Xenon Pharmaceuticals - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $7.5M (Neurocrine collaboration milestone), a significant beat versus Wall Street consensus of $1.9M; diluted EPS was -$0.83, modestly better than consensus of -$0.90. Bold beat: Revenue and EPS both beat Street in the quarter.*
• Guidance updated: X-TOLE2 Phase 3 FOS topline shifted to early 2026 from prior H2 2025; patient recruitment expected to complete in “next few months,” reflecting a modest delay but nearing the finish line. Bold change: topline timing moved to early 2026.
• Operating spend increased: R&D $61.2M (+$17.0M YoY), G&A $19.0M (+$4.2M YoY); net loss widened to $65.0M (vs $47.9M YoY) on higher R&D and lower interest income.
• Balance sheet remains strong: cash, cash equivalents and marketable securities at $691.1M; runway guided “into 2027,” supporting multiple registrational programs (epilepsy, MDD, BPD) and first-in-human pain programs.
• Call catalyst: management affirmed ~6 months from topline to NDA filing if positive, with CMC/nonclinical sections already in good shape, framing an actionable regulatory timeline for investors.

What Went Well and What Went Wrong

What Went Well

• Clear R&D progress across late-stage and early-stage pipelines, including ongoing Phase 3 epilepsy (X-TOLE2/3, X-ACKT), active Phase 3 MDD (X-NOVA2; X-NOVA3 mid-year), and planned Phase 3 BPD initiation mid-year; early-stage Kv7 (XEN1120) Phase 1 initiated and Nav1.7 (XEN1701) Phase 1 planned for Q3. “It’s an incredibly exciting time for Xenon...” — Ian Mortimer.
• Mount Sinai investigator-sponsored MDD study showed consistent drug activity versus placebo on MADRS and SHAPS at all time points, affirming Phase 2 X‑NOVA signals; week-6 deltas >4 points (MADRS) and >3 points (SHAPS) underscore potential antidepressant and anti-hedonic effects.
• Strong balance sheet and forecasted runway into 2027 despite elevated spend, enabling late-stage execution and pre-commercial groundwork.

What Went Wrong

• Timeline slippage: FOS topline readout moved from H2 2025 to early 2026; management framed this as modest and attributed variability in large multi-site epilepsy enrollment.
• Higher OpEx and lower interest income weighed on results: R&D +$17.0M YoY to $61.2M, G&A +$4.2M YoY to $19.0M; other income fell to $8.1M (from $11.5M YoY), expanding net loss to $65.0M (from $47.9M YoY).
• MDD IST primary neuroimaging endpoint (fMRI) was negative; while not gating Phase 3 plans, it highlights risk around academic surrogate endpoints versus clinical scales.

Transcript

Operator (participant)

Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2025 Xenon Pharmaceuticals Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Chad Fugere, Xenon's Vice President of Investor Relations. Please go ahead.

Chad Fugere (VP of Investor Relations)

Good afternoon. Thank you for joining us on our call and webcast to discuss Xenon's first quarter 2025 financial and operating results. Joining me are Ian Mortimer, Xenon's President and Chief Executive Officer, Dr. Chris Kenny, Xenon's Chief Medical Officer, and Sherry Allen, Xenon's Chief Financial Officer. After completing their prepared remarks today, we will open the call up for your questions.

Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the timing of and potential results from clinical trials, the potential efficacy, safety profile, future development plans, and current and anticipated indications, addressable market, regulatory success, and commercial potential of our and our partners' product candidates, the efficacy of our clinical trial designs, our ability to successfully develop and achieve milestones in our clinical development programs, including the anticipated filing of INDs and NDAs, the timing and results of those filings, and our interactions with regulators, our ability to successfully obtain regulatory approvals, the anticipated timing of the top-line data readout for our clinical trials of azetukalner, and our expectation that we will have sufficient cash to fund operations into 2027.

Today's press release summarizing Xenon's first quarter financial results and the accompanying quarterly report on Form 10-Q will be made available under the Investor section of our website at xenon-pharma.com and filed with the SEC and on SEDAR+. Now, I would like to turn the call over to Ian.

Ian Mortimer (CEO)

Thanks, Chad, and good afternoon, everyone, and thanks for joining our call today. I'll begin with a brief review of highlights from the past quarter and our progress across our growing neuroscience-focused pipeline, including progress on our phase three studies of azetukalner in epilepsy, our expanding clinical development work in psychiatry, as well as our early-stage programs that are entering first-in-human studies this year. After that, I'll turn the call over to Chris, who will share more details on our clinical development programs, including high-level top-line results from the completed investigator-led MDD study, along with an update on our recent engagement efforts to raise the profile of azetukalner. Sherry will close with a summary of our partnered program, financial results, and anticipated milestones. Starting with our azetukalner phase three epilepsy program.

As you've heard from us consistently, delivering data from our XTOL-2 study remains our number one priority at Xenon. We are nearing the end of patient recruitment in XTOL-2, which we expect we'll complete within the next few months, with top-line results anticipated early next year. While acknowledging the slight delay versus our prior guidance, I want to emphasize that we are approaching the conclusion of this study and, importantly, progressing towards our goal of bringing this important new medicine to patients. From the outset, to maximize study success, we have prioritized working with high-quality, experienced sites and monitored key metrics rigorously throughout the study. As we approach the conclusion of this work, we are very pleased that these metrics align consistently with our successful phase 2B XTOL study.

Bottom line, we continue to have high confidence in XTOL-2 and share the epilepsy community's excitement as we progress towards our phase three readout. It is this excitement that drives us and our scientific leadership and investment in the Kv7 landscape. As a reminder, Azetukalner is the only Kv7 opener and the only new ASM in development that is backed by long-term efficacy and safety data from clinical studies of patients living with epilepsy, now having amassed over 700 patient years of exposure in focal epilepsy patients. There remains a substantial need for new, efficacious, and well-tolerated epilepsy therapies, especially for those patients who continue to experience the debilitating impacts of focal seizures, even while taking multiple anti-seizure medications. We believe that Azetukalner's key attributes, as seen to date, demonstrate its potential to provide an important new option for the epilepsy community.

We consistently hear positive feedback about the need for a new medicine to address continuing unmet needs in epilepsy treatment. There is excitement within the medical community about Azetukalner's potential to offer a novel mechanism without titration, early onset of effect, seizure freedom, and mood benefit. Azetukalner has the potential to be a best-in-class anti-seizure medication that could offer significant and meaningful benefits in the future treatment of epilepsy. Shifting to broadening the use of Azetukalner beyond epilepsy into neuropsychiatry, enrollment is ongoing in our first phase three MDD study, XNOVA-2, with our second MDD study, XNOVA-3, and our first phase three study in bipolar depression, both on track to initiate by mid-year. In addition, as mentioned in today's press release, we now have the final results from the investigator-sponsored study of azetukalner in MDD.

Chris will provide some details on these results in a moment. Briefly, the results are consistent with our expectations and our prior XNOVA study, including clear drug activity on both MADRS and SHAPS based on separation between Azetukalner and placebo at every time point. We believe these results reaffirm the already strong scientific rationale to pursue further development in this high unmet need patient population. Moving now to our early-stage pipeline, there is significant momentum across our preclinical programs, with multiple regulatory filings expected this year to support the initiation of first-in-human trials across a number of validated ion channel targets. This broadening and building out of our early-stage pipeline is a direct result of the successful leveraging of our extensive knowledge and expertise in developing potassium and sodium channel therapeutics.

As our diverse pipeline of early-stage drug candidates continues to mature, I'm incredibly proud of the considerable progress we are making across multiple programs targeting ion channels that include Kv7, Nav1.7, and Nav1.1. Today, I'll give you an update on each of these promising programs. Recognizing the potential broad applicability of the Kv7 mechanism of Azetukalner, we have identified multiple chemically diverse Kv7 development candidates and believe that this mechanism may have utility in a broad range of therapeutic indications, including seizure disorders, pain, and neuropsychiatric disorders such as MDD and BPD. I am pleased to report that a clinical trial application was recently accepted for XEN1120, a Kv7 channel opener that we intend to study as a potential treatment for pain, and a phase one study in healthy adult participants is now underway.

As a reminder, there is good clinical evidence supporting the development of novel selective Kv7 openers optimized for pain. We also have a number of other Kv7 molecules and chemistries that will follow XEN1120. We also continue to make substantial progress within our Nav1.7 sodium channel program, where we believe we may have addressed the limitations of first-generation drugs targeting Nav1.7. A key part of Xenon's heritage involves our pioneering work that contributed to the strong human genetic validation of Nav1.7 as a pain target. We believe Nav1.7 could represent a new class of medicines which address the unmet medical needs for effective alternatives to opioids. We have nominated multiple selective NAav1.7 development candidates to date, and IND enabling work is complete for our lead candidate, XEN1701, for which we expect to initiate a phase one first-in-human study in the third quarter of this year.

Work within our Nav1.1 program also continues to progress. Our preclinical work to date suggests that targeting Nav1.1 could potentially address the underlying cause and symptoms of Dravet syndrome. Data shows that dosing with an orally available small molecule, CNS penetrant, and highly selective Nav1.1 potentiator suppress induced seizures and improve motor function, supporting the potential for improvements in Dravet patient motor function. Further, in these animal models, chronic dosing suppressed spontaneous seizures, protected against sudden unexpected death in epilepsy or SUDEP, and increased long-term potentiation, a potential cellular correlate of learning and memory. These preclinical data are incredibly exciting, and we anticipate that a lead Nav1.1 candidate will enter IND enabling studies this year.

This summer, we plan to host multiple R&D webinars to showcase various early-stage programs that will include deeper dives into mechanism, underlying human genetics, preclinical results, and other supporting data, as well as an overview of disease prevalence and unmet medical needs within certain patient populations. This first webinar will take place in June and will focus on our approach to treating pain with drug candidates targeting both Nav1.7 and Kv7. As Xenon continues to advance promising late and early-stage programs, I believe we are entering a catalyst-rich period for the company as we near most importantly the first phase three top-line readout of azetukalner in FOS. This represents a major inflection point for Xenon, signaling our evolution from a clinical stage to commercial organization, and I look forward to keeping you updated on our progress as we await results.

I'll now turn the call over to Chris, who will provide some additional details around our clinical development programs and, importantly, the IST results, as well as our broader outreach to the HCP and patient communities. Chris, over to you.

Chris Kenney (CMO)

All right, Ian, thanks a lot. As a reminder, our phase three epilepsy program includes our two XTOL studies in focal onset seizures, or FOS. That's XTOL-2 and XTOL-3, and our EXACT study in primary generalized tonic-clonic seizures, or PGTCS. As Ian noted, we're nearing the end of patient recruitment in XTOL-2 in the next few months. Despite the modest change to our top-line guidance, we remain highly confident in the conduct and quality of the XTOL-2 study. As Ian mentioned, we continue to see investigator enthusiasm around azetukalner and a high rollover rate into the open-label extension study, consistent with rates observed in XTOL. In addition, as with all our studies, we track a number of key metrics throughout the study as we near the end of XTOL-2.

We believe that we are seeing strong consistency on all of these metrics when we compare to our successful phase 2B X-TOLE study. We continue to be excited by the prospect of this first phase three FOS study outcome, and we believe the finish line is in sight as we look forward to completing patient recruitment in the next few months. As we're getting closer to top-line data, we continue our ongoing educational and scientific outreach efforts to raise the profile of Azetukalner amongst healthcare providers. Our team recently presented three epilepsy-related posters at the American Academy of Neurology, or AAN, meeting that took place in early April.

Building upon more than 700+ patient years of data, we're excited to share our 36-month azetukalner data from our ongoing XTOL open-label extension study in FOS that shows sustained monthly reduction in seizure frequency, impressive seizure freedom rates, and a consistent AE safety profile suggesting long-term efficacy and tolerability of azetukalner. We also presented an exploratory analysis from our XTOL study showing reduced seizure frequency rates across four focal seizure subtypes. These promising data support our conviction that azetukalner may offer hope for people who continue to seek new efficacious and well-tolerated therapies to address the debilitating impacts of uncontrolled seizures. AAN also provided another timely opportunity for us to connect directly with a broad range of healthcare providers and patient advocacy groups.

Discussions at the conference were wide-ranging and gave us the opportunity to present the science and the data to date and highlight the mental health burdens associated with epilepsy and engage in meaningful discussions around the underdetected and undertreated depressive symptoms associated with epilepsy. One of our poster presentations focused on patient-reported survey data that we collected, which further illustrates the substantial burden of illness for people living with epilepsy, with reduced quality of life, high seizure frequency, and fatigue, as well as other comorbidities such as anxiety and depression, further underscoring the need for new treatments to help people living with epilepsy. We also highlighted azetukalner's potential in neuropsychiatric disorders such as MDD and bipolar depression based on scientific rationale and unmet medical needs.

Before I dive into an update on our company-sponsored clinical programs and neuropsychiatric indications, I wanted to provide additional details and context from the recently completed investigator-sponsored study of azetukalner in MDD that was led by Dr. James Murrough at the Icahn School of Medicine, Mount Sinai. As a reminder, this study was designed as a 60-patient placebo-controlled trial with a functional primary endpoint to evaluate the effect of a 20 mg daily dose of azetukalner on brain measures of reward as measured by the change in activation within the bilateral ventral striatum from baseline to end of treatment at week eight, as assessed by functional MRI, and also to evaluate secondary endpoints that include an assessment of MADRS and SHAPS through an eight-week period.

Despite being a small study, the results provide additional evidence supporting the potential of the Kv7 mechanism and azetukalner to have antidepressant and antihedonic effects, which is a significant unmet need in treating patients with depression. Highlights of the IST results include the following. Compared to XNOVA and what we expect in our phase three program, given our entry criteria, the investigator-initiated trial enrolled a less impaired population, as indicated by lower mean baseline MADRS and SHAPS scores. For both MADRS and SHAPS, azetukalner numerically outperformed placebo at every time point measured. As expected, given the small sample size, the improvements were not significant. Looking specifically at MADRS, compared to subjects in the placebo group, subjects in the azetukalner group saw both early and larger improvements in MADRS scores.

The separation was approximately two points at the first time point measured, week two, confirming early onset of effect and peaked at a greater than four-point delta between active and placebo at week six. As a reminder, week six was the end of the study for XNOVA and is the end for our phase three MDD studies, therefore confirming and actually slightly outperforming our phase two XNOVA data. For the IST, the study went out to eight weeks, and the separation between active and placebo was less pronounced at week eight compared to week six due to a significant improvement in placebo between week six and eight. When looking at the individual patient data, this effect could potentially be explained by three subjects whose MADRS scores fluctuated considerably between week six and week eight, all in the context of a small sample size.

Subjects in the azetukalner group also saw earlier and greater improvements on SHAPS, a measure of anhedonia, which is a core symptom of MDD. Again, we see the same pattern with early separation between the Azetukalner and the placebo group, and this separation continued throughout the study, consistent with the separation seen in our XNOVA study, including a greater than three-point delta between active and placebo at week six. On the safety side, azetukalner was generally well tolerated with an AE profile generally consistent with prior studies and the known mechanism. In addition, there were no reports of weight gain or sexual dysfunction, which are common adverse events with standard of care agents. The most common adverse events include dizziness, incoordination, and confusion.

As we look at the totality of the data, most of these AEs were mild or moderate in severity, with only one serious adverse event deemed unrelated to azetukalner and a low rate of treatment discontinuations due to adverse events that was comparable to placebo. In summary, azetukalner demonstrated consistent and numerically greater improvements on MADRS and SHAPS at all time points measured. Importantly, the greater than four-point and three-point separation between azetukalner and placebo on MADRS and SHAPS, respectively, at week six demonstrates meaningful drug activity and reflects the length of the double-blind period in our phase three MDD program. In addition, we believe the benefit-risk profile of azetukalner is reinforced as there is nothing unexpected or concerning in the adverse event profile seen in this study, given the study design and small numbers. The lead investigator, Dr.

James Murrough has submitted an abstract to present these data at the American Society of Clinical Psychopharmacology, or ASCP, later this month and intends to submit for peer-review publication at a later date. Turning to Xenon's efforts to expand the azetukalner use in neuropsychiatry, I wanted to first highlight that XNOVA-2, the first of three planned phase three clinical trials evaluating the azetukalner in patients with MDD, continues to enroll patients after initiating late last year, and the second study, XNOVA-3, is on track to initiate by mid-year. We continue to engage with physicians who treat patients with MDD to educate them about our ongoing clinical studies and the potentially differentiated profile of azetukalner versus standard of care agents.

Of note, physicians are interested in Azetukalner's novel selective Kv7 mechanism of action and its potential benefit on anhedonia, rapidity of onset, as well as its potentially favorable tolerability profile, with data to date supporting no notable adverse effects on sexual function or weight gain. We also plan to run two identical clinical studies evaluating Azetukalner in a mixed population of bipolar I and bipolar II depression, with the first study on track to initiate by mid-year after recently receiving IND clearance from FDA. We look forward to providing more details around our BPD registration program once our first trial is initiated.

In summary, as we drive towards a phase three FOS readout, we believe that azetukalner provides the promise of a new anti-seizure medication to people living with the burdens of seizures and looking beyond epilepsy could address the needs of people living with neuropsychiatric disorders such as MDD and bipolar depression. I'd like to now turn the call over to Sherry, who will begin by providing some additional detail around our partner program before summarizing our financial results. Sherry.

Sherry Allen (CFO)

Thanks, Chris. Now, looking briefly at our financial results, we recognized revenue of $7.5 million during the first quarter related to a milestone payment in connection with our collaboration with Neurocrine, triggered by the initiation of a phase one study of NBI-921355, a selective inhibitor of Nav1.2 and Nav1.6, in development for the potential treatment of certain types of epilepsy.

Cash and cash equivalents and marketable securities totaled $691.1 million as of March 31st, 2025, compared to $754.4 million as of December 31st, 2024. Based on current operating plans, including the completion of the Azetukalner phase three epilepsy studies and supporting late-stage clinical development of azetukalner in MDD and BPD, we anticipate having sufficient cash to fund operations into 2027. Given our proven track record of strong fiscal management, Xenon is in the fortunate position of having a strong balance sheet to support multiple registrational programs for azetukalner and the continued maturation of our early-stage pipeline. I would refer you to our news release and 10-Q report filed today for further details around our financial results. We're entering a transformational period for Xenon as we evolve from a clinical to commercial-stage company.

We believe that positive top-line results from our phase three epilepsy program will enable an NDA submission to the FDA with the goal of advancing azetukalner towards commercialization. In addition, other late-stage neuropsychiatric programs will be well underway by year-end, with two XNOVA trials in MDD expected to be recruiting patients and a registrational study in BPD also initiated by mid-year. Our deep pipeline also contains multiple promising early-stage therapeutic candidates across a number of ion channel targets, supporting our goal to be a fully integrated, premier neuroscience-focused company. On behalf of everyone on the Xenon team, we're incredibly excited in Xenon's evolution and remain focused on taking important steps forward to bring us closer to delivering azetukalner to people living with epilepsy. With that, I will pause and open the call for your questions. Operator?

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Paul Mathews with Stifel.

Paul Mathews (Broker)

Thank you for taking our question. We were just wondering, from the top-line epilepsy data in early 2026, how quickly could you file, assuming that's positive? And then just a second question, you guys talked about tracking some key metrics. Could you provide any color on what those are and, yeah, just kind of what those metrics are and how they compare to the phase 2B? Thank you.

Ian Mortimer (CEO)

Sure. Yeah, happy to address both of those questions.

On the top-line data to NDA filing, we haven't provided specific guidance, but I think many people have heard from us in the past, and we'll be able to refine this over time. It's approximately kind of six months from top-line data to filing. Important to note is that it is the clinical data that's on the critical path. We know just how broad an NDA filing is as it relates to the nonclinical sections, CMC, clinical pharmacology, all of the data. All of that's in really good shape, and we're already writing certain sections of the NDA now, and we'll continue to do that through the remainder of this year.

On the metrics question, so there's a lot of things that we track in all of our clinical studies to really make sure that we believe we have—we're working with the highest quality sites, we're making sure we're getting the right patients in, the conduct is there. Just to give you a bit of an idea, in epilepsy, we have a patient screening period, we have a baseline period, then the patients are randomized, they go through a double-blind period, and then if they complete the double-blind period, they have an ability to roll over into open-label extension. As we think about that, there's lots of things that we can kind of measure along the way. In that kind of screening, I'll give you some examples.

Kind of in that screening and baseline period, we can look at the patient baseline characteristics, the demographics, what their baseline seizure burden is. We can measure, even before they get randomized, what their compliance is going to be like to a diary. We can also look throughout the double-blind at a number of things, and then we can look at rollover rates into the open-label extension as well. There are a number of things that we kind of track along the way just to make sure that we're comfortable in terms of the way the study's being conducted.

Paul Mathews (Broker)

Great. Thank you guys so much.

Ian Mortimer (CEO)

Yep.

Operator (participant)

Your next question comes from Tessa Thomas Romero with JPMorgan Chase & Co.

Tessa Thomas (Analyst)

Hi, Ian and team. Good afternoon, guys, and thanks so much for taking our question.

Following up here, can you provide any quantification on how many patients you still need to recruit for XTOL-2, any numbers you can put around it for us? What are you specifically focused on to ensure you meet this guidance, or is it really just par for the course here? We noticed on clinicaltrials.gov that it seems like some additional trial sites have recently been added. Finally, can you talk to what the screen failure rate is coming out to be, and is that similar to what you saw in XTOL-2? Thanks so much.

Ian Mortimer (CEO)

Sure, Tess. I'm happy to provide my perspective. Chris, you can add to this as well. Yeah, Tess, I think you kind of saw in the press release and with our prepared remarks is we're getting close. We feel we're in the next couple of months, we'll be done.

Difficult to predict exactly. There's always—we've talked about in previous calls kind of these ebbs and flows in a clinical trial like epilepsy, just given the number of clinical sites that we use overall and the number of patients that are screened or randomized from any given site is a reasonably small number that you do see some variability kind of month to month in screenings and randomizations. I think we feel good that we're getting close to the end. We can see the finish line, and we'll get there over the next couple of months. In terms of kind of new sites, yeah, I mean, look, the vast majority of the sites for XTOL-2 have been up and running for some time.

Obviously, in the early parts of a clinical trial, if we look back a couple of years ago as the study was getting up and running, those sites come online at different rates for a whole bunch of different reasons. Some of it is jurisdictional-based, and some of it is just the individual site as we work through contracting and site visits. There are a couple of sites that come in late, and the only reason there is because, for whatever reason, maybe they now have the resources ready to participate in a clinical trial, or there was something else that prevented them from starting earlier. I think it is a very, very small number, so I would not focus too much on that. I think what we should all be focused on is that we are getting close to the end here. Chris, anything to add? I think you covered it.

Chris Kenney (CMO)

Thanks for the question, Tess. I guess the one piece that you asked about was the screen failure rate. Ian already provided you with a number of metrics that we follow in the phase three program to ensure that the quality and the conduct of XTOL-2 is heading in the direction that we want, and screen failure rate is one of them. We have not seen, I think, as you know, the inclusion/exclusion criteria are really quite similar between the two studies, and in fact, there is sort of a pretty standard recipe that is used for FOS studies. It is basically a very similar study to the phase two. Not surprisingly, based upon that, we are seeing screen failure rates that are very similar.

Tessa Thomas (Analyst)

Thank you. Thanks.

Operator (participant)

Your next question comes from Brian Abrahams with RBC Capital Markets.

Brian Abrahams (Analyst)

Hey, good evening. Thanks for taking my questions.

Really two for me. I guess first, do you have any senses to the reasons behind the slight timeline slippage for XTOL-2? Are there kind of implications on kind of competitive dynamics there and any learnings that you can apply to patient finding in the commercial setting? Then secondly, on the Mount Sinai study, it seems like in a more mild population—I do not think they had a HAMD entry criteria there—there were fairly robust effects, as good or even better than what you saw in your study. Any thoughts on how that might impact, I guess, your phase three plan in terms of your entry criteria or any modifications there or to the powering of your phase threes in MDD, given what you are seeing coming out of Mount Sinai? Thanks.

Ian Mortimer (CEO)

Thanks, Brian.

Chris, I can take the first one just on the timeline and any competitive dynamics and commercial stuff. Do you want to address just any learnings from the IST and any read-through into the phase three MDD program?

Chris Kenney (CMO)

Absolutely.

Ian Mortimer (CEO)

Brian, on your first question, yeah, look, we view this as a pretty minor delay. We'll get there in the next couple of months, and we should see data early next year. I think, as I mentioned on the last question, when we kind of take a big step back, we do see some variability just kind of month to month. I don't think we read too much into this. On the competitive side, we're not seeing a change there. We're not seeing the competitive dynamics change at the individual site level.

Given, at least in our experience, most clinical sites, and maybe I should say most investigators, focus on one FOS study at a time on the therapeutic side, they're generally not running multiple. Sometimes you'd get a handful of different PIs at an institution. Different PIs may focus on different things, but for the most part, the experience and feedback we've had from our clinical investigators is they're focused on kind of one study at a time. Given that we've been in this phase three program longer than our competitors have in terms of their clinical programs right now, I don't think that's having any impact. I will just comment a little bit on the commercial setting because I think that's a really—I think that's an important question.

When we look at clinical development and the inclusion/exclusion criteria, including the baseline seizure burden that's necessary to do the statistical analysis and the powering in a clinical study, that's a very different population than what we think about in the commercial setting. All of the work we've done commercially, from primary market research to feedback from physicians at AES and all of the medical congresses, is there's still this 30%-50% of patients that are not getting good seizure control and are really looking for new therapies. As we said a number of times, if we look at the profile and the attributes of azetukalner, we get this really warm reception and excitement about azetukalner coming to market. It'll be the first time we have a novel mechanism in quite some time.

If we look at the placebo-adjusted efficacy from XTOL, we look at the long-term open-label data, the no titration, the easy-to-use attributes, and potentially the benefit on mood, as well as that we see early onset. That is kind of a package that I think we haven't really seen in the treatment of epilepsy. I think the commercial excitement continues to be there. I would actually say the profile of azetukalner coming off of AES in Los Angeles a few months ago, AAN, and all of our outreaches, the profile of the molecule just continues to grow in the medical community.

Chris, I'll let you handle the second one in terms of the IST.

Chris Kenney (CMO)

Yeah, sure. Thanks, Ian. Thanks, Brian, for the question. I'm just going to say kind of make one overarching comment, and then I'll answer your question directly.

I mean, I'd like to kind of zoom out for a second and just acknowledge that in depression, having one study after the other be positive for any drug is challenging. And what we're sitting on now is the second study in major depressive disorder using azetukalner that suggests that this drug may have activity on depression and anhedonia. That's our XTOL-2. Now, James Murrough's study, the investigator-initiated trial. But then don't forget that there was another controlled trial with ezogabine that showed similar results, and there was an open label as well. So you actually have four studies that are suggesting two different drugs with the same mechanism of action showing that this mechanism shows promise. So on a high level, it's really—I think it's just reassuring. I mean, we don't know how the phase three program is going to pan out, but it's reassuring.

To be more specific about your question, they use different criteria to get patients into their study. The major enrichment criteria that Dr. Murrough and Dr. Matthews used was the clinical global impression of change rather than the HAMD or any other depression scale. I should just say this. I mean, Ian and Sherry have been very consistent all along. This study is not gating. We were not waiting for this data to change anything. The punchline is that we have no intention of changing anything in the phase three program. I would attribute the really robust data more to the fact that it is two sites, two investigators, that the data is very controlled, and then things get more complex as you kind of blow out to a phase three program with 40 or so sites. Anyway, I mean, it is pretty impressive.

We got a separation of active and placebo of four points at week six. The phase three program is powered at two to 2.5 points. I think we're in pretty good shape. Again, thanks for the question, Brian.

Brian Abrahams (Analyst)

Thanks, Chris. And thanks, Ian.

Ian Mortimer (CEO)

Thank you.

Operator (participant)

Your next question comes from Brian Skorney with Baird.

Brian Skorney (Analyst)

Hey, good afternoon, guys. Thank you for taking the question. I guess also to follow up on the IST study as well, maybe you could just kind of walk through the details around the fMRI primary endpoint, what the neuroimaging expectations were here originally, what the thought process on making that the primary was, and what we've seen versus other active MDD drugs that are approved on similar neuroimaging endpoints. Thanks.

Ian Mortimer (CEO)

Thanks, Brian. Chris, do you want to address the fMRI question?

Chris Kenney (CMO)

Yeah, sure. Happy to, Ian. Thanks. Thanks for the question.

I mean, these were two academicians, Dr. Murrough and Dr. Matthew, who were following up on a study that they had done where the primary endpoint was fMRI with ezogabine. That study had 46 patients, so less than 30 per arm. Yet the results for fMRI were somewhat promising. They were non-significant in that ezogabine trial, but they did appear to be promising. What they did is they powered a study larger than that 46 up to 60 and powered the study for fMRI to see if there was a difference, and there was not. I would position this as—I mean, all along, we've been really interested in what the clinical scales showed. In defense of the approach, it really does ask a very interesting mechanistic question about how is it that this mechanism actually improves depression.

There was a hypothesis behind it about the reward circuit, which I'll spare all of you the details of. Ultimately, as a clinician and as a company, we were really interested in the clinical scales. They showed consistent improvements in separation between active and placebo for MADRS and SHAPS on the order of what we saw with XNOVA. Overall, yes, the primary endpoint of fMRI was negative, and I do not want to dodge that. The clinical scale showing evidence of efficacy similar to what we are planning on doing in phase three is, I think, a pretty good outcome for us.

Brian Skorney (Analyst)

Great. Thank you.

Operator (participant)

Your next question comes from Mark Goodman with Leerink Partners.

Hi, good afternoon. Thank you for taking our question. This is Basma. I'm for Marc. We have a question about the Nav1.1 and Dravet syndrome.

Given the comparative landscape and the multiple ongoing trials in Dravet syndrome, first, we'd like to know how would you like to—what's your plan to assess the efficacy of this asset? And also, since this is a precise approach, are you going to plan to assess behavior and cognition in your trial as well? Thank you. That's it for us.

Ian Mortimer (CEO)

Yeah, thank you for the question. Yeah, as you've seen in our prepared remarks, and for those that had the opportunity to attend the American Epilepsy Society meeting last December, I think we're generating some really compelling preclinical data. It really gets to the heart of your question, both on seizure reduction but the potential for disease modification as well.

Yeah, we would agree that there are a number of drugs that are used and have been developed to treat Dravet syndrome, but there's been very few that have really gotten to the underlying genetic cause of the disease. We think, to our knowledge, we're the only company that's developing an oral small molecule that can potentiate the channel that can have an impact not only in these genetic animals, these animals that actually have a 50% loss of function of Nav1.1, which is the human—it really is the human disease—is that we can protect these animals from seizures, spontaneous seizures, from SUDEP. We can have this impact on long-term potentiation. That's the real potential here. It is a little bit early to kind of map out the entire development plan for Nav1.1.

Given our approach, we would want to look at, in clinical development, both seizure reduction as well as some of those endpoints that you're referring to in terms of disease modification. We really think that a lot of these pediatric and genetically defined epilepsy, that's where the field needs to go. We need to continue to provide better drugs for these patients, both in terms of seizure reduction but, importantly, disease modification. That's really what we hope to address with the Nav1.1 program.

Thank you.

Operator (participant)

Your next question comes from Miles Minter with William Blair.

Miles Minter (Analyst)

Hi, everyone. Thanks for taking the question. Just on the powering, I think you've said it's for XTOL-2, 99% powered at 25 mg dose, 90% at 15 mg for that 360-patient target enrollment. We did some work.

I think if you look at phase two, going to phase three, the placebo does not really change in FOS studies, but the drug effect comes down. I think it was about 7% on that median seizure frequency. Just wondering, given your comments that you powered this study based on what you saw in XTOL, which was better than we expected, do you assume some sort of effect size erosion going into phase three? If you do, are you going to take this as an opportunity to maybe increase enrollment beyond that 360-patient number? Just wondering how you think about that. Thanks.

Ian Mortimer (CEO)

Great. Thanks, Miles. Chris, can I pass this one to you in terms of the modeling for the primary endpoint in the XTOL program?

Chris Kenney (CMO)

Yeah. I am actually happy to cover this one. You are correct, Miles.

The study is powered at greater than 99% for the 25 mg. It's actually powered higher than 90% on the 15 mg arm. It's powered for multiple key secondary endpoints as well, as we're interested in week one endpoints and patient global impression of change and so forth, trying to get them into the label. We think that we're covered from a powering perspective. I do hear what you're saying that conventionally, these studies can be over-enrolled at times, but I would say that the study is powered appropriately right now and that we're—in general, there's a fairly good consistency transitioning from phase two to phase three in epilepsy. The phase two data was robust. I think we're in good shape from a powering standpoint and enrollment perspective. Do you want to add to that, Ian?

Ian Mortimer (CEO)

I know, Chris. You covered it.

Thank you.

Operator (participant)

Your next question comes from Laura Chico with Woodbush.

Hi. Thanks very much for taking the question. This is Dylan on for Laura Chico. Just to clarify, how long do you envision XTOL-3 enrollment taking relative to XTOL-2? We're just trying to understand the separation of the readout timing.

Ian Mortimer (CEO)

Thanks, Dylan. Yeah, we haven't given—for the other two epilepsy studies or the depression program, we haven't given specific guidance to top-line data. If we go back and just remind everyone, when we transitioned from phase two BRXL study into phase three, we focused on XTOL-2, and that was based on that being on the critical path to filing the NDA and the regulatory interaction that we had had at that time. XTOL-2 was up and running first.

We also prioritized into XTOL-2 the majority of sites that we had worked with in XTOL, both from the individual site level as well as a number of the countries that we prioritized. There is a delay to XTOL-3 because it did get up and running later. We have not given specific guidance on that, but it will be later than XTOL-2. I think later this year, we will be in a position to give guidance on XTOL-3.

Thank you.

Operator (participant)

Your next question comes from Paul Toy with Goldman Sachs.

Hi. This is Daniel On for Paul. We are interested about your trial design for the BPD. Do you plan to stratify the BPD type one and type two in order to increase the detection or the signal-to-noise ratio? Thank you.

Ian Mortimer (CEO)

Thanks for the question. I will give a high-level comment.

Chris, I think you can address specifically bipolar one and bipolar two in terms of the patient population that we're including in the phase three program. We will provide, when the bipolar registration program gets up and running in the next couple of months—we've said mid-year the first phase three will be up and running—more detailed information on the phase three design. Stand by for the more granular detail on the endpoints and powering assumptions and sample size. We can address your specific question on bipolar one and bipolar two and including both of those in the phase three program, Chris.

Chris Kenney (CMO)

Yeah, sure. Thanks for the question. There will be two studies in bipolar depression. Both studies will be a mixture of type one and type two, as you know, based upon the question that you're asking.

You were specifically asking about stratification. As I said in my prepared remarks, we intend to share a lot more information about those studies in the near future. I just suffice it to say that if you have a primary endpoint and you think that it can be affected by something in the study, like a mixture of patients, then stratification is a pretty good question to be thinking of. I think on a theoretical level, there is reason to think that there could be a little bit of a difference in the response between type one and type two. There is probably going to be not a 50/50 mixture of one and two. It will be lopsided. I think you are making a good point about stratification, something that we are definitely seriously considering. We are going to share all that soon.

Operator (participant)

Your next question comes from Andrew Sai with Jefferies.

Andrew Tsai (SVP)

Hey, thanks for the updates. My best wishes to Sherry. I believe that's your last earnings call at Xenon. For XTOL-2, is the general guidance still to revise the data timing guidance to a specific time point over time, such as a specific month? By chance, could you plan to press release or announce when you do, in fact, complete enrollment? Secondly, we know back in XTOL there was a stronger efficacy differential for patients who are on fewer AEDs at baseline. Any color on the enrolled phase three XTOL-2 and 3 patient type in terms of the number of prior and concomitant AEDs they're on at baseline? Thank you.

Ian Mortimer (CEO)

Thanks, Andrew. Yeah, I can address those.

Yeah, as we do with all of our clinical studies, as we get closer to the end, you can expect us narrowing and refining that guidance just so everyone has a really good idea of when the top-line data are going to be available. Generally, we've just updated enrollment in our quarters. As we get closer to top-line data, we'll definitely be refining there. In terms of the patient baseline, kind of the demographics, is your question on fewer AEDs? I would even broaden out. It's more than just fewer AEDs, but I think that's a good one to track. Obviously, we track all of that. I think what we're—I'm not going to give you a specific number right now because the study is still ongoing, and so those things can change. We are getting close to the end of the study.

As you heard in our prepared remarks and in some of the Q&A already, we're seeing kind of consistency with the XTOL study. I think the way that you can interpret those comments is that we believe that the patient population overall in phase three will be consistent with the phase two population.

Andrew Tsai (SVP)

Great. Thanks.

Operator (participant)

Your next question comes from Joseph Thome with TD Cowen.

Joseph Thome (Managing Director)

Hi there. Good evening. Thank you for taking my questions. Maybe the first one on the inclusion of the bipolar one patients, maybe if you could just give us a little bit more detail as to why you decided to include both bipolar one and bipolar two patients in the study, especially given the Biohaven data that came out earlier this year. And then maybe just a second question on the XEN1101 phase two.

Obviously, it's small, but I think in that study, the patients were taking two pills of 10 mg, I guess assuming BID. Obviously, your phase two, it was 20 mg once a day. Do you think there is anything in sort of that two tablets versus one tablet that could have led to the greater results here? Are you thinking about changing anything relative to that? Obviously, no, it's a small study. Thank you.

Ian Mortimer (CEO)

Thanks, Joe. Chris, do you want to just comment on BP1 and 2 and just make sure that we're clear that obviously, it's not manic patients that were or patients with mania that were enrolling? Maybe you can just go through a few details there and also just the clarification on the dosing from the IST.

Chris Kenney (CMO)

Yeah, sure. I mean, yeah, I mean, what Ian just said is critically important.

You're talking about the same patients between the Biohaven study and ours in the sense that they have bipolar, but they're at a very different—first of all, those are type one by definition because they have these manic episodes. We're interested in the portion of the disease where these patients are struggling with most of the time, which is depression. The underlying pathophysiology of the depression is thought to be pretty similar between type one and type two. We sought out advice from multiple key opinion leaders who spend time in this area of research and got a pretty consistent message that it was worth studying both. We think that the chance of success is good while those patients are in a depressive state.

Yeah, I mean, the fact that the mania study was negative from Biohaven, I mean, there's been a very limited release of information. I think it's hard to kind of know what to glean from that. One thing that's reassuring is assuming that placebo and drug behave similarly, it tells us that the mechanism doesn't exacerbate mania, which I think is somewhat reassuring as we go forward into bipolar depression. I think if you take a look at the totality of the data that exists, there's a much stronger argument to go forward into bipolar depression than mania. I think I actually said the same thing in the last earnings call, which was before those data came out. Thanks for the question, Joseph.

Ian Mortimer (CEO)

Oh, tablets. Yeah. Same as—

Joseph Thome (Managing Director)

Yeah, just on the number of— Yeah.

Chris Kenney (CMO)

Yeah, the quick answer is I don't think that that should make any difference whether they're taking two 10s or one 20. Same formulation. The drug has a long elimination half-life. And so it probably makes very little difference whether the drug is being taken once or twice and whether you're taking it as two 10 tablets or one 20. I don't think that explains any of the differences. I think, look, I mean, again, zoom out. There's a consistency of separation between drug and placebo on the SHAPS and the MADRS in two controlled studies with azetukalner and with supporting data from ezogabine. You're talking about small studies, right? Ezogabine 46 patients. Our study had about 55 patients per arm. This study, the investigator-initiated trial, was about 30 patients per arm. They're small studies. I think you're going to end up with variability.

I would be cautious to kind of over-interpret a point here or a point there.

Ian Mortimer (CEO)

Chris, just to—I just want to be clear. I know they were taking two 10 mg, but it was QD dosing. Oh, sorry. In the IST. Yeah, in the IST. Joe, just to be clear, that was just based on drug supply that was available. It was two 10s versus 20, but it was QD, not BID. We would not have expected any differences in any of the results based on a change in dosing.

Joseph Thome (Managing Director)

Okay. That's very helpful.

Chris Kenney (CMO)

Thank you.

Operator (participant)

Your next question comes from Jason Gerberry with Bank of America.

Hey, good evening. This is Dean On for Jason. Thank you guys for taking our question.

First one, apologies if a similar question might have already been asked, but can you just remind us for XTOL-2 where seizure-freedom measure kind of fits into the statistical hierarchy? If you have any assumptions for how seizure-freedom rates will kind of shake out relative to that high single-digit percentage that we saw in XTOL. For XEN1120, just how are you guys thinking about lead indication selection? You can maybe speak to what you're hoping to see from the drug's pharmacology profile in phase one testing. Thank you.

Ian Mortimer (CEO)

Thanks, Dean. I'll do—Chris, why don't I do the XEN1120 question first? Maybe I can start on the seizure-freedom question. Please provide your perspective as well. On XEN1120, yeah, really great progress. I'm overall incredibly pleased with the progress that we've been making on our discovery portfolio.

I mean, if you just think about it, in the last couple of months, Neurocrine filed a CTA for 355, which is a molecule that we synthesized that's this Nav1.6, 1.2 inhibitor. We have filed a CTA and first in human for XEN1120. In the next couple of months, we'll be in the clinic with a Nav1.7. We finished the GLP enzyme for that. Three INDs in a pretty short period of time for the early-stage portfolio. I think it's really exciting times. The first in human for XEN1120, to answer your specific question, will be a traditional healthy volunteer study where we're going to want to see a number of things. We're going to look at, obviously, the pharmacokinetic profile as well as the adverse event profile at a variety of different dose levels.

As we think about future development, what we said in our prepared remarks is we'd like to take this molecule into a proof of concept study in pain. We think there's good clinical validation and rationale to go into pain. I think that would really broaden out the applicability for the mechanism. That's the current plans for XEN1120. On your question on the epilepsy program in terms of seizure-freedom, when we think about seizure-freedom, I'll just make some global comments because I think it's important to set context. Chris can get into his perspective and some of the details. I wouldn't say there's a standard definition for seizure-freedom. Generally, when we talk to clinicians, they really think about the patients over a one-year period. Have they had any seizures over one year?

Obviously, that's something that's not tested in the double-blind portion of a clinical study because the double-blind portion is eight weeks or 12 weeks depending on the study. You really are following those patients in open-label extension and seeing how they're doing over a longer period of time. That's what's really important as we look at that kind of 100% reduction in seizure burden. That's why the open-label data that we continue to generate and we continue to present at medical congresses is important. As a reminder, we started with a one-year open-label extension study for XTOL. We extended it to three and then five. Now it's a seven-year study. We have patients that have been on Azetukalner for many, many years. We can look at those seizure-freedom rates, which we've published, which we think are really impressive over time.

Chris, maybe just talk about that 100% of seizure reduction in the double-blind period.

Chris Kenney (CMO)

Yeah, sure. I mean, I think that it's worth emphasizing that the epileptologists, when they think of seizure-freedom, they're looking over a really long time horizon, not eight weeks or 12 weeks. Specifically, the question was about whether seizure-freedom is in the statistical hierarchy. It isn't. We're interested in the rapidity to onset that we saw in XTOL. The week one time point is in the statistical hierarchy, but not seizure-freedom. Where we're really focusing on the seizure-freedom is the data that we're seeing over several years in the XTOL OLE and then obviously eventually in the phase three open-label as well. Thanks for the question.

Thank you.

Operator (participant)

I will now turn the call back over to Sherry Allen for closing remarks.

Sherry Allen (CFO)

Thanks, everyone, for joining us today on our call.

I know there were a few of you that we didn't manage to get to your questions during the allotted time. So we'll reach out to you directly after this to connect. Operator will now end the call.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.