Earnings Call: Q3 2018

Nov 6, 2018

Quarterly report

Good day, ladies and gentlemen, and welcome to the Q3 twenty eighteen Xenon Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Ms. Jody Rates. Ma'am, you may begin. Thanks, Daniel. Good afternoon. Thank you for joining us on our call and webcast to discuss our financial and operating results for our third quarter ended September 30, 2018. Joining me on today's call are Doctor. Simon Pimstone, Phenon's Chief Executive Officer and Ian Moremer, Xenon's President and Chief Financial Officer. Following this introduction, Simon will provide perspective on Xenon's progress and then Ian will review our financial results. After that, we will open up 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 about the sufficiency of our cash to fund operations into 2021, the timing of IND or IND equivalent submissions with regulatory agencies, the initiation of future clinical trials, the efficacy of our clinical trial designs and anticipated enrollment, the potential efficacy candidates. The timing of and results from ongoing clinical trials and preclinical development activities certain milestones in both our proprietary and partner development programs. The plans of our collaboration partners and their interactions with regulatory agencies the results of our research and development efforts, the status and timing of the potential addition of new programs to our pipeline and related development activities, the timing of our public presentation and potential publication of future clinical data and the potential to advance XEN496 into a Phase III clinical trial and XC007 into a phase 2 clinical trial. 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 statement. Today's press release summarizing our 3rd quarter results and the accompanying quarterly report on Form 10 Q is available under the Investors section of our website at www.xenonpharma.com and filed with the SEC and on SEDAR. Now, I'd like to turn the call over to Simon. You, Jody, and good afternoon, everyone, and welcome to the Xenon Call. This past quarter marked a number of achievements. Notably, we presented positive data from our XEN1101 Phase 1b transcranial magnetic stimulation or TMS pharmacodynamic study and provided an update on our XEN901 program at the European Congress on epileptology. We announced the pipeline addition of XEN496 which is a potassium channel modulator for the treatment of KCNQ2 epilepsy that we are developing and expect to initiate a Phase III clinical trial mid-twenty 19, and we significantly strengthened our balance sheets and anticipate having sufficient cash to fund operations into 2021. With our continued progress and growing momentum, we believe we are establishing 1 of the most pelling neurology pipelines in clinical development with a number of programs that we expect to be in mid to late stage clinical development in 2019. On our call today, I'll begin by highlighting the key takeaways regarding the newest addition to our neurology pipeline XEN496 I'll then provide updates on the rest of our neurology pipeline before turning things over to Ian to provide a financial overview. In early September, we unveiled our plans for a Kv7 potassium channel modulator called XEN496, with the active ingredient ezogabine otherwise referred to as retigabine. We believe XEN496 represents a perfect fit within our portfolio of ion channel neurology focused therapeutics and we're excited that XEN496 provides us with the opportunity to We intend to develop XEN496 using a precision medicine approach to treat a rare and severe pediatric epilepsy called KCNQ2 epileptic encephalopathy, also known as EIEE7 or KCNQ2EE. Awaya background, ezogabine is the only FDA approved anti epileptic drug or AED, a mechanism of action that potentiates Kv7 mediated potassium current. It was originally approved by the FDA in June 2011, as an adjunctive treatment for adults with focal seizures with or without secondary generalization. Glaxo SmithKline marketed ezogabine in various jurisdictions as Protiga in the U. S. And Trobalt in Europe, but withdrew the drug the market worldwide in June 2017, citing commercial reasons. Because of a pigmentation risk especially the initial concerns about potential visual toxicity related to retinal pigmentation, which to date have not been proven, as well as issues around the three times a day dosing regimen and Cmax related CNS AEs is arguably never gained a large market share in the landscape of other approved AEDs in the adult population. As we dive deeper into ezogabine as it related to XEN1101, our novel Kv7 modulator currently in early clinical development for the treatment of epilepsy. We found both in our KOL discussions as well as in reported case studies, interesting in compelling reports of positive benefit to risk ratios in cases where there was use of ezogabine in children with KCNQ2 epilepsy. We became increasingly interested in the pediatric use of ezogabine and began to build a case for XEN496 to potentially offer a precision medicine approach to treating children with KCNQ2EE. KCNQ epilepsy is generally a very difficult to treat infantile encephalopathic epilepsy with seizures and cognitive decline mostly refractory to current AEDs. In one recently published reported by John Miller chap in 2016, ezogabine was associated with improvement in seizures and or reported improvements in development in 3 of the 4 infants treated before 6 months of age and 2 of the 7 treated at an old age. No serious adverse effects were reported in this case series. Another study that included a review of medical records and structured interviews with families of 8 children with KCNQ2EE, who had previously been prescribed ezogabine. This was a report by Olsen in 2017, also suggested that ezogabine was effective and tolerable. Sustained improvement in seizure frequency was observed in 5 of the 6 patients with at least weekly seizures along with reported improvements in development or cognition in all eight patients. The only adverse event reported was urinary retention in 3 patients and overall ezogabine was well tolerated. Considering the encouraging results, both in terms of efficacy and tolerability reported of ezogabine in KCNQ2 epilepsy, we concluded that the potential benefits of treating children with case and Q2 epilepsy with ezogabine greatly outweigh the well understood risks. Having identified a significant unmet medical need for XEN496, we took a number of steps to advance this program. Firstly, we obtained a regulatory right of reference from GSK authorizing the FDA to reference GSK's non clinical and clinical data when considering our regulatory submissions. This is especially valuable considering that ezogabine has been tested and used in thousands of patients. Secondly, we consulted with clinical experts and patient advocacy groups prior to submitting a pre IND briefing package to the FDA, which outlined our proposed pediatric clinical development plans for XEN496. We included key letters of support addressed to the FDA from the KCNQ2 cure alliance from key opinion leaders and from parents of these patients. Thirdly, we received a positive response from the FDA indicating that it was acceptable to study XEN496 in infants and children up to four years old and that a single pivotal trial in approximately 20 patients may be considered adequate in order to demonstrate XEN496 efficacy and KCNQ2 epilepsy. 4th, we also received orphan drug designation from the FDA for XEN496 as a treatment of KCNQ2 epilepsy. 5th, we established a steering committee made up of key opinion leaders in the pediatric epilepsy field to help guide the clinical development of XEN496. With input from 6 phase 3 clinical trial is well underway and we're in the process of clinical trial site selection. 6th, and finally recognizing that ezogabine was initially developed as a hard coated tablet that is unsuitable for use in children we are advancing development of a pediatric specific formulation for XEN496 that may also address the pigmentation liability associated with ezogabine. Therefore, overall, our positive interactions with the FDA GSK right of reference strong relationships in the KCNQ2EE community and efforts to develop a proprietary pediatric formulation provide us with what we believe are very important advantages and risk mitigation measures in our XEN496 program It is anticipated that the Phase III clinical trial examining XEN496 efficacy as a treatment of KCNQ2 epilepsy will be initiated in approximately mid-twenty 19. We look forward to providing additional details regarding the proposed clinical development of XEN496 over the coming months. Following XEN496 in our pipeline is XEN1101, which is our novel Kv7 potassium channel opener for the treatment of epilepsy and potentially other neurological disorders. Based on results from the interim phase 1 clinical data, We believe XEN1101 is the potential to be a best in class Kv7 modulator. Importantly, pharmacokinetic or PK data from our phase 1 clinical trial confirms a half life consistent with once daily dosing for XEN1101 versus the 3 times daily required for ezogabine. This potential dosing advantage viewed together with the low risk of pigmentation leads us to believe we will observe improved overall tolerability of XEN1101 compared with ezogabine. Additionally, in preclinical models and now also in our PMS studies in humans, we have shown evidence that XEN1101 has activity at lower doses compared with historical data for ezogabine from other studies. Therefore, overall, Our hypothesis that XEN1101 could have significant improvements over ezogabine has been observed pre clinically and now is being supported with promising results in early clinical development, including in a pharmacodynamic or PD readouts. We have now completed enrollment in our phase 1 clinical trial, which is evaluating the safety, tolerability, and PK of both single ascending doses or SADs and multiple ascending doses or MADs of a powder and capsule formulation of XEN1101. In addition to fairly traditional phase 1 design, we designed a pilot study using the TMS assay for XEN1101 in order to obtain an early PD readouts measuring impact of the active drug on cortical and corticospinal excitability. We have also used the TMS results to help shape our future development plans for XEN1101, including optimizing dose selection for our upcoming phase 2 study. Based on the encouraging results from an initial TMS pilot study, which we presented in May at the HELAT meeting, we opted to move ahead with a more robust trial design for our phase 1 B TMS study, which was designed as a double blind placebo controlled randomized crossover study in 20 healthy male volunteer subjects. The positive results from this phase 1b TMS study were presented at the European Congress on epileptology meeting at the end of August, including data showing that XEN1101 reduced corticospinal excitability as demonstrated by a concentration dependent elevation in resting motor threshold or RMT the key TMS EMG measure and showed this RMT effect with XEN1101 was more robust and observed at a significantly lower dose when compared to historical ezogabine data from other studies. XEN1101 has been shown to be generally well tolerated with all adverse events or AEs reported as mild or moderate and reversible, there were no withdrawals, no serious AEs, and no deaths. We intend to publish the complete XEN1101 phase 1 clinical trial results at the upcoming American epilepsy society or AES meeting taking place between November 30th to December 4th in New Orleans. The totality of the data generated to date with XEN1101 including the preclinical data set, the phase 1 clinical data, including dosing, PK safety and tolerability, as well as the robust signal in TMS combined with a well understood mechanism of action and the known development parts of ezogabine gave us the confidence to We believe this Phase 2 study will allow us to get a definitive read on efficacy in this population and will also be dose range finding. As it will include multiple active arms. We anticipate that the detailed protocol for the phase 2 trial will be released in coordination with the AES meeting where we will be meeting with a number of our KOLs and sites that will be involved in the trial. We expect this trial will be initiated before the end of this year. We look forward to providing the full details highly selective NAV 1.6 sodium channel inhibitor called XEN901 being developed for the treatment of epilepsy. Although those sodium channel blockers are a mainstay in the treatment of epilepsy, utilizing these drugs to their maximum effect in patients is often limited by side effects. The preclinical profile and selectivity of XEN901 suggest it may provide a significant advancement in efficacy safety and tolerability with the potential to be superior to other sodium channel blockers, allowing more patients to achieve seizure freedom. Therefore, I believe XEN901 could be a very important addition to the AED space. We are nearing completion of a randomized double blind Cbo controlled phase 1 clinical trial to evaluate XEN901 safety, tolerability and pharmacokinetics in both SAD and MAD cohorts, Interim results disclosed in May August of this year demonstrate a favorable pharmacokinetic data profile that showed dose proportionality and supported twice daily or better dosing. The multiple dose levels tested yielded drug exposure above the predicted efficacy range required to achieve the EC70 and the preclinical maximal electroshock seizure model. Based on experience with PMS in the XEN1101 Studies, we, along with our collaborators at King's College, are exploring the use of the TMS assay in a small subset of subjects in the ongoing XEN901 Phase 1 clinical trial. An update on our XEN901 program is also anticipated at the upcoming AES meeting in a few weeks. And a phase 2 clinical trial evaluating XEN901's efficacy as a treatment for adult focal seizures or for rare pediatric forms of epilepsy expected to be initiated as soon as feasible thereafter, depending on planned discussions with regulatory agencies in the near term. We believe we'll be in a position give a complete update on the next steps We are also developing XEN007, a CNS acting calcium channel inhibitor that directly modulates the calcium channel known as CAF 2.1. The active ingredient is flunarizine. Flunarizine is approved and used outside of the U. S. For the prevention of chronic migraine as well as vertigo. Has also been reported to have clinical benefits in a number of other neurological disorders, including hemiplegic migraine or alternating hemiplegia and alternating hemiplegia of childhood and forms of adults and childhood epilepsy. We received orphan drug designation from the FDA for 7 for the treatment of hemiplegic migraine. In addition, we entered into key agreements in order to access regulatory files and manufacturing support to potentially enable the accelerated clinical development of XEN007 directly into a Phase II clinical trial. We are currently evaluating various development strategies XEN007, including the initiation of physician sponsored clinical trials across different neurological disorders. Lastly, I'd like to touch on our partnership with Genentech before turning things over to Ian. We have an ongoing license agreement in place with Genentech focused on developing novel, oral selective NAV 1.7 inhibitors for the treatment of pain And as we've discussed on previous calls, there was a preclinical finding with respect to a lead compound GDC0310 over the past number of quarters, Genentech has been completing additional preclinical work on GDC0310 to determine next steps in the program. This preclinical work is now complete and Genentech is elected to focus its future NAV 17 development efforts on backup molecules and not to pursue future development with GDC-three ten. While we are disappointed that GDC-three ten is not moving ahead, Both Xenon and Genentech continue to believe strongly in the Nav1-seven target and the program remains a very significant effort at Genentech. The benefit of such a strong collaboration over many years is that there are backup molecules already identified. And as these molecules progress Through development, we will be eligible for milestones and royalties as outlined in our agreement with Genentech. While Genentech has not provided further detail on timing as the stage. We look forward to updating guidance as this collaboration continues and as backup molecules enter development. In summary, I'm very excited about our immense progress to create what I believe is one of the most exciting neurology pipelines currently in clinical development. Looking ahead in the near term, we anticipate seeing advancements across all of our development programs. Including developing a pediatric specific formulation for our XEN496 products and submitting final proposed clinical protocol in order to initiate a Phase III pivotal trial in approximately mid-twenty 19 in a pediatric epilepsy known as KCNQ2. Disclosing our final 1101 phase 1 results at the upcoming AES meeting, and initiating a Phase 2 clinical trial evaluating XEN1101 as a treatment for adult focal seizures before the end of this year. Providing an update on XEN901 at AES before year end and initiating as soon as feasible thereafter Phase II clinical program. Evaluating XEN901's efficacy as a treatment of either adults or pediatric forms of epilepsy, depending on planned discussions with regulatory agencies in the near term and evaluating various clinical development strategies for XEN007, including the support and initiation of physician sponsored clinical trials across different neurological disorders in 2019. Now I'd like to turn this over to Ian to summarize our financial results for the third quarter and to provide some concluding remarks. Ian? Thanks, Simon. I'll start by providing an overview of our cash position and cash runway guidance, and then I'll provide a few highlights of the financial statements. In September, we significantly strengthened our balance sheet through the successful completion of an underwritten public offering of 4,500,000 common shares at the public offering price of $14 per common share. Providing us with proceeds of $59,200,000 net of underwriting discounts and commissions, but before offering, offering expenses. I'm pleased to report that this offering also resulted in the addition of new institutional Cash and cash equivalents and marketable securities as of September 30, 2018 were $127,000,000 and this compares to $43,700,000 as of December 31, 2017. Based on our current assumptions and this includes fully the planned clinical development of XEN496, XEN1101, XEN901 and XEN007, we anticipate having sufficient cash potential new partnering arrangements. I won't spend any time going over the details of R&D And G And A expenses as they're included in both the press release and our 10 Q filing. However, I will mention a one time transaction that occurred during the quarter. Under other operating expenses in our income statement is the one time $6,000,000 payment Valient or Bosch Health. This payment was a buyout of all future milestones and royalties owed to Valient with respect to our XEN1101 program. With this transaction we now have nominal future economics owed on our proprietary clinical pipeline of 4 assets and this gives us tremendous flexibility as we develop these programs. So in summary, with the support of a strong balance sheet, and foundation of leading expertise in ion channel drug development, we believe we have built 1 of the most exciting and innovative neurology pipelines currently in clinical development in the industry. We have built a balanced portfolio of assets that include both new chemical entities or NCEs as well as drugs previously approved to address high unmet medical needs where we believe these products are well suited. We are particularly excited by the potential to leverage the unique mechanisms precision medicine approach to address extremely rare and difficult to treat pediatric epilepsies. We look forward to continuing to provide you updates on our progress. Operator, we can now open the Our first question comes from Stephen Willey with Stifel. Your line is now open. Yeah, good afternoon guys. Thanks for taking the questions and, congratulations on the progress. Maybe for Simon, just wondering if you can maybe speak to some of the inputs that are driving the decision making process to 901 development in either adult or pediatric patients. Maybe if you can just kind of speak to some of the things that need to happen there in order to solidified decision as to which patient population you choose to proceed first? Yes. Thanks, Steve. Ultimately, I think we would like to test this drug in both adult indications as well as pediatric, the obvious pediatric indication being patients with mutations in the SCN8A gene gainer function mutations in the channel that 901 blocks. The critical question for the FDA, which we hope can be resolved in the nearer term over the coming months, is Can this be more of a parallel activity? Or do we need to run a traditional step down? As you know, Steve, with previously approved AEDs, drugs have got approved and then a step down into adolescence and pediatrics in some cases. But not typically until the drug has achieved safety in a large number of adults with the disease. This is a slightly different issue, which we are looking to tackle, which is having a drug that's exquisitely well suited And in fact, developed for a precision medicine approach where kids who have mutations in this target, we think would potentially, preferentially benefit from a drug that directly modulates the pathology of the epilepsy. And so really the discussions coming up with the FDA will be around what the requirements would need to be to allow us to enter into the pediatric population You know, of course, in our favor to date is the fact that, and we've disclosed this and presented this, we've shown very good tolerability pre clinically both at the non GLP and in the GLP setting. And we've disclosed publicly also before based on interim data presented at previous meetings that tolerability in adults in the phase 1 volunteer study looks extremely good as well. And so really we need to get clarity as to what else the FDA would want to see before we could expect to take 901 into a pediatric setting. Our goal of course is to do it in a way that we believe is safe, but to do it in a way that we think we can test the drug in this clinical setting, particularly the pediatric setting, as soon as we believe we've concluded the necessary safety steps. And I think that's really the issue at hand. We intend to test the drug in adults. We haven't landed on an indication Of course, sodium channel blockers are used first line in focal epilepsy today. That may be an indication. We'll we'll I think we'll come out with the final plans. I think with FDA interactions having been held at least we know what the steps are to test the drug in the pediatric setting. Ian, did you want to add anything? The only thing I would add is is maybe just a little bit on timing. So we're we expect to have some feedback from regulators over the next couple of months So it would be early in 'nineteen that I think will guide in terms of our timing for the different programs in pediatric and adult Obviously, on the adult side, we could probably initiate a study more quickly, once the phase 1 is wrapped up, which will happen in the near term. On the pediatric side, we've done some work on the juvenile tox to start preparing for that, but more formal juvenile tox work would have in, in the first half of twenty nineteen. So any pediatric development could probably start in the second half of twenty nineteen. Got it. And with respect to a phase 2 program in adult patients, again, like you said, Simon, this is sodium channel blocker and these drugs are primarily used in frontline therapy. Would you be able to pursue a frontline patient population within the setting of Phase 2 development? Yes, we don't know that, Steve, this is obviously, discussions that are currently underway as to what a phase 2 would look like if it were in focal epilepsy, as you know, most of these studies are add on adjunctive. And I think we would go into the initial thinking that that would be the requirement at least in an initial phase 2. And there are some pros and cons in terms of that. I think it's a little bit too premature at this point to, to guide as to what that trial may look like. I think focal epilepsy would clearly make sense. I think the first foray is probably going to be smaller trial, more of a proof of concept to a rather than a multi dose ranging 2b study with larger numbers to support a pivotal program. Just given the novelty of the approach. And of course we'd have to think through with respect to the protocol, the whole notion of whether patients have been on a sodium channel blocker or not if they are on the sodium channel blocker, what does that mean? If they have failed the sodium channel blocker, what does that mean? And these are discussions currently underway among the group without KOL panel. Got it. And then just with respect to the 901 update at AES, will will that update include the subset of TMS data that you're generating? We hope so. That is a work that's being completed, we hope that the analysis will be completed over the next few weeks We have a call with our investigator actually in the next few days just to see where that's at, but we expect that we should at least have some preliminary preliminary data on TMS for 901 as well. Pleasure. Our next question comes from Maury Raycroft with Jefferies. First question is on the new 496 formulation. I'm just wondering if you'll have to demonstrate comparability for that before starting the Phase III and mid-nineteen? Yes, that's a good question, Maury. We don't know the answer to that in terms of will we will we have to do a bioequivalent study in humans? I think what we'll have to show at minimum is that the new formulation essentially performs similar to the prior form, in both in vitro and in vivo models, so looking at, in vitro markers like dissolution kinetics and then looking at PK across species, I think that will be important to show the new formulation behaves similarly to what's been reported previously. We based on that, if we do show very similar performance, our hope is we will not have to do a human bioe study If clearly the performance is different, we will need to do a bioE study. We'll want to do a bioE study. But that's clearly going to be a discussion point for the FDA. Our going in approach would be to do what we can to ensure similarity in both in vitro and in vivo models. And based on that, I think we can assume likely similar performance in humans for sure. If the performance is different across species or in vitro, then a bioE study in adult volunteers will likely be required. The current timeline estimates around mid-twenty 19 does not assume a bioequivalence study is being done. So if one were needed to be done, that would add a few months to the timeline. Okay. Okay. Great. And And then for 7, are you leaning more toward running the Phase 2 on your own or with the physician sponsors or are you planning on both? I think the initial thinking, Maury, at this point, again, we plan on giving a pretty comprehensive updates on the program in the new year for a variety of reasons. But the initial thinking is to run a few investigator led studies across a number of different indications I mean, one of the interesting challenges with this drug, it has been used quite extensively in a variety of neurological disorders with actually good effect. And so one of the challenges I think we have is where to focus development and why it's taken us the last 6 to 12 months has really been as we work through this both from a commercial side and a protection strategy as well as doability, what are the right, what are the right indications? And so, you know, our current leaning just strategically at a high level is to test the drug across more than one indication next year. These will almost certainly be an investigator led settings outside of the U. S. And based on that data, advanced development plan through an IND to follow, which could potentially be a Phase 2three program. I think the investigator led approach for us next year may also allow us depending on the ultimate final design, but we may see that there'll be some open label opportunities and we can start to see some data with this drug, in fact, in 2019 potentially. We do plan in the New Year to have a more fulsome disclosure on the program plans. So we are just waiting on some discussions that are currently underway at different levels. Got it. That's helpful. And I did have a follow-up on that one just based on potential strategies to attend IP, but I'm guessing that could potentially come in early 2019 as well? Yes, I think so. I mean, look, at a high level, Murray, there's the composition of matter obviously is not what's going to protect this. And there are multiple other ways, and I'm speaking very generically to provide protection to a molecule like this, in terms of both orphan strategies, but also in enhancing intellectual property and and we're certainly aggressively pursuing enhancement of IP in addition to potential reliance on an orphan clusivity strategy, we'd like to have both to cover the product if possible. Got it. Okay. And last quick question just on the AES conference. Wondering if you can comment on whether we should expect one data cut in the AES abstracts and when that cutoff would be and will we see more mature data at the conference? Yeah, you'll see, so the abstracts for AES were submitted in the always see additional data. So we have submitted 6 abstracts to AES. So you'll see 6 posters there. But you will see data that's in addition to what's in the abstract. Got it. Okay. Thanks very much for taking the question. Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Jodi Rates for any further remarks. Thanks for joining us This does conclude today's program and you may all disconnect. Everyone, have a wonderful day.