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.

Operator: [Operator Instructions] The next question comes from the line of Tessa Romero from JPMorgan.

Tessa Romero: So with enrollment expected to complete in the second half of next year in X-TOLE2, what are the key levers to being on this sooner versus the later end of that enrollment guidance? And it was a little bit alluded to in the prior question, but what is the latest thinking on the cadence of the pivotal data sets for X-TOLE2, X-TOLE3 and X-ACKT? Should we expect X-ACKT before X-TOLE3 or how should we really thinking about that?

Chris Von Seggern: I’ll start. Chris Kenney, provide your perspective as well. Tess, I don’t think there’s any, from my perspective, specific lever to pull for patient enrollment to be completed earlier in the second half of 2024 versus later in the second half of 2024. We are executing well against the plan of site initiations and patient screenings and patient randomization. So we feel confident where we are. We do our best to predict. And as we have guidance that is out a year or so, we’re going to put some error bars there based on our best assumptions and expectations. As we get closer we’ll be able to narrow those. But I don’t think there’s any specific lever in terms of trying to make that go faster. I think we have, from the very beginning, we want to run a good study and we’ll go as quickly as we can while maintaining the integrity and the conduct of the study.

Chris, I don’t know if you have anything to add specifically there and then I’m happy to jump in on the second question on the cadence of data events.

Chris Kenney: No, I don’t have anything to add. For every patient that’s enrolled in any clinical trial, there are so many different variables and so many different variables at each site and variables at each country. And so it’s just it’s complicated to the extent that it’s hard to sort of put my finger on one or two things and say this is what’s going to drive the timeline one-way or another.

Ian Mortimer: And then your second question in terms of cadence. So obviously X-TOLE2 has been our focus, and we’ve talked often with investors that we’ve tried to leverage in X-TOLE2 as many of those relationships that we had in X-TOLE, so investigators that have experience with the drug and clinical sites that we’ve worked with in the past. And quite frankly, investigators that still have patients that are being treated with XEN1101 in open label extension from the X-TOLE study. So we’re doing all of that in X-TOLE2. When we have guidance on X-TOLE3 and X-ACKT then Tess, we can come back to the guidance on which one’s going to readout first of those two separate Phase 3 clinical trials. It’s premature to do that today.

Operator: Our next question comes from the line of Andrew Tsai from Jefferies.

Andrew Tsai: Just one on MDD reading out. We understand that AE profile of 1101 could be different from — between MDD and epilepsy. I think you’ve mentioned previously how you are monitoring blinded safety. So how are the blinded AEs and the AEs due to discontinuation rates looking compared to your internal expectations, is there anything out of the ordinary relative to what you guys assumed going on in the study? Or maybe said another way directionally speaking, are you seeing lower AE rates in the MDD study compared to your epilepsy study?

Ian Mortimer: I’m sure, this maybe the first of other questions just on some of the details of the MDD study. I’m sure you can appreciate and others can as well. The study is now complete. We’re very close to unblinding the data and we’ll have data in the coming weeks as we’ve guided in late November to mid-December. So we’re not going to make any specific comments around what we’re seeing in the data. We have said previously that, obviously, as we run any clinical study, we’re going to monitor it along the way and we’re going to do safety review committees that are required. And based on those previous safety review committees, there hasn’t need to be any adjustments in the study. But we’re not going to talk about specifics on the blinded data and we’re looking forward to sharing the full data set in the near term.

Operator: The next question comes from the line of Jason Gerbery from Bank of America.

Unidentified Analyst: This is Dina on for Jason. Congrats on the progress this quarter and thank you for taking our question. So I just had a question on the X-NOVA top-line that we’ll be seeing very shortly. I guess, if we don’t see a positive trial, does that add any risk or uncertainty in your view to being able to generate additional data for 1101 antidepressant effect in epilepsy patients? And then just wanted to sort of follow-up on the MDD market research on 1101 safety profile, kind of given that safety is kind of a major driving force in the MDD space besides the lack of serious AEs that come with the SSRIs and SSRIs that you mentioned earlier, the sexual dysfunction, weight gain. Did KOLs point out any part about 1101’s AE profile that could be sort of a positive differentiator in MDD patients? Thank you so much.

Ian Mortimer: A lot there, so I think we’ve got them all down here. But if we missed one, just jump back in. So maybe I’ll make one kind of global comment around the X-NOVA study, and then I’ll pass it to Chris Kenney just to talk about the population that is an epilepsy patient that has comorbid depression, which is different than the primary — obviously, the patient that has major depressive disorder. And so Chris, maybe you can just comment about that. And obviously, we are looking, not stratifying, but looking at some of those data in Phase 3. And then Chris, one second, we can talk about the 1101 AE profile in MDD. I think, you started your question with if XEN1101 doesn’t work in X-NOVA. I think, if we don’t see separation, we’re very confident in saying that we don’t think there’s any read through into the epilepsy program.

So I just want to be absolutely clear with that. We’re very confident in the consistency and reproducibility across epilepsy studies and the compelling profile we have from X-TOLE and the ability to execute in X-TOLE2 and X-TOLE3. So I think this is a really interesting and important readout in the near term in X-NOVA, but I don’t think the outcome of that has any read through into our epilepsy program. But why don’t we go a little deeper. Chris Kenney, just in looking at that comorbid patient or the patient that has comorbid depression that’s an epilepsy patient?

Chris Kenney: I mean, what I would say is that the underlying pathophysiology of the depressive symptoms can be different depending on whether you’re looking at a patient who has a different psychiatric issue or neurodegenerative issue or epilepsy. So just because a drug is behaving a certain way in one of those population doesn’t mean it’s going to behave exactly the same in the other. And just to be a little more concrete, in the Phase 3 program, our epilepsy patients, obviously, we’re focused on developing an anti-seizure drug and that’s the focus. But we are looking at mood using scales in that population. So once those Phase 3 studies are done, we’re going to have this enormous body of information about how those patients respond to the drug from the standpoint of their depressive symptoms.

Now the downside is we’re not purposely enriching for depressive symptoms the way we are in X-NOVA and so there are some limitations. But we’re going to let the data guide us for both studies and just acknowledge the fact that depression isn’t the same as epilepsy.

Ian Mortimer: Chris Von Seggern, a little bit more on the MDD or AE profile of 1101 in MDD?

Chris Von Seggern: So just to remind folks, if we take a step back and think about the profile that emerged from X-TOLE with the 20 milligram and the 10 milligram profile, the majority of the AEs that are reported were mild. And when you think about the difference between 20 milligrams and 10 milligrams, the 10 milligram dose was highly comparable if not indistinguishable from placebo as it pertains to the AE profile. And then the 20 milligram profile, highly consistent with other CNS active anti-seizure medication with dose limiting are really AEs that emerge at the high end of the dose paradigm, but still appropriate for that patient population. So trying to bookend the AEs in the context of the MDD market research. So are there other — the specific question was around are there other AEs that can be seen as a positive differentiator.

Well, I think, the cleaner the profile looks, the better XEN1101 emerges in the eyes of clinicians. So that very well could be a positive differentiator if one sees an AE profile that is similar to the 10 milligram profile that emerged from X-TOLE. But to be clear, we also spend time in our market research, diving deep into the perspective on an AE, such as dizziness, which is a little less common in the current standard of care, but in the context of it being a mild and potentially transient AE was something that clinicians viewed in the totality of the risk benefit profile to be certainly within reason and would ultimately result in the product being used in their armamentarium.

Ian Mortimer: And maybe I would just add one other point to Chris’ comment. If we — we have a huge body of data on XEN1101 now. Just as a reminder in Chris Kenney’s comments earlier, we have our first patients out more than four years of dosing. We have hundreds and hundreds of patient years of exposure now and we’re seeing this consistency in profile. And we know that not all patients are going to tolerate these drugs the same. So in our epilepsy experience, as we move an X-TOLE from 10 to 20 to 25 milligrams, you get a step up in efficacy and you get a step up in some of the CNS adverse events based on the potency and activity of this drug. And we know that when we think about epilepsy or we think about depression, there would be multiple dosages available.

And so if you don’t tolerate a certain dose, there’s an opportunity for you to move to a lower dose, which can address some of the tolerability. So I think we have — when we think about XEN1101, we know a tremendous amount about it and we have that flexibility, because we know patients will tolerate the drug differently from patient to patient.

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

Paul Choi: I have two, first for the team. With regard to the pace of enrollment in X-TOLE2, I appreciate your comment that it’s tracking faster than X-TOLE. But could you maybe just comment on it, if you’re seeing any competition for recruiting patients and whether any of your clinical trial sites overlap with others developing potassium channel drugs for epilepsy? And my second question is under a scenario where X-NOVA reads out positively. Can you maybe comment on how the recent FDA rejection of zuranolone has or hasn’t affected your thinking on potential future development in MDD?

Ian Mortimer: So maybe I’ll make a couple of comments first on X-TOLE2 and Chris Kenney, you’re very close to the investigators on the site, so please add your perspective as well. And then we can get to the X-NOVA question. So as we think about X-TOLE2, I mean, I think one of the messages we’re communicating today is that obviously we have a lot of experience in running global epilepsy studies. I think, if we look back over the next few years, we have run the largest number of significant epilepsy studies when we compare ourselves to any other sponsor. So I think there’s a huge amount of experience that we’re gathering. Often we don’t find that a clinical site will take on two competing studies to focus on one, but I’ll let Chris provide his perspective there.

And then when we just look at the recruitment rates in X-TOLE2, when we look at other companies over the last number of years that have run epilepsy studies, I believe that our recruitment rate and our ability to complete these studies have outperformed others. And so obviously, we’re very proud of the work that the team has done. But Chris, any other specific comments that you’re seeing at individual sites on competition?

Chris Kenney: I mean, the challenges that have come up, probably the number one challenge at the sites is more about making sure that each site has the appropriate resources to be able to support the study. And the issue of competition with other anti-seizure medications hasn’t slowed down to my knowledge even a single site. So if you think about the timing in terms of, I believe, when you say Kv7 drugs, I believe you’re alluding to the public information that Biohaven is going to start Phase 3 by the end of this year. We were going out to sites quite a while ago. And so we’ve locked in those sites already that we were most focused on. So that really — competition with other Kv7 has not had any rule in terms of slowing us down to date.

Ian Mortimer: And then Paul, your other question on X-NOVA and maybe the regulatory environment. We haven’t had regulatory interaction with the psychiatry division. Obviously, if X-NOVA is positive and we move into late stage clinical development, we do an end of Phase 2 meeting. So I think maybe we’ll just pause on that question until we have more interaction. When we look at the zuranolone summary basis of approval and we’ve looked at the regulatory information that’s publicly available, we don’t see any read through to the work that we’re doing with XEN1101 in major depressive disorder with the caveat, as I mentioned earlier, that we still need to have detailed regulatory interaction as we would think about the late stage program.

Operator: Our next question comes from the line of Joseph Thome from TD Cowen.

Joseph Thome: Maybe the first one on the upcoming Neurocrine data. How are you thinking about potentially moving forward with that co-fund option, what are some considerations you have? And can you remind us when you have to make that decision, is it immediately after data, is it after an end of Phase 2 with the FDA or is there time on that? And then for the 1101 NDA filing, can you just remind us what kind of safety database is required to initiate that? Is having patients through that 12-week double blind period sufficient or will you need some additional time after the data readout before you could start the filing?

Ian Mortimer: Sherry, do you want to tackle the first one on co-fund? And then, Chris and I can provide perspective of on the safety database.

Sherry Aulin: So as a reminder for our collaboration with Neurocrine, we have a tiered royalty structure. So ultimately, if the drug progresses, we would be eligible for royalties that are based on sales. So the co-fund option allows for us to opt in to pay for or fund 50% of the Stage 3 development costs. And in return, we would get an incremental step up in the royalty, which at the highest tier would amount to a [20 royalties]. We’re going to have the benefit of having a lot more information in hand before we have to make the decision around [Technical Difficulty] we want to trigger the co-fund. So importantly, we’re going to have data from this upcoming Phase 2 study, which we’ll be able to evaluate in addition to all of the information around the Phase 3 development program.

So an agreed upon protocol with FDA on Phase 3, a full budget around what the Phase 3 development program will look like, and we’ll be able to make a decision based on that, the totality of that information. I do want to point out, I think given our experience in the space, we are very well positioned to be able to review all of that and make a very informed and educated decision. And also, I will say that at this stage, Neurocrine is driving the development next steps of the [352] program. And ultimately, we’ll have to see what their next steps are. So it is possible that from this Phase 2 signal finding study, they may decide to proceed into larger Phase 2b study rather than directly into Phase 3, in which case the timelines around [Technical Difficulty] longer.

So don’t expect that it’s a decision that we need to make in the near term. I’d say at the fastest if they are going straight into Phase 3 probably, I’d say at least 12 months, maybe more like 18 months until they have regulatory interaction and all of that information I discussed.

Ian Mortimer: And then, Joe, I think your question on NDA and safety database when you specifically sat around after the double blind period, I’m assuming that you’re kind of referring more to long term exposure. So I’ll answer it that way and then if you have a follow-up, let us know. So this is a large market opportunity. So we think about ICH guidelines in terms of exposures, the long term exposures that are required, there’s 300 subjects. So this is the guidance, there’s 300 subjects of six months of exposure and 100 subjects of 12 months of exposure. And as I’m sure you can appreciate, we have a significant amount of long term data. Actually, I think that’s one of the things that is continuing to differentiate us versus even those in the competitive space is that we now have so much experience with this molecule that long term safety is not going to be gating to an NDA filing by any means.

Operator: The next question comes from the line of Danielle Brill from Raymond James.

Danielle Brill: I was wondering if you could talk about the decision to permit enrollment of patients with PTSD in X-NOVA. We asked this since PTSD can be associated with lower treatment response rates to more traditional antidepressants. Specifically curious if you stratified enrollment and if you plan to break out treatment response rates with inpatients with or without PTSD or other comorbid anxiety disorders?

Ian Mortimer: Chris Kenney, can you provide perspective there?

Chris Kenney: Well, the top-line analysis of X-NOVA is going to focus on the MADRS and the SHAPS top-line safety, et cetera. So it’s not part of the top-line. The second round of data, we can look at those sorts sort of things but that isn’t a major — looking at PTSD, it’s not stratified in the study. And looking at whether those patients are spawning differentially isn’t part of the plan. Danielle, I don’t know the numbers off the top of my head, but I think we’re talking about relatively small numbers. And so I think that in the context of a study this size, I think even doing that may have limited utility.

Operator: Our next question comes from the line of Marc Goodman from Leerink Partners.

Unidentified Analyst: This is Madhu on the line for Marc. Could you just give us an update on your pediatric formulation of XEN1101 and also your second gen molecules that are in preclinical development? Could we expect to see any data from these candidates in the near term?

Ian Mortimer: Yes, we have, as we stated, I think, in previous calls, we’ve got alignment from regulators on what the pediatric plan is for XEN1101. So there’s some layers to this in terms of focal onset seizures, we have an ability in the US to take advantage of the, what’s called, the PK extrapolation rule where we can do open label work in younger cohorts of patients. We’ll start with adolescents and then move into children. With our exact study or our primary generalized tonic clonic seizure study, we have, based on feedback from regulators, move the lower bound of age to 12 and above for that study. So we’ll be enrolling some of those patients in the Phase 3 program. And then in terms specifically on a pediatric formulation, so obviously, an oral capsule can go down to a certain age group and then when we get into much younger age groups, we’re going to need to work on a pediatric formulation.

So that work is ongoing internally. In terms of next generation Kv drugs, yes, I think we’ve communicated a number of times that we have a number of different chemistries and different molecules that we’re interested in preclinically, that target the potassium channels in the CNS. And we don’t talk a lot about kind of stage of development where we are publicly with those. But we would expect over the next year or two we would have molecules that’ll transition into clinical development and that’s probably an appropriate time to start sharing some of the preclinical data publicly as well. Operator, we can move to the next question.

Operator: Our next question comes from the line of Laura Chico from Wedbush.

Unidentified Analyst: This is Ingrid on for Laura Chico. Wondering if you could speak at all to any efforts to coformulate 1101 with another ASM? Would this be something that could be explored in vocal epilepsy space? I realize this may be challenging to dose optimize. But would there be any advantages to this type of approach?

Ian Mortimer: Yes, really interesting question. Chris Von Seggern, I know you’ve done some time thinking about this and obviously, the types of anesthesia medicines that have been developed over time. So maybe you can start and then, Chris Kenney, if you have anything to add as well.

Chris Von Seggern: Yes, what I can say is and what we expect from a commercial use standpoint and the focal onset seizure mark it is most certainly combination use with other commonly used anti-seizure medications. And there are a handful of those products, which are used quite frequently early in lines of therapy, Levitiracetam, lamotrigine and increasingly lacosamide, are products that would be potentially ideal candidates for thinking about co-formulation opportunities. It’s definitely something that’s been on our radar for consideration. Although, there are technical complexities to consider when you think about the range of doses that exist as well as the requirement for other products to be titrated to full efficacy. One of the key advantages of XEN1101 and the treatment of FOS is that we don’t require titration and that gets us to a therapeutic dose with the initial dose selected.

So there’s a little bit more technical complexity to that question than the obvious desire to think about co-formulation with other commonly used anti-seizure medication and something that still needs to be explored.

Ian Mortimer: Chris Kenney, anything to add?

Chris Kenney: Nothing to add, Ian.

Ian Mortimer: Yes, I think, as Chris said, there’s a real challenge there as you have a lot of these drugs that are titrated, and not everyone gets to the same dose. And so that provide some inherent technical challenges on co-formulation.

Operator: Our next question comes from the line of Mohit Bansal from Wells Fargo.

Unidentified Analyst: This is Serena on for Mohit. Thanks for taking our question. So I have two, the first is that if the monotherapy study in MDD doesn’t work or even if it does. Is there a possibility of studying the 1101 as an adjunctive and MDD to see if there’s any synergistic effects? And then my second question is if you can help us understand why there are no treatments specifically approved for anhedonia when it looks like some antidepressants have shown a benefit on anhedonia scores?

Ian Mortimer: Chris Kenney, do you want to start on — and maybe I’ll start with a global comment and then maybe you can provide your perspective on monotherapy and potentially future development and in the adjunctive setting as well. And any perspective you have, I think, both you and Chris can weigh in on. I think if — just turning to the very first part of your question on if X-NOVA isn’t positive, would we move ahead with adjunctive studies? I think that’s unlikely that if we don’t see a signal in this study that we would be running an adjunctive study separately to this. I think in the scenario where XEN1101 is positive and X-NOVA and we’re moving ahead, then I think it’s a question that we’ve definitely thought about. And it’ll be somewhat jurisdictionally dependent also based on interaction with regulators. But Chris, why don’t you provide your perspective there and then we can move to the anhedonia question.

Chris Kenney: I think you covered it, Ian. I don’t have anything to add to that.

Ian Mortimer: And so, yes. I mean, maybe just add a different way if we’re positive in X-NOVA and we’re moving ahead into registration studies, then I think we would look at both potentially monotherapy or adjunctive studies in future development. On the anhedonia sides, either Chris or Chris, your perspective on maybe why we haven’t seen — I know anhedonia is definitely showing up as an endpoint in a lot more studies now, but we haven’t seen that used as a primary endpoint in development.

Chris Kenney: I mean, I’ll start off and then I’ll hand it off to Chris. If you take a look at the patients who meet the criteria for having moderate to severe depression, which is the case in the X-NOVA study then it’s very difficult to find a complete lack of anhedonia. In fact, that’s a key feature of getting the diagnosis of MDD. So they tend to lock together pretty closely. And as Ian just said, I mean, there’s been this Increasing interest in anhedonia. I think your observation is more driven, I think, by people not just not focusing on it on the past, and now it’s become clear that it’s something worthy of treatment.

Chris Von Seggern: The only thing I can add there is that when we go out and do market research, there’s very clear consistency with primary efficacy endpoints around MADRS in this space. And one can only assume that’s in order to avoid deviating from a regulatory perspective on what gets ultimate FDA approval. But we have seen, to Ian and Chris’ point, increased interest in anhedonia as a component of the efficacy profile for these products given the fact that it’s a comorbidity associated with depression, and we’re eager to see how this unfolds in the coming years.

Operator: And our last question will come from Tim Lugo from William Blair.

Tim Lugo: For X-TOLE2 and 3, I know they’re designed very similarly to X-TOLE. However, I think, one of the defining features of X-TOLE was how many therapies those patients have failed. And now 1101 is an unknown asset as Xenon is a very well known company within the community. Can you just talk maybe how the base line profiles of X-TOLE2 and 3 are lining up versus X-TOLE and maybe how that could swing what will eventually be the results coming from the study?

Ian Mortimer: I think that’s a really interesting question that we’re absolutely monitoring. I don’t think we have a lot to fan in today, but something that we’ll be tracking. So I’ll get my perspective and then Chris Kenney provide yours as well. So this is a good opportunity maybe just to take a step back and confirm some of the comments that you’ve made, which are on point, which is X-TOLE2 and X-TOLE3 are designed after X-TOLE, obviously, the naming convention there was very deliberate. So it is the same inclusion exclusion criteria for X-TOLE2 and 3 as compared to X-TOLE. But as you suggest during X-TOLE, 1101 was an unknown molecule at that time and also we know that X-TOLE was run — at least part of X-TOLE was run during the pandemic, and we got a quite severe patient population.

And when we look at the literature, we can’t find another study where it was as severe a population as we trialed in an X-TOLE. And we look at three different measures, we look at the number of drugs that patients had failed prior to study the number of background therapies they were on coming into study, as well as the baseline seizure burden. And so there is a hypothesis that maybe an X-TOLE2 and 3 will get a less severe patient population. Yes, we’ll look at that, Tim. We’re not at a point right now to be able to comment on that. It’s always difficult when you’re running a study because those baseline characteristics are changing every day as you’re enrolling more patients. But as we get closer to completing these studies, I think that would be something that would be relevant for us to comment on.

Chris, anything to add to that?

Chris Kenney: Well, I just want to sort of emphasize the importance of keeping an eye on the baseline characteristics of these studies as we go forward. So that’s something that we always do because we want to make sure that the population is somewhat in keeping with what we’re expecting. And if not, then we want to be able to pivot and not wait till the end of the study to realize that. So that’s something that we follow very closely. I think it’s hard to imagine a scenario where we’re going to end up with patients who are more impaired. And so I think it’s more likely to Ian’s point that we end up with patients who are less impaired. And as we tease out the data from X-TOLE, it suggests that those patients actually respond better. So we would have to confirm that in Phase 3, of course. So I think that’s all I’ll say. It remains to be seen exactly how the populations compare.

Operator: Thank you. With that, this concludes today’s conference call. Thank you for joining. You may now disconnect.