDD. So, we know from our Phase 1 work that XEN1101 — azetukalner has a marked food effect and so, all of our efficacy studies have been completed in the presence of food. And so, the drug is taken with the evening meal. That’s important because we usually see maximal concentration of the drug. We do have, obviously, patient-to-patient variability, but we see the maximal concentration of the drug during sleeping hours in the middle of the night. There isn’t — so the protocols talk about it being administered or taking the drug with the evening meal.

We don’t have to specify on what type of food the drug is taken with. So, hopefully, that addresses the food question. Chris, do you want to talk about our thinking around DDI and adjunctive?

Dr. Chris Kenney: Sure. So, in terms of DDIs, I mean, things have evolved over the past couple of decades or so. I think, from the standpoint where even if you didn’t predict a specific DDI, you would sometimes do a drug-drug interaction study with a drug and another drug, say, an anti-seizure medication or antidepressant that’s used quite a bit. The field has kind of gone away from that because we’ve gotten pretty good at predicting drug-drug interactions. And so, as it pertains specifically to antidepressants, we don’t foresee any major issues whatsoever in terms of drug-drug interactions with any of the antidepressants used. So, the current — so we don’t see any need to do those additional NDA-enabling studies and we haven’t had any regulatory feedback to suggest that there was disagreement.

Basma Radwan: Thank you. That’s very useful.

Ian Mortimer: Thanks. Thanks, Chris.

Operator: And your next question comes from a line of Andrew Tsai from Jefferies.

Andrew Tsai: Hey. Thanks. Good afternoon. Thanks for taking my question. Can you just remind us how long it took X-NOVA to start up and generate the topline data and whether you think the Phase 3s should also have a similar timing? Thank you.

Ian Mortimer: Thanks, Andrew. Sherry, do you want to go through the X-NOVA timing?

Sherry Aulin: Yeah. Absolutely. So, yeah, just as a reminder, X-NOVA took us about 18 months, I would say, from start to finish. As a reminder, we randomized just over 160 patients in that study. As Ian mentioned earlier, these Phase 3 trials are going to be powered well for Phase 3, so we’re going to see multiples of the number of patients that we saw per arm in a 1-to-1 randomization. So, think about a study size that’s 2x to 3x the size of X-NOVA. These studies do take, I would say, generally less time to enroll than epilepsy. There’s just more patients out there that meet the enrollment criteria. So, we do expect that the timing will be not too dissimilar to X-NOVA, so probably somewhere kind of in the two-year range, I would say, Andrew, if you think about start to finish for each of the Phase 3 studies.

We’re not going to start them all practically. These studies are typically staggered a little bit. So, as we’ve said, the first study will initiate later this year. Practically, though, there will be a little bit of a stagger a number of months to the second study and then, again, a number of months to the third study. Hopefully, that helps.

Andrew Tsai: Very helpful. Thank you.

Operator: And your next question comes from the line of Peyton Bohnsack from TD Cowen.

Peyton Bohnsack: Hi. Good afternoon and thank you for taking our questions. Just a quick one from us. Can you remind us on what you’re doing to control placebo rates in the MDD program in the Phase 2 trials and highlighting any changes that may have come from the learning from the X-NOVA trial and the interactions with the FDA? Thank you.

Ian Mortimer: Great. Thank you, Peyton. Chris, do you want to walk through both what we had done and maybe a focus more on what we expect to do to continue to keep an eye on placebo rate in the Phase 3 MDD program?

Dr. Chris Kenney: Yeah. Absolutely. So, I mean, X-NOVA, we’re quite pleased with the results that we saw with the X-NOVA study. And so, in terms of trying to control placebo effect to the extent that we could, we really focused on choosing a CRO that was highly experienced in major depressive disorder. We used the SAFER criteria to make sure that appropriate patients were getting into the study. So, that’s an external group that has no skin in the game in terms of whether a patient is enrolled or not. We also obviously chose really high quality sites with lots of experience in MDD, made sure that the training on the scales was done appropriately so. And then there’s a bunch of ways that you can keep an eye on data in real time to make sure that you’re not seeing anything unusual either in a patient or at a site level, or of course, at the study level.

Obviously, you keep an eye on the baseline demographics and make sure that you’re putting together a population that you expect. And then going forward, one thing that’s absolutely clear in these studies is that a handful of patients can really have an untoward effect on all of the results. And one of the things that we’ve seen as a common theme in successful MDD studies is a real focus on making sure that patients with mild, on the milder end of the spectrum, don’t get into the study. And so, as we share these design elements, you’ll see that we’re using a slightly higher cutoff on the EMD. That’s one thing. And then we’re doing some other things too that we’ll share publicly when the time is right. So, we’re really focused on trying to minimize the placebo effect to the extent that we can.

And the only other thing I will say is that compliance is a major issue and so that we’re in the psychiatric population. And so we’re going to be doing as much or more as we transition to Phase 3 to ensure compliance to the extent that you can.

Ian Mortimer: Thanks, Chris. And the only other one that I would add to Chris’ list that we’ve talked about publicly is in the Phase 2 program. We had two active arms versus placebo. And in Phase 3, as we’ve talked about, we’ll go to a 1-to-1 randomization. And so, the literature teaches us that that should have an impact on the placebo rate by lowering the placebo rate in terms of expectation bias.

Peyton Bohnsack: Great. Makes a lot of sense. Thanks for taking our questions.

Ian Mortimer: Thank you.

Operator: Your next question comes from a line of Tim Lugo from William Blair.

Tim Lugo: And for — again, for MDD, I know there’s been a lot of questions around MDD. But you mentioned the higher cutoff of the HAM-D to try and manage the placebo effect. But also, given the anhedonia effect and the differentiation versus the existing modalities, did the FDA kind of give you any guidance during the meeting on how heavily pre-trained the population should be or how many therapies maybe failed or cycled through prior to enrollment?

Ian Mortimer: Thanks, Tim. Chris?

Dr. Chris Kenney: Yeah. I mean, the feedback that they provided wasn’t so much in terms of medications failed or anything like that, the resistance of the population per se. They did provide some cutoff, excuse me, some feedback on cutoffs that can be used to optimize the patient population, and of course, we’re going to implement those recommendations. I promise you’ll hear more — you’ll hear the specifics on all of that before too long.

Tim Lugo: Okay. Thank you so much. And actually, one last question. So, when should we expect the Mount Sinai Phase 2 results? Is that something we’re still expecting this year?

Ian Mortimer: Yeah. We — just as a reminder, there is an IST ongoing for azetukalner in an MDD study being run by Mount Sinai and Baylor. This is looking at 20 milligrams of the drug versus placebo. The primary endpoint of that is a functional endpoint. It’s a functional MRI endpoint, but then there are secondary endpoints in clinical scales of depression and anhedonia. Tim, we don’t have specific guidance on that. We do know that there are some based on, obviously, we have a close relationship with the physicians running that study. We fully expect that the patient enrollment will complete this year and then it’ll be a conversation with the physicians in terms of where those data may be presented. So, has — we don’t — we just don’t have that information yet. As that information is available, then we’ll be able to communicate it to you.

Tim Lugo: All right. Thank you.

Ian Mortimer: Yeah.

Operator: Your next question comes from the line of Mohit Bansal from Wells Fargo. Please go ahead.

Mohit Bansal: Great. Thank you very much for taking my question. I just wanted to think about your thought process on the depression market in general. There’s a lot of development in mid- to late-stage. Recently, we have seen Kappa-opioid receptor. We have seen AMPA potentiator. Interesting data on depression scale, but there could be some effect on anhedonia and sidonia [ph] as well. So just wanted to see how do you compare and contrast with XEN1101, and these other mechanisms also look really safe. So, how do you think about the market evolving with these multiple drugs out there?

Ian Mortimer: Thanks, Mohit. Yeah. Excellent question that we think about a lot. Chris Von Seggern, do you want to walk through how we just think about the overall medical need and where azetukalner would fit in, especially considering that there are other drugs that are in development?

Dr. Chris Von Seggern: Yeah. Absolutely. I think, first and foremost, if you take a step back and you think about the major depressive market, we’re talking about an addressable population that is measured in the multi-multi-millions. As we all know, the main say of therapy in this space is SSRIs and SNRIs, of which there are many. Patients typically cycle through a couple of those options before they transition into what we consider the more of the branded market. We think there’s ample opportunity for a number of products to fill a void in the need for patients who don’t have an adequate response to an SSRI or SNRI, or importantly, have greater need as it pertains to an adverse event associated with either weight gain or sexual dysfunction.

So, we do appreciate that the competitive landscape in this space is quite a bit more than what we see in the focal onset seizure arena. But from a profile as it pertains to azetukalner, clinicians are really excited and have continued to express enthusiasm about that profile. Kv7 potentiation has a really strong link to the depressive state. The efficacy and safety profile that we’ve seen coming out of the X-NOVA study has really resonated with clinicians reaching for a novel mechanism of action. And then importantly, other attributes of rapidity of onset and the potential to address anhedonia are things that clinicians are really hungry for. So, the emergence of competition around us will further bolster some of those attributes. But there’s still plenty of opportunity for multiple successful products from a branded standpoint, given the residual unmet need that is so substantial in the major depressive market.

Mohit Bansal: Super helpful. Thank you.

Operator: Thank you. And your final question comes from the line of David Huang from Citigroup.

David Huang: Hi there. Thanks for taking my question and fitting me in. I just wanted to ask about your, I guess, latest thoughts on, given everything we know about 1101’s clinical profile, which now obviously includes a mood benefit, does that impact how you think about the peak sales opportunity for the product in epilepsy and MDD? And are there any, I guess, analogs out there historically in the market that we could think about as potential comps for 1101? I know products such as Vimpat have come up in discussions before, but just wanted to get a sense of what your current and latest thinking was on that?

Ian Mortimer: Thanks, David. Yeah. I’ll pass the call to Chris Von Seggern, because we’ve done a lot of work now on really understanding, having a mood benefit of azetukalner in epilepsy and we’ve done even more market research just over the last few months. So Chris talked about that a little bit in his prepared remarks, but I think he can go into a little bit more detail now in terms of that as a differentiator and as an opportunity from a commercial perspective.

Dr. Chris Von Seggern: Yeah. Happy too, Ian. So prior to the X-NOVA results, we felt very strongly, based on the research that had been conducted to date, that the azetukalner product profile, should the product be approved, is really a market-leading profile. So again, the attributes we’ve historically discussed, novel mechanisms, vaccine, rapidity of onset and ease-of-use attributes are really, really, really compelling when you think about the dozens of alternatives that exist in the focal onset seizure market. And you’re right, historically, we’ve talked about Vimpat, the most recent blockbuster in our category as being a product that we tend to think about as having, really occupying that first branded opportunity where we feel the azetukalner is positioned well, should it come to market.

I think what we’ve learned with the market — with the recent market research in the backbone of the X-NOVA data is that, it really changes the profile of this product and clinicians are even more enthusiastic when you think about the potential benefit in depression. And that’s driven by a couple of factors, the first of which is the mainstay of treatment in our category, levetiracetam, is known to exacerbate mood-related conditions. And we often see clinicians choosing their anti-seizure medication based on the existence or emergence of mood-related disorders. The other component is there’s great evidence in the literature that suggests that as patients progress through lines of therapy, the rate of depression increases and the outcomes for those patients who experience depression get worse or compliance and poorer seizure management and control.

That unmet medical need is amplified in these patients who have comorbid depression and when presented with a profile of a azetukalner that includes a potential benefit in the mood-related category, clinicians just express really significant enthusiasm. And when we think about the market, this sort of moves the thinking from a product like Vimpat, which was exceptionally successful in this market, to a product like Lamotrigine, which, from a category standpoint, is the second most utilized product in our category. And clinicians often point to Lamotrigine beyond seizure benefit derived from a perception of mood benefit in the epilepsy population. So from the recent research and our continued evolution of thinking here, the data emerging from X-NOVA really do change the nature of the opportunity for a azetukalner in the focal onset market.

Operator: Thank you. And that completes our question-and-answer session. I will now turn the call back over to Sherry Aulin for closing remarks.

Sherry Aulin: Thank you all very much for joining us on our Q1 2024 call today. Operator, you may now end the call.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.