Good morning, everybody, and welcome back at our Guggenheim Healthcare Innovation Conference. I am Delma Caiati, one of the research analysts here at Guggenheim, and it's my pleasure to introduce our next company, Xenon Pharmaceuticals. From the company, we have Tucker Kelly, the CFO, and it's a pleasure to have you here, Tucker. Maybe, before going into the Q&A, you just released the third quarter financial results, so why don't you give us the latest update on the company, and then we'll move on from there?
Sure. First of all, Delma, thank you and Guggenheim for hosting us at the conference this year. It's great to be here in Boston with an awesome group of investors. Things at Xenon are going incredibly well right now. For those of you who aren't familiar with Xenon, we're an ion channel company. We've got capabilities from drug discovery and research, and we're on the cusp of becoming a commercial company for the first time in our history. We filed our NDA in September, and we look forward to commercializing in the U.S. the drug called azetukalner for focal seizures. Beyond that, we've got expansion opportunities in neuropsychiatry. We've got ongoing studies in major depressive disorder, one of which we announced last night on the Q3 earnings call.
We've been able to move up the readout for that study into December of this year, as well as a phase III study in bipolar depression. Beyond that, we just had recent data that we touched on in the Q3 call last night that we can dive into as well, Delma, around our early-stage pain programs. We have three in the clinic now. Two are targeted against a sodium channel called NaV1.7, and another is a KV7 target, which is the same one we have for azetukalner for focal seizures. We just had phase I data for two of those at the World Congress on Pain for the IASP Conference in Thailand.
A lot going on on the clinical side, and we've got an early active research program as well, one focused around NaV1.1 for Dravet syndrome, and a partner program that's in the clinic today with Neurocrine against NaV1.2 and 1.6. We're well capitalized. We have $1.2 billion in cash and cash into 2029. So, we're really at a kind of transformative time, and look forward to some big milestones coming up over the next year and a half, two years.
Thank you for that great overview, and clearly a lot to unpack there. Let's start with the epilepsy programs. As you said, you submitted the NDA in September, and we expect approval in the upcoming months. When we think about the label, how will that look like? What is your base case scenario for the label? When you think about the value proposition of the drug, of azetukalner, how will it be used in real-world clinical practice?
Sure. Let me weave those two together, because I think they are related and relevant. We think azetukalner can be a really impactful drug in focal seizures. This is an area of high unmet medical need, even though there are a large number of agents that are approved today, most of which are generic. There is only one branded left. There is still first, a large group of patients that have breakthrough seizures that are not adequately well controlled, and that is consistent with the trial population. In the phase III and registration study in the phase II-B, we saw very refractory patients. They had been on five or six different ASMs, and they were, during the study, on two or three anti-seizure medications as well. In focal onset seizures, the labels are very broad, so you do not get line of therapy type labels.
It will be a broad label for focal seizures, and we think that gives us the opportunity to start with patients who are more refractory, who are seen by epileptologists, and really need quick seizure control to help them get their disease more under control, but to then move over time into earlier line patients. That goes to another update we had on the Q3 call last night, where we are going to be opening a phase III-B/IV study looking at what we call patients with a first add-on. These are patients with epilepsy that, when you are newly diagnosed, you usually go on one of two different types of agents as a monotherapy. Oftentimes, you will take generic KEPPRA as an SV2A modulator or a sodium channel blocker, and then you will kind of flip-flop. If you are not well controlled on one, you will maybe move to the other.
At that point, if you are not really well treated, most often you go to a kind of polypharmacy approach, and you get a first add-on.
That is where patients and physicians are really trying to get a hold of the seizure control in a different way. We think that ultimately, we can provide a really impactful benefit in those earlier line patients and move from the more refractory later line patients that will likely start with a launch up until those earlier line patients. In a heavily genericized market and an area where KEPPRA and other drugs have served patients so well, a lot of patients are effectively treated when they go on a monotherapy SV2A, and they do not ever need to get there. So we think ultimately, first line is likely still the reserve for generics that people do well on, but that first add-on could be a way for us to make this a really impactful large drug in the class.
Yeah, that is actually a very interesting update that you add. I was wondering, so that is going to be an open-label study. Does it give you the opportunity to include the data also in Section 14 of the label?
Yeah, not clear that it would be label enabling or expanding the label. We think it will provide good scientific evidence of what activity looks like in earlier line patients. We think that is particularly important for general neurologists. As we talked about on the call last night, we think it is also an opportunity to involve a broader range of physicians in the clinical development of azetukalner, that includes general neurologists as well. So not necessarily expanding the label with an open-label study, but we do think it can be impactful and helpful in terms of being able to look at what the drug can do for patients that are not as refractory.
Are you planning to show any interim data before the topline?
Yeah, we'll provide more details on the study design. Last night, we just kind of debuted the high-level overview of what we want to do in the study. We'll talk a little bit more about the details going forward. We'll have a big presence at AES. That's the annual American Epilepsy Society meeting coming up in Denver in December, and we wanted to get this news out ahead of that so we can really start to talk with physicians and build some momentum around enrolling that study in the first half of next year.
Got it. Since you mentioned the AES, what should we expect from the data there? You always have a very large presentation, number of presentations.
We do, yeah. We continue to increase our presence as a company as we mature, and again, on the cusp of being a commercial company, we'll have our largest presence ever at AES. That's both on the conference room floor with our booth, with our medical affairs team, and doing things like talking to physicians about potential enrollment in studies like X-FIRST. But also just continuing to build disease state awareness, to talk more about mechanism. That's one of the key things about ezogabine that's different. We have a novel way of approaching anti-seizure medications. We'll be the first KV7 potassium channel modulator on the market here in the U.S. now, if we're able to get approval. We'll have a big presence at AES. In addition, we've been, I think, very active on the clinical front in terms of putting out additional data.
We had some additional data at the European Epilepsy Congress in August. At AES, you could expect one of the things we've done every year for the last few years is present updated data on the X-TOLE OLE. X-TOLE was the phase II-B study. It's the first of the two registration studies that we'll file on for approval. What we've done is follow those patients that decided to go into the OLE, or open-label extension, up to last year was 48 months, this year it'd be 60 months. That's been really powerful data, showing, one, that a lot of patients have stayed on study.
Last year at AES, we talked about having just under half of those patients who enrolled in the X-TOLE OLE still on study after four years. We think that is a real testament to the ability to get good, effective seizure control and good tolerability for patients. This year, we are going to roll that forward to 60 months. We will have additional data there as well as some additional work for the topline data on ezogabine that we announced in March. The other thing we had yesterday that was not in the press release but happened maybe midday was that we had the phase III published in a peer review journal in JAMA Neurology.
Congratulations
for X-TOLE2. Thank you. It has been a busy time for
Yeah
our clinical medical affairs and the scientific pubs team.
Okay, that is great. Of course, now the key focus for investors is the launch. How to model that and what is the strategy? Can you give us an update where you stand in that regard? How are you thinking about physician targeting in the initial phase and then after you will get the data from X-FIRST study to start with?
Yeah. I think one of the things that Xenon has done incredibly well, I joined about a year ago, we made really good early investments in our commercial and medical affairs function. Even leading into the X-TOLE2 data back in March, we already had, I think, the really strong core team in place to help us not only execute the studies, to position us to becoming a commercial company. All that's accelerated since the X-TOLE2 data was incredibly positive. We had the largest placebo-adjusted MPC, or median percent change, in seizure frequency seen in an FOS study before, and a really good benefit-risk profile across the two doses that we studied in that trial. From that, we've been really spending a lot of time continuing to build out the infrastructure internally.
Our chief commercial officer has built out the balance of his leadership team across areas like the commercial operations, marketing, market access. I think we've got a stronger core, and now we'll be continuing to build that team out. They bring experience from large companies and small companies, a lot of experience in epilepsy launches and new drug launches, which we think is really important. They've been doing a lot of the work now on the heels of the X-TOLE2 data, combined with the X-TOLE information that we submitted with FDA in September, to really do all the additional work you need to do. So demand studies, pricing research, go-to-market strategy, targeting physicians. What we talked about is that we think, again, this could be a really big drug.
We think that it's going to be really impactful at the outset with epileptologists, who again, have the more refractory late-line patients. What's going to make it a really big drug and more widely adopted is its ability, given some of its features, to be used by the general neurologist.
Yeah.
There's about 2,400 epileptologists in the U.S. There's about 18,000 general neurologists, and then there's around 16,000 APPs, or advanced practice providers. At the outset of launch, we think there's probably around 5,000 or 6,000 physicians that we're going to be targeting right out of the gate, and those are going to be the epileptologists, high-prescribing general neurologists, and APPs. The goal there is really to get the drug in their hands, get them some experience with how well patients can do on it, and find what the right dose is for their patients. We expect to have four doses on label, so we'll continue to kind of build out the go-to-market strategy, and then as I mentioned, kind of over time, build out our presence amongst the general neuro call point more aggressively so that we can get broader adoption utilization.
For physicians that I think struggle with some of the other agents today that require either long titration or have significant drug-drug interactions that requires them to, for instance, de-escalate the dose on other concomitant ASMs, azetukalner doesn't have any DDIs that require adjustments for anti-seizure medicines. It doesn't require titration. We have four doses, and that gives the physicians a lot of optionality about what the right starting dose is for their patients. We have a really nice curve in our investor deck that shows just how dose-dependent the efficacy is across the two studies and those four doses, and we see a different adverse event profile as you move up in dose as well. We think that provides a lot of flexibility for physicians to try and figure out what the right dose is for their patient depending on what the needs are.
They could be somebody who has significant seizure burden, and the whole goal is to get those seizures under control as quickly as possible, or they could be a patient that, for instance, is lower body weight. We know there's a BMI to exposure relationship with azetukalner, so having the ability to maybe go in at 10 or 15 milligrams, which is still an effective therapeutic dose, but has a better AE profile than you do at 25, I think really speaks to the breadth that we think we can have with prescribers and patients.
Makes sense. I think in the past, you have mentioned that you are preferring a type of specialty model approach, specialty pharma approach versus retail. Maybe, can you explain to us what's the advantage of that, and what's the trade-off, and why did you prefer that approach?
Yeah. When we're on the market, which will likely be kind of very beginning of 2028 after we have the FDA review, and then there is often DEA scheduling that takes three months. We'd be getting sort of DEA scheduling, say, in the fourth quarter of 2027, likely launching beginning of 2028. It'll be almost nine years at that point since the last ASM has been launched in focal seizures. That's a drug called cenobamate or XCOPRI. Again, at the time, they launched in the retail channel. I think both the way we look at it today, the experience of our team, and just how the industry has evolved, we really think a specialty pharma model can provide a lot better experience for physicians, for patients, and has advantages for us as a manufacturer and a sponsor.
As I think we all know, when you go to a pharmacy in the U.S. these days, they are really incentivized to stock generics. It is very much a volume-based business. For any specialty products, it is hard to keep them on the shelf or have them available or to assist patients with things like copay assistance or prior authorizations. For us, being able to have the ability to help physicians and patients navigate that part of the process will hopefully facilitate the ability to get drug into patients' hands once the physician decides to write the script. We see in the data today that for agents that are often prescribed through the retail channel, they have a high rate of abandonment.
We think we can lower that and have scripts that get written, filled, and dispensed to patients more readily, which we think is good for patients and certainly good for us in terms of being able to convert the work that our teams did to promote awareness and visibility and a physician's decision to prescribe into activity and uptake with patients. It also gives us a lot more information about the patient journey.
Yeah.
More connectivity, so that whether it is about refills, and just understanding where the drug is being used and how it is being adopted as we commercialize. We think there are a lot of advantages to that, and we have seen the industry certainly evolve over the last five to 10 years from where initially SPs were very much relegated to rare diseases. I came from a company most recently that was in targeted oncology, where again, the patient numbers were in the thousands, not the hundreds of thousands that we were trying to help. There, it was very much standard to do it. I think it has become much more common in larger patient populations now to use an SP model. We think it has got a lot of advantages across the channel and will help us get uptake increased as we launch.
Talking about access, how are the payer conversations going, and how long will it take to get a broad coverage? How important is that for the launch trajectory?
Sure. We think the payer mix to start there is commercials maybe around 40%. Because these patients often have seizures and cannot drive, it is oftentimes more difficult for people living with epilepsy to remain employed and have jobs, so there are a higher number of patients that are on Medicaid. That is about 40%, and then the balance in Medicare roughly. We are going to go after all three parts of the channel. I think there are positives for us as we think about access. For government pay programs, it is a protected class, epilepsy, so that is helpful in terms of being able to have engagement and adoption and coverage. For the commercial pay side of things, right now, the advantage is that it is a class with a lot of drugs, but all but one are generics.
From a category spend standpoint, it is not an area that is of high focus. It is not a drain on resources. We bring what we think is a really compelling benefit risk and value proposition for payers, physicians, and patients. We have, again, really strong efficacy we have talked about, a tolerability and adverse event profile, and ease of use profile that we think is really compelling. We think we have a very strong message, and our team has been working even before the X-TOLE2 data, but certainly since then, and will be up until approval to really educate about the novel MOA, about all the reasons why we think this could be a really powerful new option for treatment for patients. We will work really hard over the coming timeframe to think through what the best pricing strategy is.
We do not have any guidance yet in terms of thinking through what the coverage will look like at various points in time. But we have a great team in place that is working really hard so that we get access as quickly as we can, and we will have different things that you do when you launch a drug to provide quick starts and ways for patients as they navigate until we get coverage, things like access to medications when physicians write the scripts. Again, hopefully with the specialty pharma, being able to mitigate some of the roadblocks that come up with prior auths or other scientific exceptions, medical exceptions that you need in order to get coverage early after a drug is approved. A lot of work on the market access side.
We think that is going to be a strength of ours to be able to get coverage for patients as quickly as we can.
What is the best benchmark to look at for the launch trajectory?
Yeah. I think one of the things when you talk to physicians, you talk to payers and sponsors and manufacturers in epilepsy is that it has this mantra that is similar to what we talk about with prescribing patterns amongst physicians of low and slow, and that is often how people think about epilepsy launches.
Yeah.
We do not have, again, a lot of data points. As I mentioned, cenobamate was launched back in 2019, so there has not been anything in the last few years to really have as an analogy. But in general, when you look at prior launches, they tend to be a more conservative physician base, and they tend to be lower and slower in terms of uptake. Our goal is to take that shape of that curve and shift it up to the left. It is not going to become a rare disease launch. We are not going to have a spike and then a plateau. These drugs tend to grow right into LOE, so that is a good thing from our perspective, that we expect to continue to grow all the way through our IP protection in the out years.
It will really be about getting the drug and the mechanism well-known by epileptologists, general neurologists, having the drug experience in their hands with patients. We know from the physicians that have worked with it in the clinical setting, they come away very favorably impressed, and certainly when we trial the product profile with physicians who have not had patients on the drug, I think they are very eager to have it in their hands. They really want a novel mechanism. They love the ease-of-use features. Particularly for the general neurologist, that will take a bit longer in terms of uptake for them. They do not see as many patients. They have a slightly less refractory patient population oftentimes.
So, I think it will be a little bit different in terms of we are going to get better access and penetration earlier amongst high-prescribing general neuros, more the epileptologists, for more late-line patients. Then the goal is to quickly kind of move earlier in the treatment paradigm and broaden out the physician base to general neuros who maybe don't see quite the concentration of patients with epilepsy, but we think will really value having an option that doesn't require the titrate, gets an effective dose early, and it doesn't require them to kind of down-dose other ASMs.
Thank you for all those colors, Tucker. Maybe now moving to the neuropsychiatry programs. So, in September, you paused intentionally your programs in MDD, in bipolar, because you saw some events that were not present in the phase II, so during the phase III trial. Did you have a chance to look further into the baseline features of those patients or any other possible potential factor that may have caused that? That's my first question. Now, what drove the acceleration in the readout that you expect in December?
Sure. So as I mentioned at the outset, we are studying the drug not only in focal seizures and primary generalized seizures, but also in major depressive disorder and bipolar depression. We had two phase IIIs that were running and ongoing. What we announced in September was that in the phase III study, we had started to see adverse events that we have seen all along in the epilepsy studies, but we importantly hadn't seen in a phase II-B study that we had run in depression before. So, that was the X-NOVA study, and that's the basis on which we kind of planned our registration-enabling phase III trials in MDD and BPD. So there wasn't any new safety event.
Yeah.
It's the same events we had seen throughout the development program, these neuropsychiatric AEs that we have seen with epilepsy, but we just hadn't seen them in the phase II-B. So likely, that was a smaller study, right? We had 50 - 60 patients per arm. There were two treatment arms and one placebo arm. Ultimately, I think it's probably kind of a regression to the mean. So, we weren't surprised ultimately to see it, other than the fact that we hadn't seen it in the depression patients before. It's obviously a different indication, a different benefit-risk profile. We haven't unblinded a large randomized study. We will now be doing that in December, and we will touch on that in just a second.
But it really gave us the opportunity to step back and say, "What's the right TPP for this drug in the different indication in MDD?" Part of our value proposition, we think, is having a novel mechanism, like it is in epilepsy, that is different from the SSRIs or the SNRIs, but also has a different AE profile. We haven't seen, for instance, things like weight gain or sexual dysfunction. Those are challenges oftentimes for patients and prescribers in MDD, and so we obviously have an adverse event profile, but it's a different one, and so that's part of the rationale for why we think it could be something that could work well for patients and physicians in MDD. But when we saw that, in fact, we were seeing on a blinded basis similar rates of these types of neuropsychiatric events, we decided to do two things.
One was we were going to pause enrollment voluntarily of new patients in the X-NOVA3, which is the second study, as well as the bipolar depression study. Our X-NOVA2 study was pretty far along. We had 360 patients roughly that were enrolled at that point, so we decided instead of waiting till we went back and figured out if we could have a dose escalation schema that might help ameliorate or soften the tolerability profile, we decided based on strong powering that we would cap the enrollment at 360. Initially, we had said that we were going to read that out in the first quarter of 2027. The update we provided on the call last night was that we have been able to bring that back into December.
I think we learned a lot as we kind of made the decision to do that in September. Our clinic ops team and our CRO worked really hard to do all the things you need to do to kind of close out a study and get ready for top-line readout, and we were really pleased that they were able to pull that into December. For us, having that risk-benefit profile and unblinding the study sooner is really helpful. One, we get to see in X-NOVA2 how we did, and that'll really help us inform better our development path going forward, as we think about reinitiating dosing with a revised dose escalation schema and talking with the agency about the path forward. It's great to be able to get that in. It allows us to get that readout sooner and make good, informed decisions based on that data.
Got it. I guess you have your own internal scenarios. It's like, what are you going to do if you see something like 3 points MADRS, 3 points delta MADRS, with a tolerability profile that is similar to the classical azetukalner profile? Let's say in a scenario like that, would you go on with some amendment in the protocol, or would you rather stop the programs, or what would be the decision in that scenario?
Sure. I think we feel confident that if we have a very positive result or a positive result, but maybe there is a little bit more nuance in it, that we would still move forward in that case and think through what the right dose escalation scheme is. I think even if it is a wildly positive result in efficacy, we feel like it is important to get the tolerability AE profile optimized as much as we can, so I think we would still be looking at some dose modifications for reinitiating enrollment in X-NOVA3. Ultimately, it is really going to depend on the totality of the data. MDD is a hard indication. We have always known that. We have been, I think, very sanguine about that. That is why we are eager to get the readout. We really want to see what that benefit-risk looks like.
We are using HAM-D17 as the primary endpoint, and we had looked at in the phase II MADRS. Here, it is HAM-D17, and we have got important secondary endpoints around anhedonia, so the SHAPS scale. I think what we really want to do is see all that data. It will be the first time, obviously, we are unveiling and unblinding a large study in MDD, and that totality of the information will give us a good sense of whether we have got a strong effort here. If for some reason we do not, we will certainly, we have got a lot of good places to make those investments. Our hope is that all the reasons that we went into MDD in the first place remain true. We think this drug has an antidepressant effect, and we think patients need new options.
We are hopeful that we have a positive result and we are able to get back on track quickly
Yeah
with the other studies.
Makes sense. In this last minute or so, I would like to touch base on the other innovative part of the company, which is pain. Actually, you have a long experience in pain.
We do.
You are bringing that back. You recently had really interesting data from both the assets, the KV7 assets and the NaV1.7. Can you give us the key highlights of those data, and how are you thinking strategically of bringing forward those programs?
Sure. We are very excited about these programs. I think in particular, the NaV1.7 is an area where it has such a compelling genetic story, an area where we and other companies for quite a long time have tried but not succeeded in getting good chemistry, and a good approach that allows us to replicate the phenotype of having literally no pain for patients that do not have any expression or less expression in the NaV1.7. For us, the healthy volunteer phase I data that we put out addressed a lot of the key issues that had been seen before. Again, it was not efficacy. We are moving into phase II POCs. On NaV1.7, we were able to get a drug that shows that we have no autonomic nervous system effects that had been seen with prior ones. We have good free fraction.
We have good target engagement, so we're getting at the receptor occupancy levels that we had hoped for in both the central and peripheral nervous systems. We're going to be trialing in this phase II in acute pain, a product profile that hasn't been tested before. I think it's been a bit of a holy grail. It's been such an important
Yeah
target for people when they see the genetics. That has been a disappointment in the past. We think we've got, hopefully, the opportunity to look at a molecule that is really going to be quite different. We're excited to get that into the POC first half of next year. Different story with KV7, but again, there's real clinical evidence to support an analgesic effect in a non-opioid pain product there. We're looking forward to getting that as well into a phase II POC in the first half. Healthy volunteer data was really good on both kind of receptor occupancy, target engagement, and overall safety profile. In addition, we had some supporting data pre-clinically. In both cases, we had evoked pain models in cynos models, and we saw there really good pain reduction. Down 100% for the NaV1.7 and the KV7, really significant pain reduction.
Again, early data in cynos, but we think really supportive of the genetics and of the other preclinical data, like on XEN1120, which is the KV7 that we've seen in mouse models, where you have challenges replicating some of the analgesic effect that opioids have in the kind of phase I in some of these models. We feel like the preclinical data that we presented in Thailand was really supportive of what we think could be a really compelling profile in what could be very large indications. We'll be going initially into acute pain.
Okay.
We think those are good markets. We think the chronic market is obviously where the big opportunity is. We think either as monotherapies or even potentially as combinations, either with each other, a NaV1.7 and a KV7, or with a NaV1.8, like Vertex have with JOURNAVX, and others are working on clinically. We think those are really exciting. We get from an investor standpoint, a lot of the focus is on late stage, on commercial. That's understandable. We're really excited, and we'll continue to try and build value throughout the pipeline with our early-stage assets as well.
Really exciting opportunities there, and thank you so much, Tucker, for the great conversation.
Great. Thanks, Delma. Appreciate it. Take care.