Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q3 2023 Earnings Call Transcript

Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q3 2023 Earnings Call Transcript November 8, 2023

Xenon Pharmaceuticals Inc. beats earnings expectations. Reported EPS is $-0.73, expectations were $-0.75.

Operator: Hello, thank you for standing by. And welcome to Xenon Pharmaceuticals Incorporated Third Quarter 2023 Earnings Conference Call. I would now like to turn the call over to Sherry Aulin, our CFO. You may now begin the conference.

Sherry Aulin: Thank you. Good afternoon, everyone. Thank you for joining us on our call and webcast to discuss Xenon’s third quarter 2023 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 will open today’s call with a summary of our progress, Kenney will provide an overview of our ongoing XEN1101 clinical program and Chris Von Seggern will summarize key findings from our market research around the potential of 1101 in major depressive disorder or MDD treatment landscape. I will summarize our financial results, progress within our partnered programs and anticipated company milestone events before opening the call 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 our and our collaborators’ clinical trials; the potential efficacy, safety profile, future development plans, addressable market, regulatory success and commercial potential of our and our partners’ product candidates; the efficacy of our clinical trial designs, our ability to successfully develop and achieve milestones in our XEN1101 and other development programs; the timing and results of our interactions with regulators, our ability to successfully develop and obtain regulatory approval of XEN1101 and our other product candidates; anticipated enrollment in our clinical trials and the timing thereof; and our expectation that we will have sufficient cash to fund operations into 2026.

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 financial results and the accompanying report on Form 10-Q will be made available under the Investors section of our Web site at www.xenon-pharma.com and filed with the SEC and on SEDAR. Now, I’d like to turn the call over to Ian.

Ian Mortimer: Thanks, Sherry. And good afternoon, everyone and thanks for joining our call today. I’m excited to share with you the progress that we have made this past quarter across our neurology pipeline. To begin, we remain confident in our ability to execute on our ambitious XEN1101 Phase 3 program, and this includes our X-TOLE2 and X-TOLE3 clinical trials in patients with focal onset seizures or FOS, and our X-ACKT clinical trial in patients with primary generalized tonic-clonic seizures or PGTCS. We believe our experience with our Phase 2b X-TOLE study, which was similar in design to our ongoing X-TOLE2 and X-TOLE3 trials, provides us with a solid foundation of operational experience and strong existing relationships with leading clinical investigators in the epilepsy space.

As a reminder, we aligned with FDA on key elements of our Phase 3 program, including plans to submit an NDA upon the successful completion of X-TOLE2, our first XEN1101 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. In X-TOLE, we screened patients over a period of 26 months from the first quarter of 2019 through the first quarter of 2021. And then X-TOLE2, we initiated our first clinical site late last year with our first patient being randomized in Q1 of this year. And we expect patient enrollment to complete in the second half of 2024. So this would be in line or faster than X-TOLE based on our current assumptions and expectations.

And as a reminder, X-TOLE2 will recruit more patients than X-TOLE. So overall, we are pleased with the progress our team has made so far this year. In addition to ongoing execution in our Phase 3 epilepsy program, we also continue to showcase XEN1101 and connect with leading epileptologists and neurologists, including at the 35th International Epilepsy Congress, or IEC, that took place in Dublin in early September. We presented data from the ongoing open label extension study from our Phase 2b X-TOLE trial. Showing the long term efficacy of XEN1101 has demonstrated by patients experiencing continued seizure reduction during the OLE and extended periods of seizure freedom. And this is translating into overall improvements in patients’ quality of life.

Chris Kenney will provide some more details around the significance of these findings later in the call today. We are also pleased to report that the peer reviewed results from our Phase 2b X-TOLE study of XEN1101 in adults with focal epilepsy were recently published in the prestigious JAMA Neurology Journal. Turning now to our program in major depressive disorder. We remain on track to see top line results from our XEN1101 Phase 2 X-NOVA study in late November to mid-December. Given the high unmet need in MDD and the fact that depression is the most common comorbidity in epilepsy, we are keenly interested in these data. In September, we hosted a well received webinar with leading MDD clinicians, Dr. James Murrow and Dr. Sanjay Mathew, who provided their commentary on the mechanistic rationale supporting potassium channel modulation as a potential treatment for MDD.

Before turning the call over to Chris Kenney, I would also like to remind everyone that we have planned for a significant presence at the annual American Epilepsy Society Meeting, or AES, next month with multiple posters and presentations alongside our booth and scientific exhibits. And so for those of you who are planning to attend, we look forward to connecting with you in Orlando next month. So I’ll now pass the call over to Chris. Chris?

Chris Kenney: Thanks a lot, Ian. Let me begin by echoing Ian’s acknowledgment of the publication of the Phase 2b X-TOLE data in JAMA Neurology. The compelling efficacy and safety data from this clinical trial supported further clinical development of XEN1101 in epilepsy and the ambitious Phase 3 program that we’re pursuing today. We also continue to gather data from our ongoing X-TOLE open label extension study with a cohort of patients now on XEN1101 for more than four years. To date, we have amassed several hundreds of patient years of safety and efficacy data, further supporting XEN1101’s compelling profile and differentiating from other molecules in development for epilepsy. We look forward to presenting additional long term data from the X-TOLE open label extension at the American Epilepsy Society next month.

As noted by Ian, we recently hosted posters and presentations at the International Epilepsy Congress in Dublin that included interim results from the X-TOLE open label extension study. Newly compiled interim data focused on quality of life measures as assessed using a validated tool called the quality of life in Epilepsy Inventory-31, in the overall open label extension group as well as the subgroup that was seizure free for at least 12 consecutive months at the time of the interim data analysis. Clinically important improvements in the QOLIE-31 subscales of seizure worry, social functioning and medication effects were seen across all patients, with even greater improvements in the seizure free group, which saw clinically important improvements in all quality of life subscales assessed by the QOLIE-31.

As a clinician, it is encouraging to see these quality of life data, which are consistent with compelling clinical results generated to date and contribute further to the growing evidence that support the promise of XEN1101 as a novel differentiated potential treatment for patients with epilepsy. Turning to our work in major depressive disorder. As noted by Ian, we remain on track to report X-NOVA top-line results in late November to mid December. While our original trial design plan for 150 subjects with 50 subjects per arm of 10 milligrams XEN1101, 20 milligrams XEN1101 or placebo based on patient randomization rates, the X-NOVA top-line results will include data for more than 160 patients. As a reminder, within the top line results, we expect to report out on the primary endpoint, which is to assess the efficacy of 10 milligrams and 20 milligrams of XEN1101 compared to placebo on improvement of depressive symptoms using the MADRS score change from baseline to week 6.

We also intend to report on the secondary objective, which is to assess the efficacy of 10 milligrams and 20 milligram doses of XEN1101 compared to placebo on improvement of anhedonia symptoms using the SHAPS score change from baseline to week 6. In addition, we will provide data on the overall safety and tolerability seen with XEN1101 in these patients diagnosed with MDD. With that summary of our near term data announcement, I’d like to turn the call over to Chris Von Seggern, who will share some of the primary market research conducted by Xenon in support of our MDD program. Chris?

Chris Von Seggern: Thanks, Chris. I’m pleased to share information from our market research efforts that helped us better understand the drivers of clinical decision making, the unmet medical need in MDD and key attributes desired by clinicians in future treatments. Our research efforts involved US key opinion leaders and high volume prescribing psychiatrists with the intended goal of understanding how XEN1101 would fit into a future treatment paradigm. We tested the potential product profile consistent with the adverse event profile seen in X-TOLE to understand physicians’ perspectives pertaining to various product attributes, including efficacy, tolerability, mechanism of action and ease of use attributes. Given that antidepressant medications are generally perceived as having non differentiated efficacy, we learned that there are several other key unmet needs that create an opportunity for future products in the MDD space.

First and foremost, physicians are interested in new agents with novel mechanisms of action. Given the heterogeneity of depression, products with novel mechanisms of action could be used in patients who do not respond initially to generic therapies. And while the first and second line therapies of choice, SSRIs and SNRIs were seen to offer reasonable efficacy, certain safety liabilities were identified as a concern for many patients. Physicians consistently pointed out challenges with common adverse events, such as sexual dysfunction and significant weight gain when treating patients with MDD. In testing, the adverse event profile of XEN1101 seen in X-TOLE, we gathered feedback that CNS adverse events, such as dizziness would be acceptable at levels observed in X-TOLE.

We also heard interest from physicians about the potential for products that can deliver more rapid relief of symptoms given the delayed therapeutic response with the current standard of care. Because currently approved therapies do not address anhedonia, which represents a common comorbidity of depression, this was another dimension of interest. Given that there is preclinical support for the Kv7 mechanism that play a role in addressing anhedonia, the unique mechanism of action of XEN1101 could be viewed as an important differentiator in the eyes of these prescribing physicians. Finally, the ease of use attributes identified in our epilepsy market research, such as once daily dosing with food and no titration, are also important to psychiatrists.

In summary, we believe that if approved XEN1101 can play a significant role within the MDD treatment landscape. It’s novel Kv7 mechanism of action coupled with a differentiated adverse event profile that lacks the same liabilities as other MDD therapeutics, such as sexual dysfunction or significant weight gain, ease of use attributes and the potential to address anhedonia results in a compelling product profile. Importantly, if XEN1101 shows efficacy in MDD, this could be a striking differentiator in epilepsy, given the certain anti-seizure medications are associated with unwanted mood symptoms and depression as a common comorbidity in epilepsy patients. I would now like to turn the call over to Sherry, who will give us a brief update on our partner program with Neurocrine before summarizing our third quarter financial results and upcoming milestones.

Sherry?

Sherry Aulin: Thanks very much, Chris. Beginning with our partner programs, our collaborators at Neurocrine are conducting two separate Phase 2 clinical trials evaluating NBI-921352. One study is focused on adult patients with focal onset seizures and the other study is examining the use of NBI-921352 in patients with SCN8A related epilepsy. Notably, Neurocrine has guided that data from its adult focal study are anticipated to be released later this month. As a reminder, NBI-921352 is a highly selective inhibitor of a sodium channel called Nav1.6, which we discovered at Xenon and licensed to Neurocrine, and we’re excited to have this hypothesis of selective sodium channel inhibition be tested. We look forward to working with Neurocrine on this upcoming data release and the next steps in the program.

I’ll now touch on some highlights from the 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 $639.1 million as of September 30, 2023 compared to $720.8 million as of December 31, 2022. Based on current operating plans, including the completion of the XEN1101 Phase 3 epilepsy studies, we anticipate having sufficient cash to fund operations into 2026. So looking ahead to some important milestone events for Xenon, we expect two important clinical data readouts in the near term. First, our top line X-NOVA MDD results are anticipated in late November to mid-December. We also expect data from the adult focal onset study conducted by our partner Neurocrine in November.

We look forward to presenting longer term X-TOLE open label extension data, including rates of seizure reduction and seizure freedom at the upcoming AES meeting in December. And importantly, we continue to make progress on advancing our XEN1101 Phase 3 epilepsy program, including our X-TOLE2 and X-TOLE3 clinical trials in focal onset seizures and our X-ACKT clinical trial in PGTCS with patient enrollment in X-TOLE2 expected to complete in the second half of 2024. Our team believes we can make a difference in the lives of patients living with epilepsy and other neurological disorders. We remain focused on executing our clinical development plans and look forward to our near term milestones and reporting on our progress in the months ahead. I’ll now ask the operator to open the line for any questions.

Operator?

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Paul Matteis from Stifel.

Paul Matteis: I had two questions, if you don’t mind, one on X-TOLE2. Ian, thanks for the color on timing and congrats on the execution. Can you just give some clarity on once you get to full enrollment, what would be the timing to top line data? And then second, I had a question for Chris or really the broader team on X-NOVA. And I thought some of the commentary, Chris, you mentioned on inacceptable adverse event profile to clinicians was pretty interesting, especially related the CNS side effects. Ahead of these data, how would you draw that line as it relates to a dizziness rate or discontinuations due to AEs, where the profile still remains commercially competitive versus a profile where you think it actually might be more problematic in this population?

Ian Mortimer: I’ll tackle the first. On the second one, maybe Chris, on second, you can just start and just, I know we did it in the prepared remarks, but just ensuring that we’re all kind of aligned on what we think about in terms of the AE profile and then Chris Kenney provide perspective on what’s acceptable there, as we think about a differentiated AE profile. So in terms of XTOLE2, Paul, we’ve guided today that we think patient enrollment will be completed in the second half of next year. So when the last patient gets screened into the program, there’s a two month baseline period. And so we need to count the number of patients or the patients need to count their number — patients need to count their number of seizures for a baseline number before those patients are randomized.

And then it’s a three month double blind period, so that’s five in total and then there’s some follow-up before we can be in a position to unblind data and provide top line results. So it’s kind of in that six to eight month range from last patient enrolled to top line data, again, just depending on the timing of follow-up and database lock and data analysis, but in that range. So hopefully, that’s helpful. And Chris, over to you on the AE profile.

Chris Kenney: Yes, happy to address the AE profile. So as we indicated in the prepared remarks, what we’ve done from a profile testing with US prescribers is present them with an AE profile that’s consistent with what we’ve seen coming from X-TOLE with both the 10 milligram profile and the 20 milligram profile across the dimension of AEs that were common from the epilepsy study. So that specific profile, in the context of offering efficacy that is consistent with what we’ve seen with other products in the space and then the overarching profile of XEN1101 in terms of once daily dosing, the ease of use attributes that we mentioned in epilepsy as well. So that’s specifically what’s been tested. And what we’ve heard very clearly from physicians is that there’s a role for a product that looks like the XEN1101 profile in the future treatment paradigm of MDD assuming that the product gets approved.

And there’s an appreciation for every product has a risk benefit that’s different and the lack of very concerning AEs that are seen with SSRIs and SNRIs, specifically sexual dysfunction [Technical Difficulty] was viewed to be compelling from a clinician’s point of view as a potential driver for utilization.

Chris Von Seggern: Yes, I’ll just add a little bit. I think I’d really like to kind of underscore the phrase that Chris just used risk benefit. Because I understand the question in the context of the safety and what’s acceptable from an adverse event perspective, but the totality of that safety data will be relevant, right? So whatever your sort of your dizziness is, whatever that rate ends up being, if you’re not really causing serious — any serious sexual side effects, that’s an upside. Also if you’re not having any serious safety issues like dress or serious rash or anything like that, I think that also puts the safety signal into context. And then, of course, I mean the question is focused on safety, which makes sense, I get it.

But really it’s in the — it needs to be taken in the context of the overall risk benefit of the drug. Because you think back to the ezogabine controlled trial with the separation of 7.9 points between active and placebo. If you’re seeing that sort of separation then what you’re willing to sort of accept in terms of adverse events goes up substantially compared to something where there’s just a couple point separation between active and placebo.

Operator: Our next question comes from the line of Brian Abrahams from RBC Capital Markets.

Brian Abrahams: On the efficacy side for MDD, now that you’ve done the market research and we’re getting closer to data, could you talk a little bit more about the scenarios, for both MADRS and SHAPS that might prompt you to explore a registrational program focused on MDD, to focus more on anhedonia, or to focus more on building out the mood signal in the epilepsy indication? And then just secondarily, since you gave the time line update on X-TOLE2. Can you just clarify, I guess, how far behind X-TOLE3 is timeline wise and how much of a rate limiter that study is for future filing or could that — could those safety data just be submitted as a safety update during the review?

Ian Mortimer: Yes, I’ll tackle these and then if anyone has anything to add on our side, please jump in. Yes, we’ve kind of really talked about the different outcomes in MDD if there’s potentially multiple paths forward, right? Obviously, if we don’t see separation and activity then I think that’s clear. And then the two paths in terms of seeing activity, I think if we see a separation and we believe that we are seeing an antidepressive effect but we believe that there’s still risk in terms of a registration program, then I think that’s a good opportunity for us to continue to differentiate XEN1101 in the epilepsy space. And we didn’t focus on it on our remarks today, but I think everybody knows and I’ll remind everyone on the call that not only do we have very compelling efficacy in epilepsy, but with a novel mechanism, QD, no titration and we’re seeing early onset to efficacy at week one are all things that we think is a very compelling product profile in epilepsy.

And if we can add mood to that in terms of medical communication and education, I think that could be even stronger. So that’s obviously an option. And then although we’re not going to put specific numbers around it, and I think risk benefit that we just spoke about in the previous question, I think is important. If we think that the risk benefit overall is compelling in depression then we are comfortable moving ahead with registration work in the primary indication of major depressive disorder. So there has to really be a clear bar there that we believe that we can replicate the data in larger studies in Phase 3. In terms of your second question on X-TOLE2 and then X-TOLE3. So X-TOLE2 is on the critical path that’s filing an NDA. So it’s not X-TOLE3 or X-ACKT.

Obviously, any patient that goes through X-TOLE2, X-TOLE3 or X-ACKT can go into open label extension. And we can use the safety data from those other studies as part of the requirements in terms of the overall safety database. But we’re really focused on X-TOLE2 on the critical path to filing because as we discussed with FDA at our end of Phase 2 meeting, we’ll be filing on the X-TOLE2 data combined with the X-TOLE data that we’ve obviously previously published and we’ve shared with FDA as well. So at some point in the future, we’ll give guidance on X-TOLE3 and X-ACKT. But to answer your specific question, not on the critical path in terms of registration and filings.