Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q3 2022 Earnings Call Transcript

Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q3 2022 Earnings Call Transcript November 8, 2022

Xenon Pharmaceuticals Inc. misses on earnings expectations. Reported EPS is $-0.57 EPS, expectations were $-0.52.

Operator: Good day, and thank you for standing by. Welcome to the Q3 2022 Xenon Pharmaceuticals, Inc. Earnings Conference Call. After the speakers presentation there will be a question and answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Sherry Aulin, Chief Financial Officer. Please go ahead.

Sherry Aulin: Thank you, and good afternoon, everyone. Thank you for joining us on our call and webcast to discuss Xenon’s third quarter 2022 financial and operating results. Joining me are Ian Mortimer, Xenon’s President and Chief Executive Officer; Dr. Chris Kenney, Xenon’s Chief Medical Officer; and Dr. Chris Von Seggern, Xenon’s Chief Commercial Officer. Ian and I will open today’s call with — sorry, Ian will open today’s call with a summary of progress across our pipeline. Chris Kenney will provide additional detail around our recently launched XEN1101 Phase 3 program, and I will summarize this quarter’s financial results, progress within our partnered programs and our anticipated company milestone events. Chris Von Seggern will be available during our Q&A session to address questions around our commercialization strategies.

Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding our and our collaborators’ development plans, anticipated regulatory interactions and submissions anticipated results and related time lines; the potential efficacy, safety profile, addressable market and commercial potential of our proprietary and partnered product candidates; the efficacy of our trial designs and anticipated enrollment; the potential receipt of milestone payments and royalties from our collaborators; our expectation of having sufficient cash to fund operations into 2026 and the timing of potential release of future clinical data. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings.

Our results may differ materially from those projected on today’s call. We undertake no obligation to publicly update any forward-looking statements. Today’s press release summarizing Xenon’s third quarter 2022 financial results and the accompanying quarterly report on Form 10-Q will be made available under the Investors section of our website at www.xenon-pharma.com and filed with the SEC and on SEDAR. Now I would like to turn the call over to Ian.

Ian Mortimer: Thanks, Sherry, and good afternoon, everyone. Thanks for joining the call. I’m truly excited to open today’s call with confirmation that we have launched our XEN1101 Phase 3 program, thereby continuing to build upon our leadership position in the KB field and driving our mission to provide new therapies for patients with epilepsy. The Xenon team is focused on executing on our ambitious development plans for XEN1101, including our 2 Phase 3 clinical trials in focal onset seizures called X-TOLE2 and X-TOLE3 and a Phase 3 clinical trial in primary generalized tonic-clonic seizures called Exact. These comprehensive Phase 3 plans build upon the foundation of the compelling data generated with XEN1101 to date, including statistically significant reduction in every seizure reduction endpoint at all doses tested in and even greater seizure reduction data in the open-label extension with greater periods of seizure freedom.

The adverse event profile of XEN1101 is consistent with other ASMs that are active in the CNS. These positive data, along with feedback from KOLs and primary research findings support our firm belief that XEN1101 could play a significant role in treating epilepsy. In addition, XEN1101’s differentiated profile includes a number of desirable attributes such as an only in-class potassium channel mechanism and a dosing regimen of once a day with no titration while providing meaningful and statistically significant seizure reduction after only one week of dosing. Ultimately, our goal is to deliver a differentiated therapeutic option for the unmet needs within a broad population of epilepsy patients, and our progress over the past quarter has been significant.

Turning now to our ongoing Phase 2 X-NOVA clinical trial. This study is examining XEN1101 in major depressive disorder, or MDD. In parallel with an investigator-led Phase 2 MDD study being conducted by our collaborators at Mount Sinai. Our decision to examine XEN1101 in MDD was based in part on promising clinical results with Ezogabinedose 300 milligrams TID as a treatment for MDD and antodonia as well as encouraging preclinical data with both Ezogabineand XEN1101. It is also important to note that depression is the most common comorbidity within the epilepsy patient population. We have further refined our guidance with the expectation that we will receive top line results from the X-NOVA study in the third quarter of 2023 as we’ve made good progress on site initiation and patient enrollment to date.

In addition to the clinical development activities supporting our robust XEN1101 program, we continue to advance our ongoing XEN496 Phase 3 EPIC pediatric clinical trial evaluating XEN496 in patients with KCNQ2 developmental and epileptic encephalopathy, or KCNQ2-DEE. These are patients who are 1 month to less than 6 years old in the study. As with other clinical trials examining orphan or ultra-rare indications, taking a challenge to identify, screen and enroll eligible patients. And while there is significant interest in parents, caregivers and physicians, to provide a precision medicine to this important unmet medical need. This is also a young and fragile patient population, which sometimes makes travel to clinical sites difficult. Taking into account these challenges around FX enrollment rate to date, we’ve adjusted our expectations around the completion date of the study to 2024.

Based on what we know about the KV7 mechanism of action and further supported by physician case studies with ezogabine, we believe XEN496 has the potential to positively impact the lives of these young patients. Before turning the call over to Chris, I want to reiterate the immense amount of progress made across our pipeline in 2022, and I’m looking forward to additional clinical inflection points in 2023. I’ll now ask Chris to provide some more detailed comments on our XEN1101 program and multiple Phase 3 clinical trials. Chris?

Chris Kenney: Thanks a lot, Ian. Let me begin by thanking the Xenon team for all the hard work, which led to the successful initiation of our Phase 3 X-TOLE2 clinical trial last week, designed similarly to support the Phase 2b X-TOLE clinical trial results, X-TOLE2 will run in parallel with an identical study called X-TOLE3. Each study will enroll approximately 360 patients who will be randomized 1:1:1 for once daily dosing of either 15 or 25 milligrams of XEN1101 or placebo. Our dose selection for the Phase 3 studies was informed by the safety and efficacy data in X-TOLE as well as by PK/PD modeling, which we completed earlier this year. The primary efficacy endpoint is the median percent change or MPC and monthly seizure frequency from an 8-week baseline through the 12-week double-blind period with XEN1101 compared to placebo, using X-TOLE data to support our model with greater than 90% power for the primary endpoint at both doses.

Based on the strong Phase 2b efficacy data as reviewed by Ian, we’re including the secondary endpoint of week 1 median percent change in seizure frequency within the statistical hierarchy of the Phase 3 focal-onset seizure trials to build upon from the differentiated profile of XEN1101. With our XEN1101 Phase 3 program now underway, we’re also continuing to execute upon our plans to pursue an additional epilepsy indication. We expect our Phase 3 Exact clinical trial to enroll approximately 160 subjects with primary generalized tonic-clonic seizures or PGTCS. These subjects will be randomized 1:1 for once daily dosing of either 25 milligrams of XEN1101 or placebo. The primary efficacy endpoint is the NPC and monthly seizure frequency from an 8-week baseline through the 12-week double-blind period of the XEN1101 compared to placebo.

We’re excited by the opportunity to study XEN1101 in primary generalized tonic-clonic seizures in parallel with our trials focused on patients with focal onset seizures. Of note, XEN1101 shows antiseizure activity in both Maximum Electroshock Seizure, or MES, and pentylenetetrazole, preclinical models, both of which are known to predict efficacy for primary generalized seizures. Furthermore, other anti-seizure medications like levetiracetam, valproic acid and lamotrigine suppressed photosensitivity in generalized epilepsy patients as did an earlier potassium channel modulator thereby potentially predicting efficacy in PGTCS with XEN1101. Additionally, in our Phase 2b X-TOLE clinical trial XEN1101 demonstrated broad impact across all focal seizure subtypes, including focal seizures that progress to generalized seizures.

On the regulatory front, following the release of our compelling Phase 2b data, from our XEN1101 X-TOLE study, we aligned with the FDA during an end of Phase 2 meeting on key elements of our Phase 3 program to support a new drug application or NDA. To briefly summarize, we plan to submit an NDA upon successful completion of X-TOLE2, our first XEN1101 Phase 3 clinical trial along with the existing data package from the Phase 2b X-TOLE clinical trial and additional safety data from other clinical trials in order to meet regulatory requirements. We’re also aligned with FDA on key elements of a single Phase 3 clinical trial to pursue an additional indication of primary generalized tonic-clonic seizures. The ongoing X-TOLE open-label extension, or OLE, continues to generate important long-term safety data for XEN1101 in focal onset seizures.

At the request of study investigators and based on the potential to continue to provide significant benefit to patients, we’re extending the original X-TOLE OLE from 3 years to 5 years. We expect to present additional OLE data at the American Epilepsy Society Meeting in December, and we look forward to connecting with all of you there. Our team is driven by our belief that there is a significant medical need for new therapeutics to treat epilepsy, and XEN1101 has the potential to significantly improve the lives of these patients. I’d now like to turn the call over to Sherry, who will summarize our financial position, partnered programs and upcoming milestones. Sherry?

Sherry Aulin: Thanks, Chris. Before I make a few comments on our third quarter financials, I’d like to turn briefly to our partnered program with Neurocrine. Currently, there are 2 separate Phase 2 clinical trials underway. One study is evaluating NBI-921352 in adult patients with focal onset seizures with data expected in 2023 and another study is examining its use in pediatric patients with SCN8A-related epilepsy. We’re excited about the progress being made by Neurocrine, and we look forward to the clinical data expected next year. I’ll touch on some highlights from this quarter’s financial statements and would refer you to our news release and 10-Q report for further details. Cash and cash equivalents and marketable securities were $752.2 million as of September 30, 2022, compared to $551.8 million as of December 31, 2021.

The increase was primarily the result of the completion of our public offering in June 2022. I’m proud of our prudent financial management and strong cash position, which allows us to fully support our XEN1101 Phase 3 program development as well as the rest of our planned clinical, preclinical and discovery efforts with sufficient cash to fund operations into 2026. Looking ahead, 2023 represents another key year for clinical inflection points within our pipeline, including expected data readouts from X-NOVA and our partner program with Neurocrine in adult focal seizures. Before concluding our prepared remarks, I’ll briefly summarize some important milestone events ahead. With X-TOLE2, our first Phase 3 clinical trial in FOS now underway, we expect to initiate X-TOLE3 and the exact clinical trial in PGTCS in the near term.

Our X-NOVA trial in MDD is ongoing, and we expect to have top line results in the third quarter of 2023, while in parallel, we are supporting the Mount Sinai IST and MDD. We continue to advance our EPIC Phase 3 clinical trial in pediatric patients with KCNQ2-DEE with study completion anticipated in 2024. Throughout this year, the momentum has continued to build across the knowns business. Our team is highly engaged and excited to be part of Xenon’s mission to deliver new neurology therapeutics to patients in need. For those of you attending AES this year, we look forward to connecting with you in Nashville. And on behalf of my colleagues on the call, we look forward to providing progress updates in the quarters ahead. I’ll now ask the operator to open the line for any questions.

Q&A Session

Operator: Our first call question comes from Paul Matteis at Stifel. Your line is open.

Paul Matteis: I wanted to ask you an epilepsy commercial demographic question in light of the IRA and kind of confusing sort of fallout of drug pricing legislation specifically, what do we know about epilepsy drugs and the proportion of sales that come in the Medicare population? There’s some data out there that we’ve come across suggesting that patients who are enrolled, I guess, enrolled in Medicare have a higher rate of epilepsy than the general population. And I was just sort of curious when you think commercially where a drug like XEN1101, if it’s successful, could fall on the radar in terms of IRE exposure.

Ian Mortimer: Thanks, Paul. Chris Von Seggern on the call, so he can address this. And I would say it’s early days. We have done some work and can provide our perspective right now, and we can use them as a little bit of a proxy as well. But Chris, you can provide the details.

Chris Von Seggern: Yes, absolutely. And it’s a great question and something that’s been on our mind since the legislation was passed. So as Ian mentioned, it still is very early days here, and there’s a lot that will unfold in the coming years. But to directly answer your question, what we know today is approximately a one-third of the epilepsy population is covered by Medicare. And depending on what your product profile looks like, it could either be slightly enriched or slightly below that number, depending on the attributes. And we expect that 1101’s profile will be right in line, if not, hopefully, better in the elderly population. So we could be slightly enriched from that standpoint. When you think about that, that then becomes a real proportion of sales as you grow the overall sales for the product over the lifeline of the product.

And therefore, you could imagine at some point in time in the product’s life cycle, we could fall into what I would consider as an at-risk bucket for price negotiation. But if that occurs, two things that has to be considered. The first is we’ve done exceptionally well from a sales standpoint over the lifetime of the product. In that — and the risk factor really comes in late in the product’s life cycle. We don’t believe we’re going to be a product that is going to have $1 billion exposure early in the product life cycle. And certainly, from a Medicare standpoint, specifically. So our view is that as the product sales grow, we’re likely to be in that range of competitive products, but not early, very, very late in the product life cycle if we’re quite successful.

Operator: The next question comes from Andrew Tsai with Jefferies. Your line is open.

Andrew Tsai: Congrats on the initiation of the Phase 3 program. So maybe my question this time will be about the competitive landscape I would love to get your latest views. Another compound started Phase 1 recently. Would be curious to see why you think you are differentiated from that compound? And well, in other words, how would you describe what the hurdle is for competing KV7 in focal epilepsy. And then second to that is, as you think about enrollment for X-TOLE2, 3, do you foresee any impacts whatsoever to enrollment? Or is it reasonable to expect some data in 2024, for instance?

Ian Mortimer: I’ll start and then I know both Chris Kenney and Chris Von Seggern and can jump in on some of their perspective as well. So I think initially talking about the competitive landscape, we focus on a couple of different things. One, I think we need to focus on molecules that are at a certain advanced stage that are going through kind of mid- to late-stage clinical development. And then obviously, on the market, the two programs, we know extremely well. It’s our program in the Neurocrine program. that I think are kind of in that mid and moving to late-stage clinical development. You asked specifically around KV, I think the XEN1101 data, which is the only program in development right now that has clinical efficacy data has derisked the overall field, and we’re not surprised that competition is going to increase.

But I think we’re really comfortable just on where we are in the development of 1101 and the profile that’s starting to emerge for that product as well, not just the compelling efficacy and you and others know about some of the subgroup analysis we’ve done but also the other attributes of the drug in terms of no titration, the week 1 efficacy, I think there’s some really desirable attributes specifically of XEN1101 that we’ve seen in the clinic that we haven’t seen being matched with another molecule. So as we think about the competitive space, often we’re actually thinking about where this would fit in commercially. And maybe Chris can comment on the commercial market and the branded space because I think that’s really how we should be thinking about where 1101 was set.

Chris Von Seggern: Absolutely. Thanks, Ian. So as we’ve said in the past, and we still strongly believe supported by our market research, the attributes of 1101 are quite compelling and likely will result as this being a product that is very meaningfully used in the marketplace. We’ve talked about this before, but we often see 1 or 2 generic therapies used in advance of transitioning to a branded market. And we think about 1101 as being the product of choice in that future branded opportunity now that Vimpat or lacosamide has lost exclusivity, really creating an opportunity for our product to fit into that environment. The attributes associated with 1101 are both interesting from a mechanistic standpoint. Obviously, KV7 adds a new mechanism into the armamentarium for this disease, but one can’t overlook the unique components of 1101 that really separate it from all available therapies today.

when we think about a rapid onset of efficacy, the lack of requirement for titration, QD dosing, all of these things are potentially unique to 1101 and while other KV7 may emerge, they’ll have to compete with what is, from our perspective, a very, very compelling clinical profile that’s likely to be used broadly once introduced into the marketplace.

Ian Mortimer: Thanks, Chris. And then, Andrew, you had just a question on X-TOLE 2 and X-TOLE 3. So we haven’t, as you know, given formal guidance on when we may expect data. I think the best — we’re comfortable talking about kind of the best information we have today. And we really used the X-TOLE study as a proxy. The X-TOLE study took about 2.5 years to complete. Obviously, differences, the Phase 3 program are — the studies are a little bit larger, but within the same ballpark of the X-TOLE study. X-TOLE was initiated or started before the pandemic and then continue through the pandemic. And we definitely saw an impact in those early days of COVID in the spring and summer of 2020 that had an impact on screening new patients and recruitment.

And also, we obviously — just everything we’ve just talked about and Chris has mentioned, is just the profile of 1101. I think we have a really compelling pitch to investigators and for them to have a conversation with their patients on participating in the Phase 3 program.

Chris Kenney: Ian, can I just build on that? This is the other Chris?

Ian Mortimer: Yes.

Chris Kenney: Just thinking about getting to an NDA, I mean there’s a few things that you need. You need 1,500 unique exposures and you need several hundred exposures for 6 months and at least 100 exposures for a year. You need at least a couple of studies to confirm efficacy. And so when you think about where we are right now, past Phase I, past dose finding, past end of Phase 2, one study that we’re positioning is pivotal. We’re really one study away from being able to have in addition to complementary safety data and NDA. So I think we’re pretty close.

Operator: Our next question comes from Tessa Romero with JP Morgan. Tessa, your line is open.

Tessa Romero: So just a few at questions from us as we think about x Nova here. So how are the 2 doses of 10 mg and 20 mg QD selected versus, say, 15 mg or 25 mg QD? And we also know this is a monotherapy study. So can you clarify what is the washout period for any prior antidepressant net that the patient may have been taking? And any other clarity on why the severity score of greater than or equal to 20 was chosen for the shafts in the HAMD-17?

Ian Mortimer: Yes, I’ll — Chris, why don’t — I can start a little bit just on some of the background on how we got to the dose selection because I think a little bit of the history is important there. And then I don’t know if you’ve got kind of at your fingertips, the answer on washout period. If not, we can always follow back up with tests and then we should just talk about the patient, the moderate to severe patient population that we’re enrolling. So as in terms of our MDD study, you’re right. This is a 3-arm study, 2 active doses and placebo, 50 subjects per arm, 10 and 20 milligrams that were chosen. We have started thinking about MDD even before the X-TOLE data readout a year ago, given a lot of the background that we’ve stated multiple times, including in the prepared remarks today.

And so we have designed that protocol. And then when we unblinded and the initial draft of the protocol was to look at the 20-milligram dose. We had drug supply for that dose. We knew that it was the mid dose that was active in transcranial magnetic stimulation, and we were ready to go. And then when we unblinded data, what was interesting to us is that we also saw statistically significant seizure reduction data at 10 milligrams. And the 10-milligram dose looks very much like placebo in terms of its AE profile. And so we modified and amended the protocol to include that 10-milligram arm. So I think it’s going to be really interesting to see both a lower dose, 10 milligrams and a higher dose to 20 milligrams given the AE profile and the activity we’re seeing at those 2 doses in X-TOLE and the epilepsy study.

I would also add the Ezogabine data that, obviously, they have data that drug generated data both in epilepsy and in depression as well. In the depression work was done at their mid dose of 900 milligrams. And so we can do some of our own modeling in terms of the dry exposure and the activity that we may see at the doses that I’ve talked about for 1101 in major depressive disorder. Chris, I’ll pass it to you if you want to say anything else on the dosing and then the washout period and the scores, the baseline scores coming in at the patients.

Chris Kenney: So the easy question is about the , which is that they have to be washed out for at least a couple of weeks for the drugs with a longer pharmacodynamic or pharmacokinetic elimination half-life. It’s 4 weeks for fluoxetine or 5 half lives. As far as the dose goes, I mean, one of the things I can make an argument that this drug should be better tolerated in patients in this population because they’re not taking concomitant medications as is the case in the epilepsy, or you could say, well, maybe this population of patients is more prone to adverse events in epilepsy. So you could kind of argue both ways in terms of tolerability. And ultimately, we just need to complete the study unblind the data and see. So I think that, that played into a little bit of the dose selection as well.

Ian Mortimer: And then, Chris, the last question was just on the baseline greater than 20 on HAMD and .

Chris Kenney: Right. So that was through conversations with key opinion leaders to basically define a population of patients that had moderate to severe depression. The — I will let you know that we are enriching for anhedonia in addition to depression. However, by virtue of the fact that you create an MDD population, there’s already quite a bit of anhedonia as it is. And so that additional cut-off of making sure that there’s a sufficient amount of anhedonia doesn’t actually substantially change the population that much. It’s largely enriched based upon the impression because there’s already a fair amount of anhedonia in those patients.

Operator: So the next question comes from Jason Gerberry with Bank of America. Your line is open.

Unidentified Analyst: This is Dina on for Jason. Congrats on the progress this quarter. Our question is just on sort of the emerging pipeline of potassium channel activators. We get your view on the GABA receptor cell activity and tolerability index data from Biohaven’s Kv7 activator and potential benefits, and maybe if we could get your view on the competitive dynamics regarding product profile differentiation such as potency?

Ian Mortimer: Yes, I’m happy to answer those questions. And I would say some of our answers we had talked about previously, just about some of the unique attributes and differentiating features of 1101, but you had a very — some very specific questions on — one is on potency. So 1101, if we go back to the first-generation molecule Ezogabine1101 is about 15 times to 20 times more potent on target. So on KV7 too and CNS versus Ezogabine and it’s more potent than the Biohaven molecule. So Biohaven molecule from a potency point of view on target is somewhere between 1101 and Ezogabine. So the potency advantage, and again, I think that can be addressed by dosing, but potency, the most potent molecule in clinical development in terms of the KV mechanism is 1101.

In terms of GABA, so some of — we don’t believe that these drugs have their effect through a GABA mechanism, either efficacy or safety. And on the — any data that’s being generated, we don’t believe 1101 has any activity on GABA a at 10 micromolar, which some others have shown some of that data. And just to remind you, 10 micromolar is more than 50 time the plasma concentration of 1101 in our human clinical trials. So it’s not — even that assay is not done at a relevant concentration. So I think we’re very comfortable that these are KV drugs, and that’s the mechanism that we’re seeing the efficacy. And we’re also seeing the side effects, these are on target side effects of things like dizziness. We sometimes had questions around somnolence.

Actually, if you look at the somnolence rates in X-TOLE, they’re very consistent with other very successful anti-seizure medicines, drugs like Capra or Lamictal. So again, we believe that we have a very active drug in the CNS that’s driving both the efficacy and also the AE profile of the drug.

Operator: The next question comes from Brian Abrahams with RBC Capital Markets. Your line is open.

Brian Abrahams: So on MDD, I know 1101 relative to Ezogabine is more potent in terms of target modulation as better durability and better safety, which has led to comparable or better effects in epilepsy. But the complete mechanism by which KV7 channels regulate depression, I think, is not completely understood. So I guess I’m curious, are there any differences with regards to receptor subtype selectivity or biodistribution or binding properties that we should be thinking about that could impact how 1101 behaves in depression relative to Ezogabine. And are there any preclinical depression models, for instance, that you’ve looked at that might just have shown either comparable or even better activity for 1101?

Ian Mortimer: I think it’s a really, really interesting question. Maybe I’ll just talk a little bit about the profile. And then Chris Kenney — Chris just presented actually at a conference, at a neuropsyche conference that was talking about mechanism and the opportunity for 1101 in depression. So Chris, I think you can probably — just because you’ve just given a great talk on it around some of the mechanism as it relates to both reward circuitry and the upregulation in these populations, what we’ve seen preclinically. And then the most recent publication, which I think is fascinating if people haven’t read on ketamine and the potential link to KV there as well. But in terms of — I think, Brian, you’re asking the question the right way.

We’ve seen really nice data with Ezogabine in both epilepsy and depression, and now we have the 1101 epilepsy data. So the missing box that we’re checking is the depression data for 1101. And so how much are these similar or different. Our feeling is that they’re similar. Ezogabine in 1101 do bind to the same binding site in the channel. We — and we’re not concerned about certain sub selectivity in terms of isoforms there. And part of that is just the way these channels form in the brain as well. So I think we’re really comfortable that we have a good shot given everything we know with Ezogabine. In terms of some of the preclinical data, Ezogabine was run in a chronic social defeat stress model, which I think really drove the potential mechanism and ideas around KV modulation in the brain.

We haven’t run that specific model with 1101, but we have looked at other models of reward and depression preclinically and 1101 performed very well in those models. I’ll pass it to Chris just to give a little bit more on the mechanism and some of the stuff that we’re excited about.

Chris Kenney: Yes. The only thing I’ll add about the mechanism, I think you’re asking a very difficult question because remember, the 7.2 and 7.3 proteins are combining together to form these tetramers, right? And that’s contributing to the current. And so I think it’s very hard to tease that out. I’m not so sure anyone will ever be able to answer the question you just asked on a mechanistic level. What’s reassuring to me as a clinician is that you have one drug that worked in focal onset seizures that’s Ezogabine. And then our data, I think you said something along the lines of or better. I mean, I would argue that it’s definitely stronger than the Ezogabine data. I know that it’s difficult to compare one study to another, but we do it all the time.

And when I do that, the efficacy that we saw for those two highest doses was beyond what we expected based upon the Ezogabine data. So obviously, we don’t know if that’s going to translate into MDD. It’s just very reassuring. The last thing, which is really kind of indirect to your question that Ian was alluding to was the story the scientific story around targeting KV7 in depression just got more interesting this year as this study was being conducted. And specifically, what what’s been published is that it appears as though ketamine exerts at least some of its antidepressant effect through KV7 through that mechanism. And so the fact that we could be tapping into, as you know, ketamine is a pretty potent antidepressant. The fact that we’re tapping into that the same mechanism without having any of the associated side effects, at least from the studies we’ve looked at so far is pretty compelling.

So it’s the mechanistic story is still unfolding, but seems to be getting more interesting as time goes by.

Operator: The next question comes from Marc Goodman with SVB Securities. Your line is open.

Madhumita Yennawar: This is Madhu on for Mac. One question today is, could you just talk a little bit about your thoughts on the overall focal onset market given the latest trends that you’re following and the Vimpat loss of exclusivity. Any new insights or patterns you’re seeing there would be helpful?

Ian Mortimer: Thanks. Chris, over to you.

Chris Von Seggern: Yes, happy to tackle this one. So obviously, the biggest event in the last 6 months in our marketplace is the loss of exclusivity of Vimpat and the dynamics that are unfolding as we speak with moving that very substantial commercial product to a predominantly generic environment. What we’ve seen is that so far, our lacosamide use has stayed reasonably steady, although it’s still early days. But we expect to see increased use of generic lacosamide given the value proposition that, that product offers. And we would expect that to rises to likely the third most utilized individual product in the category based on its efficacy and safety profile. And that certainly will unfold over the coming year. Correspondingly, we’ve seen increased use of , which is not unexpected given the fact that UCB is a powerhouse in the commercial environment in this arena and a lot of the resources from our understanding have shifted to that product to continue to support its growth.

X-TOLE OLE made continuing to track. Their early sales trajectory are indicative of what is a reasonably strong launch, and we think that’s good for the market overall as other products continue to replenish the branded sales potential within the marketplace. There is still plenty of opportunity for both novel mechanisms and in the future, new branded agents to replenish the sales potential that’s been lost by Vimpat, at least from what we’ve seen from our research, and what we’re hearing from KOLs in the space. So there isn’t that much else happening in the space, and we’re likely the next major mover in the space. And we hear from all the competitive research that we do, that 1101 is high on everyone’s radar in terms of both the mechanistic differentiation as well as the late.

It’s really the only late-stage therapeutic offering that could be added into the — our mentarium in the coming years.

Operator: The next question comes from Laura Chico with Wedbush. Your line is open.

Laura Chico: One thing we’ve seen from a few other CNS clinical stage players has been a bit of constraint on recruiting for various studies as CRO staffing has gotten tighter. You were able to move X-TOLE through a quite turbulent time with COVID. So I’m wondering if you could comment on any steps you might be taking for X-TOLE 2 and 3 to facilitate recruitment, and obviously, you’re just kicking things off, but any potential headwinds you might see on the horizon that you’re trying to avoid as you’re getting started?

Ian Mortimer: Thanks, Laura. I appreciate it. I’ll make a couple of comments, and then Chris Kenney, if you want to add to it as well. Yes, I’d say a couple of things that we’re trying to do, not just — we’ve talked a lot about X-TOLE 2 and X-TOLE 3, and Chris talked about it in his remarks today. being consistent in terms of the protocol of X-TOLE. We want to try to stay as true as we can. We have a lot of success with X-TOLE we want to replicate that. That also extends to clinical sites and investigators. So one of the things that we’re doing is going back to sites that we know we’ve had success with that know the product well. And even when you think about some of the front-end loaded stuff in terms of contracting, we already have a relationship with their institutions.

So I think there’s some stuff we can do kind of on the front end that we can take full advantage of the companies that are newer into the epilepsy space can’t, but it will be something that we’ll be monitoring as we go along. Chris, anything else to add in terms of making sure that we can move this as quickly as we can.

Chris Kenney: I just want to build on what you said about trying to replicate X-TOLE. And internally, the folks who were successful who brought that study over the finish line are now still here with more financial and more people resources. So we’ve built — we’ve beefed up the folks who are already here. And then beyond that, I would say the answer is relationships, not just internally, but with the relationship with the CRO is going really well and building on those relationships with the sites that were already in existence and then expanding them further.

Operator: The next question comes from Danielle Brill with Raymond James. Your line is open.

Unidentified Analyst: This is Alex on for Danielle. I’ll continue the theme on depression. Just kind of curious, looking ahead what you’re thinking about in terms of a go/no-go signal. Is there an efficacy threshold that you want to hit regardless of whether or not you’ve been on stat?

Ian Mortimer: Yes. Thanks, Alex. Another good question. I mean, as we’ve talked about with many of you in the past, the X-NOVA study is designed as a proof-of-concept study. I think we have really good rationale based on everything we’ve talked about today in terms of the Ezogabine data. And the Ezogabine data informed us about not only have we designed the study, but also design the stats for the study. So our expectations in terms of powering is that that we don’t need the same separation that is again saw in the published data from last year to show statistical significance. But my first comment, I think is important, this is a proof-of-concept study, it is to really inform us. So I think we would just — we’re going to finish the study, unblind the data and look at the totality of the data in terms of next steps.

Operator: The next question comes from Yatin Suneja with Guggenheim. Your line is open.

Yatin Suneja: A quick one for me. In terms of the site mix, could you comment on the U.S. contribution that you are anticipating for the studies? If you can also comment on EMEA regulatory feedback that you might have received and how that has been incorporated in the planned studies. And then finally, on the financial front, if you can just comment on how should we ramp the expenses given that it’s a broad program that you are undertaking?

Ian Mortimer: I can — Chris, I can start on kind of the site and European feedback and then you can add to that and then Sherry can provide perspective on spend going forward. So just as a reminder, with X-TOLE, it was about a 60-40 split between recruitment coming from Europe and recruitment coming from the U.S. And so I think today, it’s difficult to predict exactly, but I would say we’d be comfortable that we’re probably going to be somewhere in that range for X-TOLE 2. We have — as we’ve talked about in the past, we really wanted to prioritize our interaction with FDA. And so we had our end of Phase 2 meeting and had the minutes in June, and then we submitted the Phase 3 protocol. And after we got through that, we were able to get our first U.S. sites up and running, and that was the initiation of X-TOLE 2.

We have now engaged with European regulators and have feedback as well, and we’re taking that into consideration because we will get European sites on board as we go forward. So we’re really comfortable for kind of the major regulators within U.S. and Europe that we’ve had that feedback we’ve incorporated, and we can have sites in all jurisdictions moving forward. Chris, any more details that you want to add to that?

Chris Kenney: Well, just targeting the makeup that worked for X-TOLE, which you’ve already said. And then actually that triggered what I wanted to say on the last question, which is that in order to move forward as efficiently as possible, there’s an emphasis being placed on X-TOLE 2 from an operational standpoint and getting those sites up and running quickly to the question about trying to take on the headwinds. There are a number of activities that need to be done in parallel. You talked to FDA about the whole program, but there are a number of other activities where you can shift resources in favor of one direction or another. And that’s what we’re doing in order to bring X-TOLE 2 over the finish line as quickly as possible. Sherry?

Sherry Aulin: Thanks, Chris. So yes, I’ll make some high-level comments yet on the OpEx. Absolutely, we expect to see our R&D spend ramp up now that we’ve got the Phase 3 program initiated. So we’ll see an increase in spend around the Phase 3 program over 2023 and 2024. As Ian mentioned earlier, our best proxy right now for the Phase 3 program is what we saw with X-TOLE, which took from start to finish 2.5 years. So the bolus of those costs will occur in fiscal ’23 and ’24. Keep in mind that those Phase 3 studies will feed into an open-label extension, which is 3 years in duration. So those costs for the open label extension will continue through ’25 and in and potentially a bit beyond that. And then we are thinking about also commercial — pre-commercial costs when we get into 2025 and ’26. But as a reminder, we have a very strong balance sheet at $750 million in cash ending the quarter, and we expect that, that will take us into 2026.

Operator: The next question comes from David Hoang with SMBC Nikko Securities. Your line is open.

David Hoang: Congrats on all the progress this quarter. So I just had a question around the regulatory path for the PGTCS indication. Can you just talk a little bit about any expectations relative to the timing of that data versus focal epilepsy? Are you thinking of this as an sNDA submission? Would you have — intend to have both product labels approved and available at launch and does PGTCS help you with the label that has helped you with the focal epilepsy launch?

Ian Mortimer: Thanks, David. Yes. Good question. I think that probably a bunch of us can jump in on this one. I can start and then Chris and Chris questions around label and launch and timing and stuff. So just as a reminder, we’ve anchored with FDA that we’ll run a single study in primary generalized colonic seizures. Often, if you look at other companies and other molecules, I would say the path that most companies do is they get these epilepsy drugs approved in focal onset seizures and then they run a post-approval study in primary generalized and then they file an sNDA. What we’re trying to do is given the profile of the molecule, we’re trying to parallel process these — the study is a little bit smaller in primary generalized and we’ve chosen 1 dose in that study, the high dose of 25 milligrams, which again is a very common approach if you look at other molecules.

David, it will come down a little bit to the timing. We do believe that we can run the exact study in parallel. If we have the readout and we’re ready, I think it can be all part of the same package, and if there’s a delay, then it potentially could be as part of an sNDA. So I think it’s a little too early to tell exactly what the timing is going to be, but essentially, we’re trying to run in parallel. So we have data in both focal epilepsy and primary generalized in approximately the same time frame. I don’t know, Chris Kenney, if you want to add anything to that, and then maybe Chris Von Seggern, you can just add to, as you local market and the label and what other companies have done in these different indications.

Chris Kenney: Yes. This is Chris Kenney. Can I just be real brief on this. I think it’s challenging to predict because as Ian just said, usually, it’s done in series, right? You focus on FOS and you go to primary generalized. We’re conducting these in parallel. And so are the recruitment rates that were seen in Phase I relevant, should it be fast or should it be slower? And so I think just in general, with primary generalize, it’s more difficult to find those patients. In order to compensate for that, you need fewer patients. We were targeting more sites, but there are so many variables there that I think it’s really difficult to predict. Just to add a little more content to the unpredictable theme that Ian summarized nicely. Chris?

Chris Von Seggern: Yes. On the commercial side, we’re really excited about the prospects of 1101 as a broad spectrum agent being offering efficacy in both the FOS market as well as the PGTCS opportunity, which is the second largest segment of the overall epilepsy population. We’re so excited that we’ve decided to do what no one else has done, which is to run these in parallel. And from a commercial standpoint, this gives us a unique opportunity to sell the broad spectrum mechanism either at the time of approval or shortly thereafter, if they’re in a staggered environment, well before any other competitive product, which is everyone’s already mentioned, typically begins to study post-approval. From a commercial standpoint, that offers a real differentiation because one can have the conversation with the clinicians on day 1 or near day 1 about the full spectrum of the patients that are under their care.

And that’s one of the things that’s going to be unique as an offering for 1101 near launch.

Operator: The last question comes from Tim Lugo from William Blair. Your line is open.

Lachlan Hanbury-Brown: This Lachlan on for Tim. I just wanted to touch on CMC. Can you remind us sort of where you’re at in terms of what you’ll need for an NDA maybe both for 1101 and 496? And what kind of supply you have secured with your current resources?

Ian Mortimer: Thanks, Lachlan. Yes, I mean, the high-level comments on CMC is we’re making sure that CMC is not on the critical path to a filing or approval and we’re comfortable with that. So we are continuing to work with CDMOs. And by the time we’re ready for an NDA, we’ll have done all of the registration batches and validation and all of the CMC work that’s required as part of the NDA and the approval. So I’m not sure there’s a lot more detail to share right now. But the critical path, as we’ve talked about previously is getting X-TOLE 2 completed to file the NDA in focal onset seizures.

Operator: At this time, I would like to turn it back to Sherry Aulin, Chief Financial Officer, for closing remarks.

Sherry Aulin: Great. Thanks, everyone, for joining us today. Operator, we’ll now end the call.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.