Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q4 2023 Earnings Call Transcript

Xenon Pharmaceuticals Inc. (NASDAQ:XENE) Q4 2023 Earnings Call Transcript February 29, 2024

Xenon Pharmaceuticals Inc. beats earnings expectations. Reported EPS is $-0.64, expectations were $-0.76. Xenon Pharmaceuticals Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon. My name is Janie, and I will be your conference operator today. I would like to welcome you to the Q4 2023 Xenon Pharmaceuticals, Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Sherry Aulin, Chief Financial Officer. You may begin your conference.

Sherry Aulin: Good afternoon. Thank you for joining us on our call and webcast to discuss Xenon’s fourth quarter and full year 2023 financial and operating results. Joining me today are Ian Mortimer, Xenon’s President and Chief Executive Officer; Dr. Chris Kenney, Xenon’s Chief Medical Officer; and Dr. Chris Von Seggern, Xenon’s Chief Commercial Officer. Ian will begin with a summary of our recent progress in areas of focus for 2024. Chris Kenney will provide an overview of our ongoing XEN1101 clinical programs, including our plans in major depressive disorder, or MDD, and Chris Van Seggern will comment on key findings from our market research on the potential of XEN1101 in the MDD treatment landscape. I will close with a summary of our financial results and anticipated milestone events before opening the call up to your questions.

Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the timing of and potential results from 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 2027.

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 fourth quarter and full year 2023 financial results and the accompanying annual report on Form 10-K 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’d like to turn the call over to Ian.

Ian Mortimer: Thanks, Sherry, and good afternoon, everyone, and thanks for joining us on our call today. We are proud of the significant progress made across our pipeline in 2023, including the advancement of XEN1101 in our broad Phase 3 epilepsy program as well as strong execution in our Phase 2 X-NOVA clinical trial, which culminated in the release of topline data in late November, that demonstrated XEN1101 to have clinically meaningful drug activity in patients with major depressive disorder or MDD. In addition, we’ve made considerable progress in the maturity of our discovery portfolio, which I will expand upon in a moment. Our team has made excellent progress since the release of X-NOVA, which includes completing a capital raise in December to fully fund a broad Phase 3 program in MDD and setting the date for an end of Phase 2 meeting with the FDA in April.

We have also taken meaningful steps towards designing our Phase 3 program and are committed to initiating the first of three planned Phase 3 clinical trials in the second half of this year. XEN1101 is the most clinically validated and advanced Kv7 therapeutic in development across multiple indications, and we believe the mechanism may have broad applicability. This is reflected in our comprehensive strategy to pursue multiple indications with XEN1101, while also advancing additional novel Kv7 drug candidates. Our extensive know-how developed over almost two decades in ion channel drug discovery as well as our experience with potassium channels, positions us to maintain a leadership position in the Kv7 space. And we plan to continue exploring the pipeline in a mechanism potential of XEN1101 and earlier-stage drug candidates.

We have made strong progress in our Kv7 preclinical program in 2023, including the identification of several promising product candidates, and we expect more than one candidate will be in IND-enabling studies this year, and if successful, could enter first in-human studies next year. Looking beyond our robust research and development efforts in the Kv7 space, we are also advancing development candidates targeting sodium channels, including Nav1.1 and Nav1.7, which may have utility in treating seizure disorders and pain, respectively. We are uniquely positioned in developing molecules targeting Nav1.7, given the previous pioneering genetics research conducted by Xenon scientists that suggests that this particular sodium channel is a key target for the development of novel analgesics.

We have made considerable advancements in this program in 2023 and anticipate that multiple Nav1.7 candidates could also enter IND-enabling studies over the next few years. The benefit of this program is the opportunity to generate important early derisking human proof-of-concept data. So the considerable progress made in 2023 puts us in a strong position as we enter this year, where we have three key areas of focus. One, the continued execution on our Phase 3 epilepsy program with a specific focus on X-TOLE2 as this is on the critical path to an NDA filing and potential approval for XEN1101. Second, the expansion of XEN1101 beyond epilepsy with our now planned Phase 3 program in MDD while we continue to evaluate other clinical indications given XEN1101’s compelling profile.

And third, the continued maturity of our discovery portfolio with multiple molecules expected to move into human clinical development over the next few years. So in summary, with a strong balance sheet to support our robust clinical and preclinical plans, we are looking forward to advancing and growing our broad pipeline with the goal of improving outcomes for patients in areas of high unmet medical need. I’ll now turn the call over to Chris Kenney, who will provide some more details on the progress within our XEN1101 clinical program in both epilepsy and depression. Chris Von Seggern will then provide an important summary of recently completed market research providing feedback from physicians in the depression space to underscore the problems we believe XEN1101 has for broad therapeutic utility.

So, Chris, over to you.

Chris Kenney: Thanks, Ian. To echo Ian’s comments, I’m proud of the many accomplishments achieved in 2023 by our development team and the advancements made across Xenon’s preclinical and clinical product portfolio. We continue to receive overwhelmingly positive feedback on XEN1101 from both clinical investigators as well as the broader neurological community. At the annual meeting of the American Epilepsy Society in Orlando this past December, we had the opportunity to present 30-month data from the ongoing X-TOLE open-label extension study, demonstrating impressive seizure freedom rates including almost one in four patients who were on treatment for two years or more, achieving at least 12 months of consecutive seizure freedom.

In addition, we’ve now generated more than 600 patient years of safety data with some patients having been on XEN1101 for more than four years, supportive of a well-tolerated drug profile. Given the compelling data generated both in our Phase 2b X-TOLE study and ongoing open-label extension as well as from our recent X-NOVA MDD study, we continue to hear that physicians are enthusiastic about the profile of XEN1101 as we advance our late-stage development plans. Our ongoing XEN1101 Phase 3 epilepsy program includes our X-TOLE2 and X-TOLE3 clinical trials in patients with focal onset seizures or FOS, and X-ACKT clinical trial in patients with primary generalized tonic-clonic seizures or PGTCS. In our news release today, we refined our guidance for the completion of X-TOLE2 patient enrollment to late this year or early 2025 to reflect our current modeling.

As a reminder, we intend 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. Turning now to our work in major depressive disorder. And as Ian indicated in his comments, we believe the X-NOVA results were compelling and supportive of continued clinical development of XEN1101 in MDD. To summarize the findings from X-NOVA, XEN1101 demonstrated clinically meaningful dose-dependent activity in depression and anhedonia. Although we did not reach statistical significance in the trial’s primary endpoint of MADRS, there was a clinically meaningful separation of greater than 3 points between placebo and 20 milligrams of XEN1101 and statistical significance was achieved on a number of important secondary endpoints.

XEN1101 achieved statistical significance at week six in the Hamilton Depression Rating Scale, or HAM-D17, a scale that has been used as a primary endpoint in Phase 3 depression studies. XEN1101 achieved statistical significance on change in the Snaith-Hamilton Pleasure Scale or SHAPS measuring anhedonia at week six. XEN1101 achieved statistical significance in MADRS at week one, demonstrating early onset of efficacy and XEN1101 achieved statistical significance in reporting of at least minimally improved symptoms of depression as assessed by physicians using the clinical global impression of improvement. Since reporting the X-NOVA results in November, we’ve made significant progress around key trial elements to position us for success in Phase 3.

Broadly, our development plans include three Phase 3 clinical trials, each one with one active drug arm, in other words, 20 milligrams versus placebo, compared to X-NOVA which had two active drug arms. Based on our review of the literature, we believe this should help lower the placebo response. We also intend to use the primary endpoint of HAM-D17 where we demonstrated statistical significance in X-NOVA while raising the baseline HAM-D17 threshold for entry to ensure a moderate to severe MDD population. We plan to assess the efficacy of XEN1101 compared to placebo on improvement in anhedonia using the Snaith-Hamilton Pleasure Scale or SHAPS, and HAM-D17 at week one as key secondary end points with hopes to confirm the compelling data we generated around rapidity of onset in X-NOVA.

We intend to align with FDA on these and other key design and protocol elements at a scheduled end of Phase 2 meeting in April of this year. Our aim is to initiate our first Phase 3 MDD study in the second half of this year. We recognize the importance of continuing to raise the profile of XEN1101 within healthcare community, and we intend to continue connecting with leading physicians, epileptologists and psychiatrists at key meetings. In the coming months, our team is looking forward to further outreach at the annual meeting of the American Academy of Neurology, or AAN, which is taking place in mid-April in Denver, where we have two podium presentations highlighting XEN1101 data from X-TOLE and data from the ongoing X-TOLE open-label extension study.

We also plan to feature our X-NOVA results at a suitable psychiatric-related scientific congress later this year. We are encouraged and excited by physicians’ enthusiasm for XEN1101 and its potential to improve the lives of patients within both the epilepsy and depression communities. 2024 will be a key year of clinical execution for us with continued advancements in our Phase 3 epilepsy trials in anticipation of our first Phase 3 readout from X-TOLE2 and three Phase 3 clinical trials in depression. I would now like to turn the call over to Chris Von Seggern, who will share some of our recent findings from primary market research to further build upon our understanding of how XEN1101 might address some of the current unmet needs in depression.

Chris?

Chris Von Seggern: Thanks, Chris. By way of background, we firmly believe that market research is an integral part of our planning process to better inform our clinical and commercial development plans. Similar to our approach in epilepsy, we are expanding our understanding of MDD based in part on our own primary market research with prescribing physicians. Based on those market research findings, we believe that if approved, XEN1101 could play a significant role within the MDD treatment landscape. Digging deeper into the research, we surveyed 150 high-volume prescribing physicians, psychiatrists and other key opinion leaders in the US to test product profile of XEN1101 reflective of the X-NOVA findings to understand its fit within the current treatment paradigm.

Similar to our epilepsy research, physicians were interested in the drug profile that included ease-of-use attributes such as once-daily dosing with no titration. Other key takeaways include physicians who are interested in new agents with novel mechanisms of action, especially given the heterogeneity of depression and the current unmet need of those patients who do not respond initially to generic therapies such as SSRIs or SNRIs. Physicians are looking for new therapeutics that do not have liabilities of commonly used agents such as sexual dysfunction and significant weight gain. There is keen interest in products that have the potential to deliver rapid relief of symptoms given the delayed therapeutic response with the current standard of care.

Physicians also identified the ability to address anhedonia, a common comorbidity of depression as another potential differentiator. Given supportive preclinical research and statistically significant results from our X-NOVA study when evaluating secondary anhedonia endpoint using the SHAPS scale, this presented another dimension of keen interest in XEN1101. These survey results are highly encouraging of a compelling product fit for XEN1101 in the future MDD treatment landscape. Further, given the depression of the common comorbidity in epilepsy patients, efficacy in MDD could be a notable differentiator in epilepsy, particularly given that select anti-seizure medications are associated with unwanted mood symptoms. We are incredibly excited about our strategy to pursue multiple streams of late-stage clinical development of XEN1101 in epilepsy and depression and based on our market research, see further potential for the Kv7 mechanism of XEN1101 to have even broader applicability in other neurological indications.

I will now turn the call over to Sherry to summarize our financial results and upcoming milestones. Sherry?

Sherry Aulin: Thanks, Chris. Before diving in, I want to take a moment to introduce a new member of our team, Chad Fugere, who is joining Xenon as our Vice President, Investor Relations. Many of you on the call will know Chad is an integral member of the Investor Relations team at Seagen, leading up to its $40 billion buyout by Pfizer. And prior to Seagen, Chad spent nearly two decades as a healthcare analyst on both the sell side and buy side. We’re excited to welcome Chad and proud that Xenon continues to attract top talent across all areas of our business. Turning now to our financial results. Xenon is in the fortunate position of having a strong balance sheet to support our broad and robust plans for XEN1101 and other programs in our pipeline.

We’re grateful for the support of existing shareholders and the additional new investors who participated in our capital raise in December following the release of our Phase 2 X-NOVA data. As of December 31, 2023, cash and cash equivalents and marketable securities were $930.9 million compared to $720.8 million as of December 31, 2022. Bolstered by this recent financing round, we have extended our cash runway into 2027, which is based on current operating plans that include our XEN1101 Phase 3 epilepsy studies and fully supporting late-stage clinical development of XEN1101 in MDD, which includes three planned Phase 3 clinical trials. I would refer you to our news release and 10-K report for further details around our financial results. Looking ahead to some important milestone events for Xenon this year.

We’ll continue to focus on advancing our XEN1101 Phase 3 epilepsy program, including our X-TOLE2 and X-TOLE3 clinical trials in FOS and our X-ACKT clinical trial in PGTCS with patient enrollment in X-TOLE2 expected to complete in late 2024 to early 2025. We anticipate participating in an end of Phase 2 meeting with FDA in the second quarter of this year to align on elements of the design and protocol for our Phase 3 XEN1101 clinical program in MDD. We expect to conduct three Phase 3 clinical trials in MDD with the first study expected to initiate in the second half of this year. We continue to explore potential opportunities for XEN1101 in other indications. And finally, we intend to advance our early-stage preclinical ion channel programs with the goal of delivering or the goal of having multiple candidates enter IND-enabling studies, both this year and next year.

I hope our call today has conveyed the sense of excitement and anticipation we have as a team around XEN1101 and Xenon’s other promising early-stage programs. Based on its unique mechanism of action and attractive product profile, we see immense opportunity for XEN1101 in epilepsy, depression and potentially other indications. We believe that our depth of experience in ion channel drug discovery and development will help us continue to advance and grow our robust product pipeline. I’ll now ask the operator to open the line for any questions.

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Q&A Session

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

Paul Matteis: Hey, thanks so much for taking my question. Congrats on the progress. I was wondering if you could give a little bit more color on what you’re seeing at the site level as it relates to enrollment in X-TOLE2 and whether things are running a little bit slower than planned recently or if there’s any kind of context you can give around the updated timing guidance? And then as it relates to the Nav1.7 program, given the buzz and pain, I was just curious if you could kind of drill down there, how confident are you that you have a compelling lead candidate? And when do you think something like that could be in the clinic? Thanks so much.

Ian Mortimer: Thanks, Paul. I can address those comments and then colleagues can jump in as well. So specifically on X-TOLE2, so probably just good level set and have a little bit of a reminder, both as we think about X-TOLE, the Phase 2 program, obviously, that we executed on a few years ago, 325 subjects. And then if we think about X-TOLE2 and X-TOLE3, 360 subjects. To get these studies completed takes about 80 to 100 medical centers, as I know you know, but just to be clear for everybody on the call, we go to multiple jurisdictions. We’re not just in North America, but in many countries in Europe as well. And so just given those dynamics, you just have a little bit of natural kind of ebb and flow as we think about screening as well as randomizations on a site-by-site basis.

So there’s nothing specific to answer your question that we’re seeing. So today’s refined guidance is just an update based on the best information and modeling that we have today. If we think about Nav1.7, yes, I think you’re kind of getting a feel of kind of our excitement around this program. And obviously, we’ve been working in Nav1.7 for many, many years from, as I mentioned in the prepared remarks, we were the first to clone the gene, the SCN9A gene many, many years ago. And then we’ve been working on chemistries for probably 15-plus years on the target. I think we have some really advanced candidates internally that meet, from our perspective, all of the requirements for development. And obviously, we have a significant number of criteria that we work through both in terms of kind of efficacy and potency on target, but as well as pharmaceutic properties and therapeutic index that we would expect.

So we’re continuing to do that preclinical work. And as I mentioned, I think we’re going to see multiple candidates move into IND-enabling studies over the next couple of years. And then, as I mentioned, nice thing, as you know, about pain is we can do these early proof-of-concept studies in human as well.

Paul Matteis: Thank you.

Ian Mortimer: Thanks.

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

Leonid Timashev: Hi guys. This is Leonid on for Brian. Thanks for taking our question. I wanted to ask on MDD and specifically on the investigator-initiated study. I guess curious if you guys feel like you have everything you need to plan your MDD trials based upon your own work or if there’s anything specific you’re looking for from the investigator-initiated trial. And if you think you’ll have some of that data in hand as you go to the FDA to discuss trial design and have the end of Phase 2 meeting? Thanks.

Ian Mortimer: Sure. Thanks, Leonid. Chris, why don’t I give my comments and then jump in maybe as you think about the end of Phase 2 meeting in April with the agency? So there’s nothing specific we’re looking for from the IST. I think we were really informed by the X-NOVA study, obviously, with a company-sponsored study, larger number of sites. It was a larger study than the Mount Sinai Baylor study. So really, that was our focus in terms of critical information for decision-making purposes. And what you heard today is we’re committed to late-stage development, and we’re committed to doing three Phase 2 clinical trials in MDD. But Chris, anything to add as we think about just going into the end of Phase 2 meetings?

Chris Kenney: Well, just a brief comment on the investigator-initiated trials and more time spent on getting to transitioning from Phase 2 to Phase 3. So the investigator-initiated trial, there isn’t anything that we need from there to be prepared for the end of Phase 2 meeting. I think the one interesting part about that study is that it includes functional MRI. And what it will do is sort of give some insight into the antidepressant effects that we saw in terms of what is the actual underlying mechanism. So there’s been this theory that there’s a population of neurons that are hyperexcitable that project up to the nucleus accumbens and the fMRI will sort of get to the bottom of that. So I think it will answer a fairly academic — interesting but academic question about the mechanism of how these drugs with Kv7 can improve depression, but it isn’t needed.

We have everything we need. We’ve been going through this data with a fine-tooth comb and doing everything we can to understand it and largely keep continue the things that worked and refine the things that we think can improve our chance of success like decreasing two active arms down to one, that usually improves the placebo effect by a good point or so. So we’re ready to go. We have everything we need. The IST study is not gating whatsoever.

Leonid Timashev: Got it. Thanks.

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

Unidentified Analyst: Hi, good evening. This is Dina on for Jason. Thanks for taking our question. I just had one on MDD. Mindful that you’re awaiting FDA’s feedback, just wanted to kind of get your thoughts on what you’re focusing on in terms of planning a successful stat sig program. I guess specifically curious how you’re thinking about balancing potentially pushing dose to 25 milligrams to get a better dose response and hit stat sig on MADRS by potentially giving up a little bit on tolerability, just knowing that Biohaven’s Kv7 that has demonstrated a really clean safety profile is also entering MDD trials? Thank you.

Ian Mortimer: Thanks, Dina. Why don’t we — Chris Kenney, let’s — why don’t you focus on dose selection and obviously, the — Dina mentioned MADRS, but obviously, we’re moving to the HAM-D17. So maybe kind of walk through a little bit of our thinking around dose selection and the endpoints. And then Chris Von Seggern, I think it would be helpful just to provide, we’ve done a lot of market research. We shared a little bit with it — today, but really thinking about what the drivers are here as we think about that trade-off between efficacy and tolerability?

Chris Kenney: Yeah, sure. So I mean, I think in terms of the two things that are going to increase our chance of success even further as we go from Phase 2 to Phase 3, I would say decreasing the active dose arms from two to one is one. And the other, what Ian just said, which is switching the primary endpoint from MADRS to HAM-D17. So the HAM-D17 was statistically significant in X-NOVA that’s largely driven by the fact that there was less variability, and we’ve seen that in other MDD studies. So those are the two big things that I think will increase our chance of success. We’ve had quite a bit of internal debate about the appropriate dose going forward into Phase 3. It was pretty easy for 20 milligrams to win out over 10 milligrams as you take a look at the efficacy endpoints, both depression scales and anhedonia and the clinical global impression of change.

And then the debate about 20 versus 25, I think, is more nuanced. But I think that if you look at the totality of the data from the epilepsy program, which is that, sure, there is an increase in efficacy as you go from 20 to 25, but also there was a slight increase in adverse events, particularly the most common one of dizziness and so forth. We think that based upon the market research, which Chris will speak to that, largely indicates that safety is a large driver for patients starting and staying on medications. We think that overall, the benefit of sticking with 20 milligrams outweighs the possibility of going forward with 25 milligrams. And I think I’ll leave it at that. We’re pretty happy with X-NOVA, particularly in terms of the dose, the reaction that 20 milligrams had on efficacy and safety.

Keep in mind that the safety appeared to be even better in MDD than they were for focal onset seizures. So we’re going to go forward with 20. Chris?

Chris Von Seggern: Maybe just to add to what Chris has said. I think when we look at the data stemming from X-NOVA and we translate that into a product profile that has been shared with physicians, the clinically meaningful separation we saw against the end points resonated really well with physicians and importantly, when you translate that or compare it against what physicians are used to seeing for the products that have been approved in the marketplace today, there isn’t meaningful separation. And as a result, what we heard, and this was quite consistent across the nature of the research we’ve done to date is that this is not an efficacy-driven market. So maybe I’ll share it a little bit differently. Efficacy is defined by products that are FDA approved and the ability to pull for a product that has a critical higher benefit on MADRS.

It’s not something that physicians identified as a key unmet need. Instead, what they’re pointing to are things such as adverse events profiles, safety and tolerability as primary drivers of decision-making. And what we’ve heard very consistently in our market research is novel mechanism of action with a safety and tolerability profile that as Chris had mentioned, was actually quite favorable when compared to the epilepsy profile really resonated well. And that’s a big part of the rationale and our thinking heading into why we feel really confident in the 20-milligram selection.

Unidentified Analyst: Thank you very much.

Operator: Your next question comes from the line of Tess Romero with JPMorgan. Your line is open.

Tess Romero: Good afternoon guys. Thanks for taking our questions. First one is you gave us a little bit of color tonight on X-TOLE2 enrollment. How is the exact enrollment going? And do you think you might be in a position to guide for enrollment completion sometime this year? And then second question is just, as a follow-up to some of your earlier comments, are you able to give us any further detail on what the next update might be from you on your discovery programs on Nav1.1 and Nav1.7? Could we see something further from you at all before an IND? How should we be thinking about that? Thanks.

Ian Mortimer: Thanks, Tess. Yeah, I’m happy to address both of those questions. So yeah, just as a reminder, you asked about X-ACKT. So I think most people know that we’ve got two focal epilepsy studies going on, X-TOLE2 and X-TOLE3 and then X-ACKT as the primary generalized tonic-clonic seizure study. So both for X-TOLE3 and X-ACKT, we haven’t yet given enrollment guidance, but that is something that we’ll do in the future. I think most important, we really are focused on X-TOLE2 because as we keep talking about, that’s on the critical path to filing the NDA and the potential approval of XEN1101. In terms of X-ACKT, depending on the timing of X-ACKT, that could either be part of the basis of the NDA or it could be a supplemental application.

And from our perspective, I’m not sure it really matters that much because prior to launch, even in FOS, we know that we’ll have the PGTCS data available. And then, obviously, we can follow up with regulators thereafter. So obviously, there’s a huge amount of laser focus on X-TOLE2 and X-TOLE3 and X-ACKT are important, and we’ll give guidance as we move forward. On your discovery question, yeah, I think there’s a couple of opportunities for us to give some updates. You referenced in the question specifically Nav1.1 and 1.7, and I don’t want to lose that we’ve also got a very broad program in Kv because we do believe that the mechanism is well validated, both in epilepsy, obviously, with our X-TOLE data and in psychiatric conditions with our X-NOVA data.

So there’s really an opportunity to have this broad leadership role in Kv7. So you’ll hear more from us on some of those molecules as well. And actually, those are the most advanced molecules if we think about our entire discovery portfolio. Specifically on the Nav1.1, we have shared some data on 1.1 if you go back to the American Epilepsy Society meetings over the last couple of years. We’ve been providing some of our preclinical and animal data at the epilepsy meeting. So do go to our website and you can find those posters. And I think there’s some really compelling data there. So there’s always an opportunity for us to continue to provide updates as we go forward. And then with Nav1.7, we haven’t shared any of our data publicly. So that would be the opportunity as we move forward, not only updates on where we are in terms of IND-enabling studies and getting close to an IND or a CTA filing and first-in-human studies, but also be able to provide some of the data that we’ve generated preclinically into the public domain at the appropriate conference.

So I think those are things to look forward to over the next few years.

Tess Romero: Great. Thanks for taking our questions.

Ian Mortimer: Thank you.

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

Andrew Tsai: Hey, thanks. Good afternoon. Thanks for taking our questions. So maybe the first one, just in the upcoming FDA meeting in April, thanks for sharing some of the planned elements of the MDD study designs. Is there an upside scenario in this meeting that you’re hoping for? And then secondly, actually on the Nav1.7, obviously, there’s a little buzz with Nav1.8 going on. So can you talk about whether you believe 1.7 is a superior target to 1.8? And what — to you having some of the historical challenges and pitfalls when pursuing that 1.7 that you think you can overcome? Thank you.

Ian Mortimer: Great. Thanks, Andrew. I’m happy to give some perspective on Nav1.7 and then, Chris, I’ll pass it over to you, if you just want to provide your comments on end of Phase 2 meeting in depression. So in terms of Nav1.7, Andrew, I think both Nav1.8 and 1.7 are well-validated targets for different reasons. I don’t think the genetic validation is a bit stronger on Nav1.7. But we now have clinical data available that a selective sodium channel approach, inhibition approach, [indiscernible] can yield really promising human efficacy data. And so I think we’re kind of in this really unique position where we can leverage everything we know about 1.7, which we think is an extremely well-validated target genetically but feel comfortable that the selective sodium channel inhibition approach can have therapeutic utility in the clinic.

In terms of what we’ve learned, so we had taken molecules into the clinic previously in a collaboration with Genentech. And we’re going back kind of to the 2015 range of when we had moved some of those molecules ahead with Genentech. I think we’ve learned a lot about both the chemistries and the distribution of the molecules that we’re leveraging to make the necessary adjustments and changes in learnings from all of that work as we think about our current chemistries and the molecules that we’d like to move ahead. So I think there’s been a huge amount of learning in the field broadly as well as specifically here at Xenon that we can put into practice as we move these molecules forward. Chris, on the MDD and the Phase 2 meeting?

Chris Kenney: Yeah. So, I mean, keep in mind that we just had an end of Phase 2 meeting in epilepsy two years ago. And so we learned a lot about what FDA thought regarding the non-clinical program, clinical pharmacology, safety assessments and so forth. And so the list of questions that we have going into this end of Phase 2 is shorter and is completely focused on major depressive disorder. Within MDD, the regulatory path is pretty well trodden. So the guidance states that you can use MADRS or HAM-D for the primary endpoint, we’re choosing HAM-D. We think that the clinical data and the unmet need that Chris Von Seggern mentioned from our research, all justifies 20 milligrams, along with some PK/PD modeling that we did as well.

So there isn’t anything that we’re doing that’s really unusual. So to your point about upside, I suppose the only thing that comes to mind is we’re quite interested in demonstrating improvements early on. We had this efficacy signal at week one in both focal onset seizures and in the major depressive disorder. So there seems there’s a consistency there across two therapeutic areas. And so I think one question is what can we do to set up a statistical hierarchy to put ourselves in a position where that could end up in the label? And then I would say the same thing for anhedonia. We’re quite interested in the signal that we’re seeing in terms of improvements in anhedonia. We think this is really relevant based upon talking to psychiatrists and the market research that Chris Von Seggern has done.

And so what can we do to assess those endpoints and get them in the label, I think those will be a couple of things that we talk about. Ultimately, of course, that’s going to be, they’re going to be review issues. And so we’re unlikely to get a definitive answer, but hopefully, we’ll set up, tee up those conversations down the road.

Andrew Tsai: Thanks so much.

Operator: Your next question comes from the line of Paul Choi with Goldman Sachs. Your line is open.

Unidentified Analyst: Hi, this is Robert on for Paul. Thanks for taking our questions. And we have two. The first one is on the X-TOLE2, what steps you can do to maintain the enrollment base or maybe even accelerate? And the second question is on the Nav1.7, but given the recent success in this area and with your expertise, how do you think the next-generation molecule should look like? I mean what’s your development strategy? Like, [indiscernible] partnerships. Thanks so much.

Ian Mortimer: Thanks. Can you just repeat the question on X-TOLE2? Is it — it was a question just around on whether enrollment could pick up. Is that correct?

Unidentified Analyst: Yeah, sure. So kind of like that and what kind of steps that you need to do in order to maintain the enrollment pace or maybe even accelerate?

Ian Mortimer: Yeah. I mean, as I said in my — in the answer to the first question on the Q&A today is in X-TOLE2, we have — the study is designed for 360 subjects across three arms to achieve that enrollment over an appropriate period of time. It takes about 80 to 100 medical centers. And so if you just kind of do that math, I think you can kind of recognize that each center, on average, brings a handful of patients into the study. And so I think it’s less around kind of the acceleration, but just more — we just see some natural kind of ebb and flow of the screening rate, which then goes down the funnel in terms of the number of patients that go into baseline and then eventually get randomized. So I don’t think from our perspective, there’s no adjustments that are really necessary from an X-TOLE2 perspective. And then your question on Nav1.7 was more around partnering and future development. Was that right?

Unidentified Analyst: That’s right.

Ian Mortimer: Yeah. So it’s early days. I mean, as we’ve said a number of times, we’re really uniquely positioned to prosecute on the target, and that’s because we did the early genetics on it. And we’ve also been working on developing new chemistries on the target for many, many years. So I think we’re uniquely positioned to do that. So there are no plans in the near term to think about partnering the asset. This is something that we believe we can take definitely into IND-enabling studies and through early development. Kind of the long-term plan, I think that’s quite a ways away in terms of how we think about potentially the commercial market. But right now, we have no plans on thinking about partnering Nav1.7, really doing all of the development over the next number of years by ourselves.

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

Danielle Brill: Good afternoon guys. We have questions on for XEN1101. Is there any update on the pediatric formulation? And what’s your current thinking of the ex-US strategy is? Thank you.

Ian Mortimer: Thanks for the questions. So on the pediatric formulation, why don’t — I’m happy to start. And Chris Kenney, do you want to maybe just talk about how we think about kind of getting into younger age cohorts, both in FOS and then obviously, the adjustments we’ve made in the primary generalized to get into a younger age group there. We can start there and then I’m happy to talk about kind of our ex-US strategy for 1101 overall. So just kind of a couple of high-level comments on pediatric before passing to Chris. So yes, we’ve discussed with regulators around the pediatric plans. We have agreement on what we need to do, and Chris can kind of walk you through how that practically works from a development strategy point of view.

Your specific question around the pediatric formulation, so we know that with an adult dosage form that that can go down into adolescents and into children, but as we get into much younger children, we’re going to need a different pediatric formulation, and that’s something that we’re continuing to work on at Xenon. It’s not something that we have finalized. And so we haven’t taken any other formulations into human clinical development, but that would be something that we would do in the future. But really only as we need to get into those much younger age cohorts, probably younger than age six. But Chris, do you want to just talk through the development plan there?

Chris Kenney: Yeah. I mean on a high level, we have agreement from both FDA and EMA in terms of the plans to bring this drug into the pediatric population as it pertains to focal onset seizures with their extrapolation rules and then also with PGTCS. So there’s sort of two things that have to happen before you go into those clinical trials, Ian has already mentioned in the question — mentioned the pediatric formulation. There’s also some nonclinical work that needs to be done and then you’re able to go into open-label studies in pediatric patients usually starting at a higher age and then working your way down. So all of those plans have been agreed upon and are being finalized. And then on top of that, Ian already alluded to this, in our PGTCS study, the X-ACKT, we have brought down the age cutoff from a minimum of 18 years down to 12.

And so in the near future, we’ll start gathering data on adolescent patients in terms of efficacy, safety and PK and that will be helpful to illuminate all those plans I already mentioned that we’ve discussed with EMA and FDA. So it’s all ongoing. We think this drug has potential for adults and for patients, assuming that the safety profile supports it.

Ian Mortimer: Thanks, Chris. And then the question on kind of ex US, what is our thinking there? So I think no real update, but I’m happy to be to provide just our overall strategic approach here just to make sure that we’re clear. So we have stated for some time that we are doing all of the development for XEN1101 currently and our plans are to build the commercial infrastructure and launch the drug in the US ourselves. But the current strategic plan is not to build that infrastructure outside of the US. So at some point, we will be leveraging partners to access jurisdictions outside of the US. Obviously, we don’t guide on that timing. But that is something that, as we think about the long-term development and market access of the drugs of XEN1101, we’ll focus ourselves in the US, and then we would, at the appropriate time, engage with partners ex US.

Danielle Brill: Thank you.

Operator: Your next question comes from the line of Joseph Thome with TD Cowen. Your line is open.

Joseph Thome: Hi, there. Good afternoon and thank you for taking my questions. Maybe just one on the three Phase 3 studies for major depressive disorder. I guess, are these going to be just three replicate trials or in terms of the patient population enrolled or will you potentially use one of them to examine like an antidepressant unresponsive population or TRD, how should we think about that? And then second, just on the HAM-D measure itself, I guess, is there something mechanistically about 1101 that makes the benefit clear on the HAM-D scale versus the MADRS or was it really just what you saw in the Phase 2 and maybe some of that decreased variability in the response that made you go forward with that measure? Thanks.

Ian Mortimer: Thanks, Joe. Chris, are you good to go through the three Phase 3 studies and our thinking about the population there and then also the question around HAM-D17?

Chris Kenney: Yeah, sure. Let’s start with HAMD-17. I think I sort of already alluded to the point that I think is the major advantage for HAMD-17 over MADRS, which is really the variability, not just in our study but in other studies. And it’s not subtle. It’s really quite striking. So I think that’s the major factor for why it’s beneficial. As far as the other three studies that we’re going to do in major depressive disorder, we’re considering them to be very similar to one another, one active arm versus placebo, similar size. And the big difference from one study to the next will largely be considering different jurisdictions to be able to make sure that you can operationally execute and pull off the studies within a reasonable period of time.

But for the most part, we’re looking at them as pretty much identical and the purpose of that third study is to mitigate risk, largely similar to what we’ve done with focal onset seizures, we’ve completed X-TOLE and we’ve got X-TOLE2 and X-TOLE3 running. So similar approach to MDD and focal onset seizures.

Ian Mortimer: Great. Thank you, Chris. And Joe, maybe I can just add, just to answer your very specific question, Chris, I think, kind of, it was embedded in his answer that our current thinking is those three studies would look very much the same, which means the patient population would be the same. We wouldn’t be looking, as you asked about, like a TRD population in one of those studies. We would think about it really in the moderate to severe MDD population but not the TRD population.

Joseph Thome: Perfect. Thank you.

Ian Mortimer: Yeah.

Operator: Your next question comes from the line of Brian Skorney with Baird. Your line is open.

Brian Skorney: Hey, good afternoon everyone, thanks for taking my question. Also on the Nav1.7 program you’re working on, given what seems to be somewhat disparate results from a 1.8 inhibitor, there’s been some questions that we’ve done about differential expression in different tissues, it’s not just sort of a clinical design issue here. So I guess, how do you think about expression of Nav1.7 and how does this inform sort of what key indications do you think are sort of the most likely to be pursued for this target, I think, 1.7 preferentially expressed in DRG neurons. So just as you kind of like go forward, what do you imagine for the path for clinical development here?

Ian Mortimer: Yeah, I think it’s a really good question, Brian. It’s just very probably premature to go too far down that path. But I do want to kind of pull on the thread that you’ve made in your statement, which is I think expression matters, and so the distribution of the properties — pharmaceutic properties of the chemistries matter. And I was kind of alluding to this a little bit in one of the earlier questions, is, I think that’s a lot of what we learned, us at Xenon has been in the field for a number of years is that I do think we need appropriate molecules that are going to access the target peripherally. But as you say, there is a central expression as well. In terms of really designing out, and so we believe we have chemistries that are going to appropriately address where Nav1.7 is expressed.

And as a reminder, there are these patients out there that are these homozygous loss of function where they have none of the protein and they don’t feel pain regardless of noxious stimuli. We don’t think you need that kind of receptor occupancy. Some of the genetics actually teaches us in the literature that we don’t need that kind of receptor occupancy. But I think where expression is and the properties of the drug is absolutely going to matter. As we think too far ahead around, does that give us a better indication of where we should go in terms of the ultimate therapeutic utility and how broad or narrow? I think it’s just too premature. We’re really focused on getting through IND-enabling studies and then doing some of that early human proof-of-concept work.

And then I think we can kind of broaden out a little bit more and think about the development plan from there.

Operator: Your next question comes from the line of Marc Goodman with Leerink Partners. Your line is open.

Marc Goodman: Ian, I was curious, as you’ve dove into the data from MDD, a little bit more on the safety profile, just why do you think the safety profile was just different in that population relative to the epilepsy population? And then, Sherry, maybe you could just give us a sense of R&D spend for this year? Thank you.

Ian Mortimer: Marc, yeah, I’ll kind of open up with a quick comment, but I’ll pass it to Chris Kenney to kind of give his perspective. But yeah, I would actually say that was surprising to us when we unblinded X-NOVA that the tolerability profile, and I know we had a lot of questions with investors and with analysts on what is the tolerability profile going to be like in an MDD population as we compare that to the epilepsy population and we were pleasantly surprised when we unblinded data that it looks like tolerability. We probably — again, with the caveat of a cross-trial comparison, it looks like we have a better tolerability profile in depression. Chris, maybe you can give your perspective on the reasons. And I know we may not be able to answer it perfectly, but at least some of our thinking internally on the why.

Chris Kenney: Yeah. I mean going into it, I mean, we weren’t really sure what to expect. And so it was a pleasant surprise to see the tolerability the way it was. Two reasons I can come up with why it might be tolerated better in the MDD population than the focal onset seizures. One is that the concomitant medications, remember the X-NOVA was done as monotherapy, whereas the X-TOLE study was completed as adjunct to other antiseizure medications. And they were pretty — they had pretty significant disease, that X-TOLE population. Half of them were taking three anti-seizure medications and about 40% or so were taking two. So they were taking more concomitant medications. I think that’s probably the best answer to your question.

If you want to get a little more academic, there is evidence in nonclinical experiments that Kv7 is down regulated in depression models. And so I don’t know if that’s the case in patients with depression. I don’t think we’re ever going to be able to know for sure. But if there were a down regulation of Kv7 and you’re coming in with a Kv7 opener, you might expect those patients to tolerate the drug better. I mean I think one thing not to spend too much time on this, but eventually, we’ll have safety data in the X-ACKT trial with PGTCS. They tend to be on less or fewer concomitant antiseizure medications. And so we’ll be able to compare the 25-milligram dose in that population to FOS and see if there’s any difference there, it may get to the bottom of your question.

Sherry Aulin: And Marc, just to address your point on R&D spend in 2024. So as we think about the epilepsy program, as Ian mentioned earlier, this program, each of the studies is about 80 to 100 sites, and we’re going to multiple jurisdictions. So as we think about over 2024, now we’ve got our sites fully up and running, and we’re going to complete enrollment in late ’24, early ’25. So we are going to see an incremental increase as we look at the cost across the epilepsy program. In MDD, where we’ve guided that we’re going to have an FDA interaction in April and we’re going to start our first study in the second half of the year. So we’re not going to see a significant increase as it relates to the clinical development costs yet for MDD in ’24.

We’ll see that really pick up more in ’25. And then on the preclinical programs, we are, as we discussed, moving multiple product candidates into IND-enabling studies. So we’ll see an incremental step-up as well. So overall, I think we don’t guide and give specific numbers, but directionally, we’ll see a step-up increase in ’24 over what we saw in ’23.

Marc Goodman: Thanks.

Operator: Your next question comes from the line of Mohit Bansal with Wells Fargo. Your line is open.

Unidentified Analyst: This is Adam on for Mohit. Thanks for taking the question. With enough cash runway to support Phase 3 development in epilepsy and MDD, would you be able to compare how MDD development would compare to epilepsy in terms of trial requirements and costs? And also what data from the epilepsy program you can leverage for the MDD setting? Thanks.

Ian Mortimer: Thanks, Adam. I’m happy to take the second one. And then, Sherry, do you want to provide some perspective just on kind of sizing and costs overall for MDD versus epilepsy? So in terms of — that’s — we didn’t go into this earlier, but at our end of Phase 2 meeting, one of the questions that we will be discussing with FDA is just the size of the safety database. So Chris had mentioned, we learned a huge amount with our FDA interaction with the neurology division post X-TOLE. So we had a lot of questions around — so we have a lot of comfort around the clinical pharmacology package, the nonclinical package, the overall safety database that’s going to be required in epilepsy. One of the questions that we’ll discuss with FDA in April of this year in psychiatry is how much of that epilepsy safety database can we leverage into an application or a DOTCA in depression.

So we’ll be able to get back to you on that as we’ve had those FDA interactions and what those requirements are. I mean the benefit that we have with XEN1101 right now is, and Chris mentioned this in his prepared remarks, is we have a huge amount of safety data and a real significant knowledge about the profile of the drug. We now have over 600 patient years of exposure. We have long-term dosing more than four years. We’ll have patients that will go out more than five years this year. So I think we can leverage a huge amount of what we know about the molecule and I think we’ll get credit for that in depression. The question is what else is FDA going to require, specifically, in the label population. So stand by for that. Sherry, on the costing side?

Sherry Aulin: Yeah, I was also going to add, there’s a lot we can hopefully leverage on the safety database piece, but a lot of the work that we’re doing in development for epilepsy can also be leveraged for depression. So as we think broader than the clinical studies themselves, the clin-pharm package the nonclinical toxicology studies that we run, a lot of the work that we do on the CMC side with respect to development, registration and validation batches and things of that sort can also be leveraged in the depression program. And so when we look at the totality of the cost, I mean, we’re running a broad MDD program with three studies. The studies are going to be probably larger than the epilepsy studies that we’re running.

And I would say roughly as we think about the amount of capital that we’ve raised, which was $345 million at the end of last year, that’s given us the ability to fully fund the depression program in addition to extending our cash runway by a year. And so generally speaking, it’s faster, and I would say, generally cheaper to run the depression program as we compare that to epilepsy. And in particular, as we think about epilepsy, one of the big costs is the extended open label work that we’re doing. So for example, in X-TOLE, we had an open label that now is entering its fifth year. And we recently said that we’ve extended that to — from five to seven years. So that is a significant cost, which we don’t expect will be the case for depression.

Operator: Due to time constraints, our last question comes from the line of Laura Chico with Wedbush Security. Your line is open.

Laura Chico: Thanks very much for fitting me in. Just two quick ones and following up on that. Apologies if I missed part of it, but could there be a scenario in which you just do two depression studies, I guess, given the large database and leverage of the epilepsy data set, I’m just trying to understand, could there be a scenario where you don’t necessarily need to do three trials? And would that be a discussion point in the end of Phase 2 meeting? And then related to depression, it looks like the timing for the Mount Sinai depression study has been extended based on the clinical trial posting. And I understand this is not a gating item at this point for the trial initiation or FDA discussion. But I guess I’m curious how much relevance does this study actually carry at this point to you? And what’s your working assumption in terms of data readout? Thank you.

Ian Mortimer: Thanks, Laura. Yeah. I don’t — when we think about the two versus three depression studies, I don’t think that’s going to be an FDA question, meaning, as you suggested, if we had two positive studies that, that would meet the requirements for filing. And as you suggested and we’ve highlighted, we’re going to have a huge amount of safety data around the molecule. So when we think about the decision of running two studies versus three studies in depression, it’s really more around risk mitigation and just some of the variability that you see in depression studies rather than specifically that we believe that’s either going to be a regulatory requirement or required for a certain amount of safety data. So I hope that helps to just clarify kind of our thinking around three versus two.

And then on the IST, yeah, we don’t have a lot of control over the IST. Obviously, this is the two centers at Mount Sinai and Baylor. It’s an academic run study. We provide drug supply. And obviously, there is collaboration and coordination between our institutions, but we don’t really have influence in terms of enrollment. As we’ve talked about, not gating to our plans moving forward, and we’re not waiting for those data. And we really are guided by Dr. Murrough and Dr. Matthew in terms of how they’re doing and when potentially the data would be available. So when we have a better idea of when that topline data would be available, then we’re happy to share it with you at that time.

Laura Chico: Thank you.

Operator: Thank you for your participation. This concludes today’s call. You may now disconnect.