STIFEL 2026 HEALTHCARE CONFERENCE - XENON PHARMACEUTICALS INC

All right. Great. Thanks, everyone, for sticking around for the last Fireside Chat of the day. Happy to be here with the Xenon Department of Studios Management team, Ian Mortimer, President and CEO, and Tucker Kelly, Chief Financial Officer. I'm sure folks who are listening in or here in person know the company decently well, but maybe, guys, you could just kind of give a quick rundown of the recent updates. You submitted the NDA, right? You've got some data coming up at the end of this year. recently made some progress with pain but maybe just give us some highlights and then we'll do q a yeah sounds great uh thanks thanks paul for having us um so we had earnings this week on monday so we gave a really good update there but i'll provide a quick overview we really think about the business and three main components is that to counter an epilepsy the expansion of is that your calendar into psychiatry and then the emerging pain portfolio where we've had some updates across all of those over the last couple of months. So we'll spend some time in Q&A just on the profile of a Zetacalner in epilepsy. Obviously, we've completed two large randomized placebo-controlled studies. I think the profile in epilepsy is excellent from an efficacy, novel mechanism, ease of use attributes. We had our XTOL2 data earlier this year, and that set us up to file the new drug application in September. So it's really exciting to be now in front of the agency in terms of filing our NDA and really getting ready to commercialize this medicine. And we spend a lot of time thinking about how can we do this differently in a market where there are lots of generic drugs, but I think there's a need for innovation, and I think we're bringing innovation to the epilepsy community. We've been looking at Zetucalner in psychiatry as well. We can go back through a little bit of the history. We had a voluntary pause on our Phase 3 program in September. The update we provided this week is that we will unblind that first Phase 3 MDD study, which we're calling Ex Nova 2, and we'll see data next month. And I think that's going to be really important to inform. Now we'll have unblinded efficacy and safety data to inform the program going forward. So that's next month, and then we'll be able to talk about that moving forward. And then I think we've made excellent progress on the pain portfolio. So we were at an international pain medical congress in October where we were able to show the phase one data from our two assets. One is called XCN1701, which is a NAV1.7 inhibitor. And the second is XCNE1120, which has a KV7 modulator. Both of them met kind of the TPP or what we thought about the profile coming out of phase one. And both of those molecules will enter phase two proof of concept studies in acute pain next year. Awesome. Great. I want to spend mostly time on epilepsy and pain, but maybe let's just cover this upcoming MDD update. Maybe to start, what more do you plan on disclosing around the safety profile with the top line update? Yeah, I think it's probably worth maybe to take a few steps back to frame it and then we'll talk about what we'll have in december so we believe that kv7 modulation and specifically is that to counter have antidepressant effects i think there's enough data out there pre-clinically and clinically there's been four different clinical studies run with this mechanism all have shown separation the three placebo-controlled studies all showed separation between active and placebo when we ran our phase two study which was a smaller proof of concept study just over 50 subjects per arm two doses versus placebo that was our ex nova study we unblinded a couple of years ago one we saw clear separation on both madras and in ham d17 the two scales of clinical depression and also a clinical scale of anhedonia which we call the schapp scale so 10 milligrams which was the low dose outperformed placebo in 20 milligrams the higher dose outperformed 10 milligrams so clear dose response clear separation with placebo what was interesting about the study when we unblinded is the safety profile was really benign in that phase two study i remember at the time talking with many people on the street talking with you as well that um the the tolerability was better than we expected um it was those data that we now moved into a large phase three program what we found in phase three blinded data but what we're seen in the phase three psychiatry program it looks like the safety profile is more similar to what we see in the epilepsy studies and probably and and not what we were seeing in the phase 2x novus study so still blinded data but we are seeing some of the adverse events that are more consistent with the epilepsy profile we've had lots of questions on are you seeing new stuff or different stuff no we're seeing what we would see in epilepsy profile and we've been in you know know, well over 1,000 patients in epilepsy. You know, we've had patients that have been on the medicine for more than five years. So I think we have a really good understanding. What we'll see next month when we unblind is obviously the efficacy data. The primary endpoint is being HEMD17 at six weeks. We'll also look at SHAPS, which is a scale of anhedonia. But we will have the unblinded safety data. And I think anyone that still has outstanding questions on the safety profile of the drug as it relates in psychiatry, we'll be able to answer all of those questions. We'll provide those data publicly. Um, and then, you know, we can move forward either to continue to develop in psychiatRY or we really focus as that do counter on the epilepsy launch. Yep. Okay. Makes sense on the, um, on the safety side, I think the one AE that has like spooked people the most, because like at face, it can vary in the level of severity of it is, is psychosis. Can you, can you talk a little bit more about what you saw there? And I guess you know for investors who say okay hey they this happened is there read through to epilepsy maybe you can give like a little bit of context on like other aeds and like the sort of background rates of these you know psychiatric events and you know sort of how azk compares sure um so if we look at um potassium channel modulation overall or is that to counter specifically this is a very potent mechanism and this is a very potent drug. And so we see as we're trying to dampen hyper excitability in the brain, you're going to see adverse events. What's very clear now that we've looked at multiple doses in phase two and phase three in epilepsy, we've worked at 10, 15, 20, and 25 milligrams. The 10 and 15 milligrams of the drug look very placebo-like, very difficult to indistinguish between active and placebo at those two dose levels. As you move to 20 and 25 milligrams, you get better efficacy. It's almost linear in terms of seizure reduction, and you do see higher rates of adverse events. The most common adverse events for a drug that's very potent and active in the CNS are things like dizziness, somnolence, fatigue, and headache. Those would be the adverse events that we see above 10%. If we go kind of below 10%, you start to see, as you dampen hyperexcitability, you see some events things like word finding or confusion or concentration difficulties again very consistent with azetucalner at higher doses and consistent with other anti-seizure medicines then you see the really rare events and these can be SAEs and they're usually like one patient in a study or two patients in a study depending on the event and then you see these rare events of like a psychiatric adverse event like a psychosis this is all being published with the molecule even if you go back to the azogabine days it would be consistent with that even the most highly prescribed anti-seizure medicine today which is levotiracetam or kepra has just under a one percent rate of psychosis actually psychosis is something that's seen in this patient population even postictal so postictil after someone has a seizure they can have other events obviously they're very tired sometimes they are are confused depending on what the seizure phenotype was, and sometimes you can see the psychiatric events associated with that as well. So I think we have a really good understanding. It's all being published. We've shared these data with the epilepsy community and the prescribers, and it's something that they're very comfortable with. The only thing, just to add on there, I think that's important to note is that we don't see any long-term sequelae. These patients resolve. They don't have any long term issues with it. So again, it's well known, well understood, and it doesn't have any kind of lasting impact either. Okay. Thanks, Tucker. If this MDD study does work and you show a clear effect size and maybe there's a secondary input or two that's corroborating, do you think that there's an MDD? Do you think there's going to be a clear path forward in MDD. Yes, I think there will be a path forward. The question is, is what is that path forward depending on the data? So let's walk through a couple of different scenarios. If the drug works and shows separation, but we still feel that it's going to be challenging to continue to do development, then I think that's really helpful to publish those data as we think about epilepsy in terms of medical communication. So the patients that are refractory in epilepsy that are having breakthrough seizure, there's just a really high percentage of those patients that have the comorbidity of depression. So as we know, most anti-seizure medicines are neutral. Some are what we call mood negative, that have negative mood symptoms associated with them. Very few have any positive symptoms. It's really just lamotrigine that physicians will point to. So to have a drug that we can communicate in terms of appropriate medical communications and publications in terms OF an effect on depression I think would be really helpful in the epilepsy call point. And then as we think about the development and the primary indication of major depressive disorder, obviously we would need to see appropriate benefit risk from Exnova 2, and then we'd want to go and speak with FDA in terms of the development plan going forward. Okay. So if you're moving forward in MDD, the step after these data would be to meet with the FDA before resuming? Correct. Okay. Have you guys had much engagement with the USDA about this yet? We've had interaction with FDA since September. so on september based on a regular scheduled dsmb and in consultation with the dsmv we didn't enroll new patients into the study patients that were on drug continued on drug we have had fda interactions since then to provide them an update on what we're doing we also wanted to ensure that they knew that we were going to complete enrollment in exnova 2 at a sample size that was a little bit smaller than originally designed and our plans for were to unblind those data and then share those data with the agency. So those conversations have taken place, so they're well aware of the plan. Okay, great. All right, last MDD question before we switch to epilepsy. I guess my perception is even in the smaller sample size, this is still a pretty big MDD study that is still, I don't want to say overpowered, but fairly well-powered for even a smaller effect size of what we've seen for approved ADs. Is that fair? Yeah. Yeah. I think you said, sorry, you caught me there because you said AEDs. Sorry, ADs, I meant antidepressants. I'm confusing myself with acronyms, but yeah. Yeah, no, I agree. So originally we had designed it as quite a large study. It's still a large study, approximately 360 subjects randomized one-to-one randomization active in placebo, which based on the standard deviation, and we've been looking at the blinded data to make sure that it's tracking appropriately, that we have about 90 percent power to show a two and a half point separation, which, yes, is clinically meaningful and I think a well-powered study. Yeah. Okay. That's great. All right. So the NDA review continues to progress. Maybe talk about like what you're working over the next six to nine months to prepare for the launch. Yeah. So, the team has been hard at work for quite a while and certainly after we had the They've done a lot more work with the kind of full package that we have that we submitted in September with the agency. So it kind of goes across a variety of things. So one, market access team is doing a lot of work with payers to really focus on, like, what's the right price? We think we've got a great drug here. We think it can help a lot people. And we want to get the price right, be a key decision we need to make. So they're doing a little bit of work. They're doing quite a lot work testing out different profiles and price points to figure out what we can do from an access standpoint so that we get the drug to as many patients as we can and facilitate that kind of uptake. In addition, obviously, we're working on our demand forecast to kind of marry with the pricing work. Look, we think we've got a really good opportunity amongst the core epileptology call point, but what's going to make this a bigger drug is being able to get into the general neuro. So I think our targeting work that we're doing for physicians to figure out how we best access those and at what point during the launch and building out the team. So there's a lot of operational work. Our CCO now has his total senior management team in place. So we'll be filling out the balance of the team across market access, commercial operations, sales and marketing. And then, obviously, we'll bring on the sales force as we get closer to launch, which, you know, we're expecting a standard review. And then we've got the scheduling that's likely. So we probably won't be kind of in market until kind of early 28 and probably January. Okay. Makes sense. You guys have, like, suggested before that you feel like with the data coming in better than expectations in phase three that you might have better pricing power. I mean, obviously a better pricing power, but that, you know, there might be a way to, you know, go higher than some of the market comps is like, is there any other detail you can add there at this point? Yeah, we look, we think we've got a really good, um, you know, a clinical benefit. We've got good value proposition for payers and physicians and patients. Uh, and so we think entering into it with a position of strength. Um, we got the best placebo adjusted efficacy that's been seen in FOS study. We've had good ease of use attributes, uh, good safety and tolerability, uh for an anti seizure medication. So we've got a good package, I think, to start with, which is really important. And, look, this is an area where there hasn't been innovation. So the last drug to launch in focal seizures was back in 2019, that's Sonobamate. Right now they're priced at about $15,400 roughly on an annualized basis gross. What we've said is we think we can do better than that and better than what PriviAct, which just went off patent earlier this year, did. That was priced at around $18,000. So we think we've got a really good story to tell and a good way to try and create value for patients and physicians. So, yeah, we're going to work hard to figure out what that right price point is. And the other good news is that, you know, in the landscape today, there's a lot of generics. So people often ask us, well, how are we going to price well, given that there's a wider range of medicines that are out there today that aren't branded. One, they cluster in a couple of mechanisms. So there's not another potassium channel modulator out there. And two, the way clinical practice works and the way that we expect Zetrocalibur to work is that we're not asking and don't expect to be the first drug somebody gets when they're newly diagnosed. So just in general clinical practice, they're going to be usually having at least one, if not two, generic agents at first, usually an SV2A or a sodium channel blocker. And so as we talked about on our call earlier this week, we do want to move up to that first add-on where we're the first agents that they're putting on top of another anti-seizure medication. But that means that they're already going to step through two generics, right, even when we get to that earlier line of therapy. So I think we're stepping into a good treatment paradigm that sets up well for us in addition to the kind of strong clinical package. We've talked a lot about it before. Ian and I have talked a little bit about this, about how just like the reality is with this category. If you look at Vimpad and Keppra, you know, year one sales can be low to mid single digit percent of peak. to what degree is that like just systemic to this category? And to what degree are there things in your control to try to buck that trend? Yeah, so that's certainly what the history suggests. And I think it comes from partly it's a relatively conservative physician base. They have the mantra on their prescribing world of low and slow. And i think that's kind of been grafted over onto the commercial uptake side. So our goal is to sort of take that that launch curve and sort of bend it up a bit. It's not going to become a rare disease launch. It'S not a hockey stick. And, again, the team is still doing work on the demand forecast side. You know, we think this is going to be a big drug. We think ultimately it's going to get wide adoption amongst epileptologists, general neurologists, and be a really important part of the treatment paradigm. But it's gonna take a little bit of time, and particularly to broaden out that usage into the general neuros. You know they don't often prescribe branded. They're not really prescribing Sonobamate today, the last remaining branded. So it will take some work to get that. and we'll provide some kind of qualitative guidance heading into launch as to how we think it'll go, but I think that's a reasonable assumption that this is not going to be a launch that, you know, it's going to Be a RevMed-type launch where out of the gate you're doing huge numbers. But that doesn't mean by any stretch that we think this is not going be a really big drug and that we've got a great opportunity ahead of us with AZK. Going to the thesis around general neurologists being comfortable prescribing this medicine, And, you know, should the label call out some of the AEs like, you know, like, hey, there could be a risk of psychosis or there could be a cognitive issues and things like that. Like, would that put you in any sort of compromised position to drive that broader prescribing? Maybe. And if not, what are the sort of analogs or cons we should look at? Yeah, we don't think so. And as Ian touched on before, like these aren't atypical for what you see with other anti-seizure medications, the biggest selling one, right? Capra, as you mentioned, has just under 1% of psychoses. And we've tested this profile now for a long time, right? Even before with the XTOL2 data, the profile hasn't changed, and we've talked about it with both epileptologists, general neurologists, advanced practice providers, and we get consistent feedback that they're comfortable with the profile. We don't think that that's going to be a barrier. And when you look across the labels, right, there are some that have it in warning precautions. There are others that just have it even like a Sonobimate that's in the kind of post-marketing experience. So, no, we don't Think that's Going to be A barrier. It's something that they're used to dealing with in both call points. So it's not just epileptologists, but general neurologists, even outside of the epilepsy drugs they may or may not prescribe. They're used of dealing with CNS-related adverse events like this. We don't think that's necessarily going to be a barrier. What's often more difficult for general neurologist to use a drug like Sonobimate are things like the long titration. So you have to start at a low dose that's sub-therapeutic, and they titrate up to 11 weeks and getting into a more efficacious dose. And even more than that, we often hear that general neurologists don't have really the time or the familiarity to figure out how to regulate other anti-seizure medications that these patients are on and down-dose other ASMs. The epileptologists are comfortable with that, but the general neurologist don't in general have that familiarity and sort of time to put toward that. AZK is a much easier drug to use. We start at a therapeutic dose no matter where you start, and we expect to have four doses on label at the outset. So you can start at 10, 15, 20, or 25. And you, again, do not have to modulate any other ASMs that they may be on when you put them on ACK. So we think that's a really good profile for general neurologists. And the other adverse event profile that we've talked about before, we don't think that is going to be a barrier. Great. Maybe let's cover some pain stuff in the last couple minutes here. Um, I mean, you guys just put out a lot of data and some interesting posters and maybe let's start with the NAV one seven program. Um, you know, happy to hear you review the thesis there, Ian, but I think what I'm the most interested in is just, you Know, going into this phase two study now, uh, that you'll be starting next year, maybe talk one around what we know around the therapeutic index and to your level of confidence that the doses you'll be selecting the study or, you know, saturating the target to a necessary degree in the brain. Yeah, I mean, we've been interested in this target for quite some time. I think the genetics are really as good as it gets, right? It's just an exquisite target. We now have patients that have been seen that either have 100% loss of function or somewhere between 75% and 85% loss OF function, and they have a phenotype where they feel no pain regardless of noxious stimuli. It's a remarkable phenotype for these patients. You also have gain of function in the channel. If you have too much activity in NAV1.7, you feel too much pain, non-precipitated based on stimuli, and so conditions like inherited erythromelalgia. The industry has been trying to drug this target for many, many years, and I think we're probably on kind of, I don't know, the third or fourth generation of chemistries and really addressing all of the challenges of previous approaches. If you truly think about therapeutic index, it's fascinating. You can have patients that have complete loss of function, and other than not feeling pain, they're otherwise normal. And so when you think about it, at least in these genetic patients, we really shouldn't be seeing issues around therapeutic index. What was interesting about some of the earlier molecules, and we believe the hypothesis is that if you hit the target very fast, you saw some autonomic effects. and those would see, you know, those were seen as things like heart rate changes or orthostatic hypotension. So that was something that we were paying very close attention to in our phase one clinical trial. So the chemistries that we've moved forward have exquisite selectivity and potency on target. They have enough free drug to interact with the target, both in the peripheral nervous system, as well as in the central nervous system. And we were paying close attention to see if we saw any of the autonomic effects. And now that we're through phase one, we believe we can get high receptor occupancy. We've shown some tables in our phase one data where we're well above that 75 percent at the higher doses, likely above 90 percent receptor occupency over a 24 hour period. And we're not seeing any ofthe autonomic affects that we've seen with some of the previous molecules. So I believe we have a chemistry that's never been trialed in a true proof-of-concept study, and that really achieved all of our objectives in Phase I to move now into Phase II. Okay. And, yeah, maybe talk about just, like, the thought process on the right, Phase II design to show proof- of-conception. Yeah, I mean, I think one of the things that the field has done well probably over the last decade or so is these Phase II proof-o-concent studies in acute pain. and things like bunionectomy or an abdominoplasty are becoming pretty standard studies. I think the CROs are getting better at running these studies. Obviously these patients, depending on what the surgery is, is either under a local or a general anesthetic. As that wears off, you want the experimental medicine to show an analgesic effect. So the way we're thinking about it is those type of indications, like looking at multiple doses of the active drug so we can look at dose range finding, but also having an active control. And again, as we've seen the studies being run over the last 10 years by other companies, I think those are pretty standard studies and a playbook that we'll be looking at. And if you're successful in a study like that, like how straight of a line can we draw then to chronic indications like neuropathic pain or osteoarthritis? So for NAV1.7, so we found these patients that feel no pain. The case studies are all about acute pain, right? They have a fall and they don't feel it. You know, they break a bone or they have a nail in their foot and they don't see that as pain. We haven't seen patients that have, you know, nerve pain and are 1-7, that are 1–7 deficient. There's nothing in the target based on where the target's expressed and how the target signals pain that it shouldn't work in those chronic settings. but you but the genetics are really we we see the the genetic with these kind of acute noxious stimuli but there's nothing to suggest that it shouldn't work in the chronic chronic pain indications obviously from a development point of view we'll do the acute pain studies first and then if we see an effect there right away we'd want to move both probably continue to do work in acute pain but absolutely move into chronic pain settings as well those studies historically take about a year to complete is that the right benchmark the acute painful yes yeah Yeah. They can be run quite quickly. Um, now the way that you do them is you pay for the surgery and you can enroll those patients and those studies reasonably quick. Okay. And then on, on KV seven. So, you know, we've, we're, we, we we've spent some time kind of thinking about, you know you've got, I think a couple sort of points of support there. One, you have this, you know support with flu protein, which I think is not like the most simple case, but like it's supportive. And you also have, you don't just other AEDs working in like fibromyalgia or migraine or things like that. But maybe on like the flu protein sort of example, it's probably a drug a lot of people are not that familiar with. Like how definitive is that offering proof of concept for KV-7? It's known as like a little bit of a dirtier drug too. Yeah. So flu protein was a drug that was developed decades ago and was approved for a number and had positive studies in a number of different pain indications. It did have some liver toxicity associated with it and was removed from the market because of liver toxicity. But it absolutely showed. Yeah, it absolutely shows. It's actually a tough time of year. This is not the first time this happened today, so it's all good. It may be a slightly more mixed case, but we do think KV7 modulation was really the driving force behind the efficacy there with flu protein. And there's preclinical data that also backs it up as well, right? We see KV downregulation in folks with chronic pain. So we think it's a more robust story beyond just flupertine, which, as Ian said, is a little bit more complicated of a case. And so we think there's clinical as well as preclinical evidence to support KV7 as a good non-opioid analgesic. And the flupertin data, is that coming in, like, acute indications like this, or is it a little more all over the place? uh yeah they've done the flu protein is across different pain indications including both acute and chronic pain and in these acute studies like how long would you dose because i think procedures at your gene the indication allowed them to dose up to like a couple weeks or even a month yeah um i mean we don't we haven't we don'T have the final trial design and we haven'T we HAVEN'T talked about it publicly but yeah we have enough i don'T know if the question is kind of we did in in the multiple ascending dose in phase one we went to 10 days of dosing um but But, yeah, usually for these studies, it's a reasonably short period of time. So think about it as kind of one to two weeks. One to two months. Okay. But even you get some, like, durability data, things like that. Okay. Great. We only have a couple minutes left. I mean, do you guys want to just talk maybe a little bit more broadly about sort of, like cash runway and, you know, your comfort with the balance sheet heading into a launch, these big studies potentially continuing, Syke? Yeah. Look, we were, I think, well-positioned heading into the XTOL 2 readout. We obviously did a large capital raise on the back of the strong data. So we ended Q3 now with $1.2 billion in cash, which is a lovely thing to say. And that guidance that we've maintained is that into 2029. So that funds, as I mentioned before, launched probably starting in kind of early 28. That gives us a full first year of launch. And that includes, again, continued development across both the other epilepsy studies that we had ongoing. And we did mention on Q3 as well that we're going to be starting this X-First clinical study, Phase 3B4. So that's included in that cash runway, along with the continued development in psychiatry for X-NOVA-2, which is the one we're going to read out in December, X-Nova-3, which has the one that we paused enrollment, as well as our BPD bipolar depression study. So that also includes the Phase 2 proof-of-concept studies in pain. plus we have a second generation or at least second now generation for NAV17 that's in the clinic now in a phase one healthy volunteer study. So it's a really robust clinical pipeline as well as we've got a really active research effort. So we've Got a team up in Vancouver that's doing great work in ion channel discovery and drug development. We've got preclinical program for NAV11 for Dravet's disease with a small molecule that could be disease modifying, which is super exciting, and that's in IND Enabling Talk. So we've got a lot of good things to spend money on, and these will be the highest burn years, right? We're going to build up a commercial infrastructure next year before we have any revenue. And as we talked about before, we're going to have a more modest revenue curve at the outset of the launch, but we're going to have the full commercial cost. So these will be relatively hard burn years. But we go into it well-positioned, and we've good ways in which to continue to capitalize the company at the right time. Awesome. All right. Perfect timing. Thanks, guys. Appreciate it. Thanks, Paul. Thank you.