Xenon Pharmaceuticals Q3 2026 Earnings Call Transcript

Xenon Pharmaceuticals (NASDAQ:XENE) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://edge.media-server.com/mmc/p/obfgtuc8/

Summary

Xenon Pharmaceuticals reported strong financials with cash reserves of $1.2 billion, expected to fund operations into 2029.

The company is advancing its lead product, AZK, toward FDA approval for focal seizures, with a strong scientific package submitted for NDA. Phase 3 studies for AZK in epilepsy are ongoing, with a new Phase 3b/4 study planned to assess early treatment add-ons.

Xenon is expanding its pipeline, with pain candidates targeting NaV1.7 and Kv7 moving to Phase 2 after positive Phase 1 data.

The company is building commercial infrastructure for AZK’s potential U.S. launch, with physician and payer engagement showing strong enthusiasm.

In neuropsychiatry, top-line data for the Phase 3 EXNOVA-2 study in MDD is expected in December 2026, with future plans contingent on these results.

Management expressed confidence in AZK’s unique profile and potential impact on epilepsy treatment paradigms, supported by robust clinical data.

Full Transcript

Kate (Conference Operator)

Good day, everyone, and thank you for standing by. My name is Kate, and I’ll be your conference operator today. At this time I would like to welcome everyone to Xenon Pharmaceuticals’ third quarter 2026 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ 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 Colleen Alabizo, Senior Vice President of Corporate Affairs at Xenon. Please go ahead.

Colleen Alabizo (Senior Vice President, Corporate Affairs)

Good afternoon. Thank you for joining us on our call and webcast to discuss Xenon’s third quarter 2026 financial and operating results. Joining me today are Ian Mortimer, our President and Chief Executive Officer; Dr. Chris Kenney, Chief Medical Officer; Darren Klein, Chief Commercial Officer; and Tucker Kelly, Chief Financial Officer. After completing our 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 status of and potential results from clinical trials; the potential efficacy, safety profile, future development plans in current and anticipated indications; addressable market, regulatory success, and commercial potential of our and our partners’ product candidates; the strength of our clinical trial designs; our ability to successfully develop and achieve milestones in our clinical development program, including the anticipated filing of INDs or equivalents and NDAs; the timing and results of our interactions with regulators; our ability to successfully obtain regulatory approvals; anticipated timing of top-line data readouts for our clinical trials; and our expectation that we will have sufficient cash to fund operations into 2029.

Today’s press release summarizing Xenon’s third 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+. I’ll now turn the call over to Ian.

Ian Mortimer (President and Chief Executive Officer)

Thank you, Colleen, and good afternoon to everyone joining us today. We’re excited to recap another productive quarter for Xenon as we make continued progress toward becoming a fully integrated neuroscience company delivering life-changing medicines to patients. Over the last few months, we remain focused on three key areas. First, advancing AZK toward potential FDA approval and launch in the U.S. for the treatment of focal seizures and building our commercial infrastructure and launch plans. Second, broadening the therapeutic opportunities for AZK beyond focal seizures by progressing our additional Phase 3 epilepsy studies as well as completing enrollment in our first Phase 3 neuropsychiatry study, EXNOVA-2.

And third, expanding our pipeline through advancement of our promising early-stage assets, including two of our pain candidates targeting NaV1.7 and Kv7, which we recently announced will be moving to Phase 2 proof-of-concept studies in acute pain based on positive Phase 1 data. Following the submission of our New Drug Application, or NDA, to the FDA in the third quarter, we’re full steam ahead on preparing for the potential approval and launch of AZK. Our NDA package includes strong scientific evidence from two pivotal randomized, double-blind, placebo-controlled trials in focal seizures, including the Phase 2b X-TOLE study and the Phase 3 X-TOLE 2 study. Across both studies, treatment with all four doses of AZK demonstrated a statistically significant reduction from baseline in monthly seizure frequency compared with placebo.

X-TOLE 2 outperformed X-TOLE with a 42.7% placebo-adjusted median percent change, or MPC, which is, to our knowledge, the highest placebo-adjusted MPC ever seen in a pivotal focal seizure study. AZK was generally well tolerated with a consistent safety profile observed across both studies, as well as in the multi-year open-label extension studies, such that across the entire epilepsy program we now have more than 1,500 patient-years of safety and exposure data.

Adding to the efficacy and safety profile is AZK’s novel mechanism of action, as well as ease-of-use attributes like once-daily dosing, the ability to start at a therapeutic dose without titration, our expected availability of four therapeutic dose levels, and no ASM adjustments needed for DDIs. We believe AZK represents one of the most compelling profiles ever seen in epilepsy, and we continue to hear this sentiment in our conversations with potential future prescribers as well, including at congresses, advisory boards, individual meetings with HCPs, as well as in market research.

In parallel, the team is hard at work building our commercial infrastructure and preparing its launch plan. We are making great progress engaging a broad set of healthcare professionals, including epileptologists, general neurologists, and APPs, including through multiple scientific exchange opportunities and in the field through our MSL team. We’ve also been increasing our touchpoints with patient advocacy organizations and payers as we focus on enabling patient access following commercial availability, and we’re making progress on selecting critical partners such as specialty pharmacy partners.

As we engage with a broadening set of stakeholders, we continue to hear enthusiasm for AZK’s compelling product profile, ease of administration, and the ways in which we are looking to innovate and support the complex needs of HCPs, people living with epilepsy, and their care partners. Beyond our commercial plans, we continue to enroll our Phase 3 X-TOLE 3 and EXACT studies of AZK in focal seizures and PGTCs, respectively, which could enable us to expand the potential geographic and therapeutic reach of AZK in epilepsy. Today we are announcing that we also plan to initiate an important new Phase 3b/4 study called the XFIRST study, and this will assess AZK earlier in the treatment paradigm as the first add-on therapy on top of standard-of-care ASMs.

Our clinical teams are working to initiate XFIRST in the first quarter of next year, and early feedback from epileptologists and general neurologists regarding our plans for the study have been very positive. To round out our epilepsy work, we continue to invest in multiple high-quality candidates targeting various ion channels, including our preclinical NaV1.1 program for Dravet syndrome, as well as our partnered NaV1.2/1.6 program with Neurocrine and the molecule MBI-921355, which continues to advance through a Phase 1b study with data expected in 2027.

Turning now to psychiatry, we continue to believe in the potential of Kv7 modulation as a novel therapeutic approach based on several clinical studies, including our own Phase 2 EXNOVA study, which showed promising signals of antidepressant effects for this mechanism. Innovative treatments for disorders like major depressive disorder and bipolar depression are urgently needed, especially treatments that may also impact anhedonia and offer differentiated tolerability profiles without weight gain or sexual dysfunction.

Since our last update in September, we have completed enrollment in the Phase 3 EXNOVA-2 study in MDD with approximately 360 patients, and we now expect to announce top-line data in December 2026 instead of Q1 2027. These data from our first psychiatry Phase 3 will provide us with the understanding of the benefit-risk profile of AZK in MDD, and this will inform the next steps in our neuropsychiatry program. Finally, beyond AZK, we’re very excited about the recent progress in our emerging pain portfolio. Two weeks ago at the IASP World Congress on Pain, we shared positive results from the Phase 1 studies with our lead NaV1.7 and Kv7 pain assets, XEN1701 and XCN1120, respectively, as well as exciting evoked pain data in preclinical species, including non-human primates. The clinical studies achieved all of our program goals, demonstrating the desired profiles that we hoped to see in Phase 1 and supporting the advancement to Phase 2 proof-of-concept studies in acute pain.

We’re excited to be leading the science around these two innovative non-opioid targets and to increase our visibility within the pain HCP community. So now, to provide more details on our recent pain announcement as well as our clinical development programs, I’ll turn the call over to Chris.

Chris Kenney (Chief Medical Officer)

Yeah, okay. Thanks a lot, Ian. It’s an exciting time for Xenon Pharmaceuticals as we continue to make great progress across our pipeline. I’ll start today with more detail about our emerging pain programs. As we look at the pain landscape, there remains a significant, persistent unmet need for novel, opioid-sparing therapies due to the high risk of abuse and dependency with opioids and limited efficacy of other options. Pain KOLs have expressed strong interest in ion channel modulators as a potentially transformative class of therapies.

They want mechanism-based innovation that can deliver real relief without sacrificing safety. Two weeks ago, we presented Phase 1 data for XEN1701 targeting NAV1.7 and XEN1120 targeting KV7. The data were presented at the International Association for the Study of Pain, or IASP, 2026 World Congress on Pain, and this was an exciting moment for us given our deep history with both NAV1.7 and KV7. For NAV1.7, we’ve worked on this target since our early days. Over 20 years ago, we identified a loss of function in NAV1.7 as the etiology behind congenital indifference to pain, or CIP, an extremely rare autosomal recessive disorder whose carriers are unable to feel pain but are otherwise completely healthy.

Since then, many companies have attempted to develop NAV1.7 inhibitors without success. In that regard, our IASP data were not only meaningful for Xenon Pharmaceuticals, they were also meaningful for the broader scientific field that has pursued this target for decades. The NAV1.7 ion channel is a highly genetically validated pain target with both gain and loss of function demonstrating pain-related phenotypes. As we set out to develop our current NAV1.7 candidates, understanding the challenges that previous programs faced was absolutely critical to formulating our target product profile. First-generation molecules, namely non-selective inhibitors that bind to the pore region of NAV1.7, were significantly dose-limited due to a lack of selectivity against the other sodium channel subtypes, which did not allow them to reach high levels of NAV1.7 receptor occupancy required for efficacy.

Second-generation molecules were the first to demonstrate some appreciable NAV1.7 selectivity. However, these molecules were hampered by high plasma protein binding and therefore low free drug concentrations and poor tissue distribution. Additionally, autonomic side effects were observed with inhibitors that were peripherally restricted or agents that demonstrated a very rapid increase in drug plasma concentrations. These findings helped inform the development of XEN1701, as well as our follow-on molecule XEN1720, which is currently in Phase 1.

Both were designed to achieve excellent NAV1.7 potency and isoform selectivity, high CNS exposure, and robust levels of free drug in the plasma and brain to enable effective tissue distribution. As a result, we believe that we will be able to achieve high levels of NAV1.7 inhibition, specifically greater than 75% receptor occupancy, to mimic the human genetics. Turning to the Phase 1 1701 study results, the single-ascending dose/multiple-ascending dose study included 76 healthy volunteers receiving XEN1701 and 22 receiving placebo. The study was designed to assess the safety, tolerability, pharmacokinetics, food effect, and CNS penetration of XEN1701. CSF sampling to confirm CNS drug exposure was performed in an open-label cohort. XEN1701 exhibited dose-dependent increases in plasma exposure across the evaluated dose ranges.

Plasma and CSF sampling and receptor occupancy modeling indicate that the proposed Phase 2 doses achieved and maintained greater than 75% NAV1.7 receptor occupancy in both the peripheral and central nervous system with twice-daily dosing. At the highest dose, we achieve receptor occupancy above 90% peripherally and above 80% centrally from the first hour through 24 hours. Human genetic evidence has established that more than 75% NAV1.7 inhibition is associated with a pain-free clinical phenotype.

Looking at safety, there were no treatment-related dose-limiting TEAEs, serious TEAEs, or TEAEs leading to study drug discontinuation. Most TEAEs were mild. Those observed in more than one participant in the MAD cohorts included headache, dizziness, and postural dizziness. We also were pleased to see that treatment-related TEAEs potentially related to autonomic cardiovascular effects were infrequent and balanced between XEN1701 and placebo cohorts, with no consistent dose- or exposure-related patterns and none occurring at the highest two dose levels.

We also presented new preclinical data evaluating a Xenon NAV1.7 inhibitor representative of XEN1701 in cynomolgus monkeys, which demonstrated that doses achieving more than 75% NAV1.7 receptor occupancy were associated with significant reductions in a capsaicin-evoked heat pain model, including about 85% to 100% reduction of pain at the two highest doses tested and without clinically meaningful changes in systolic blood pressure or heart rate relative to vehicle.

We’ve seen similar results in other animal models, including rodents and dogs, so these data met our target for free drug exposure in the CNS, high receptor occupancy in the CNS and peripheral nervous system, with a lack of autonomic effects that have been an issue for prior compounds. The findings strengthen our conviction that XEN1701 has a profile unlike any NAV1.7 inhibitor previously tested in the clinic, and we’re excited to progress to a Phase 2 proof-of-concept study in acute pain.

Now turning to XEN1120 and our KV7 pain program. Like NAV1.7, we also have significant experience with KV7 due both to our clinical experience with azetukalner as well as extensive research in our own labs. Multiple lines of evidence support KV7 as a therapeutic target for pain. KV7 channels are broadly expressed throughout the peripheral and central pain pathways and play a significant role in the initial transduction of pain stimuli into pain signals, the transmission of those pain signals along nociceptive neurons, and the relay from peripheral sensory neurons to spinal cord neurons in the central nervous system.

We’ve demonstrated that XEN1120 suppresses excitability in human dorsal root ganglion neurons, consistent with enhanced KV7 channel activity and reduced nociceptor firing. Further evidence comes from scientific reports that downregulation of KV7 channel activity has been observed in altered pain states. Finally, flupirtine, a compound previously approved for the treatment of pain, has a mechanism of action that involves KV7 potassium channel opening.

The SAD and MAD study included 54 healthy participants receiving XEN1120 and 18 receiving placebo. The study was designed to assess the safety, tolerability, PK, and food effect of XEN1120. Clinical PK data demonstrated that XEN1120 exceeded the predicted efficacious exposures established from preclinical rodent and non-human primate efficacy models. PK modeling also demonstrated that a loading dose rapidly achieved target exposures, while maintenance dosing could sustain plasma concentrations within the predicted efficacious range for the duration required for an acute pain proof-of-concept study.

XEN1120 was also generally well tolerated. There were no treatment-related dose-limiting TEAEs, serious or severe TEAEs, or TEAEs leading to study drug discontinuation. Most of these adverse events were mild, and the most common ones observed in more than one participant in the MAD cohorts include postural tachycardia, dizziness, and somnolence. The poster also included new preclinical data evaluating a Xenon KV7 potentiator representative of XEN1120, which demonstrated efficacy in a mouse formalin model with a treatment profile similar to opioids, and dose-dependent reductions in a capsaicin-evoked heat pain model in cynomolgus monkeys. Analgesic activity in this non-human primate model was achieved at approximately 2.3-fold lower exposures relative to the formalin mouse model. This important finding suggests the potential to achieve analgesic activity at lower doses in humans, and this plus the Phase 1 data are informing our dose selection to study in Phase 2.

We’re currently in the process of finalizing the Phase 2 study designs to evaluate both XEN1701 and XEN1120 in acute pain and expect to initiate studies in the first half of 2027. We plan to share more information on study designs and timing for data as the studies get underway. Additionally, we continue to see opportunities for both approaches in chronic pain and planning is ongoing for those future studies as well. To summarize, we are increasingly excited about this emerging area of our pipeline. It underscores our growing ability to develop our own internally discovered medicines, our strong heritage of innovative ion channel science, and our growing potential to help millions of people suffering from chronic and acute pain.

I’ll close with a few comments on AZK before turning it to Darren, starting with neuropsychiatry. As Ian mentioned, after completing enrollment in X-NOVA 2, we now expect top-line data next month. The study has randomized approximately 360 patients and is well powered at 90% to demonstrate an approximately 2.5-point placebo-corrected difference on the HAMD-17 at week six, which is clinically meaningful. The availability of unblinded Phase 3 X-NOVA 2 data will help accelerate our evaluation of the benefit-risk profile of AZK in MDD and enable us to determine next steps for our broader AZK psychiatry program following the voluntary pause in new patient enrollment that we shared in September.

Now, as a reminder, the voluntary pause followed our review in consultation with our DSMB of some neuropsychiatric adverse events in our MDD and BPD studies, which were mostly mild or moderate in nature. Although the number and severity of the events are consistent with the known profile of AZK and what we have seen across over 1,500 patient-years of exposure in epilepsy, they were not observed in the Phase 2 X-NOVA proof-of-concept study in MDD, where AZK was very well tolerated.

Through this process and since September, we’ve had productive interactions with FDA and they have been supportive of the steps we’ve taken so far. As mentioned, our next step is to see the totality of data from X-NOVA 2 to gain a fuller picture of the benefit-risk profile in psychiatry and then to meet with FDA to review the data and discuss the development plan for AZK in psychiatry. Moving now to epilepsy. Our strong momentum continues through our attendance at various medical conferences. We have had hundreds of HCP engagements over the last few months where we continue to hear strong support for AZK’s differentiating pivotal data, safety profile, novel mechanism of action, and ease-of-use attributes. At the end of August, a large cross-functional Xenon Pharmaceuticals team attended the European Epilepsy Congress in Athens, where we had five full days of meetings with HCPs, key opinion leaders, and patient advocates.

We had six presentations at the meeting, including a poster highlighting AZK’s potential additive effects when used with commonly prescribed ASMs, as well as an encore of our X-TOLE2 top-line data, which was presented from the podium during a platform session. Following the presentation, two KOLs shared unsolicited comments with the room about how their patients’ lives were significantly impacted from being treated with AZK. We’re now in the midst of preparing for AES, where we expect several new AZK presentations as well as a sizable Xenon Pharmaceuticals presence on the Congress floor.

As Ian mentioned, we also continue to focus on additional opportunities to expand the use of AZK. We’re nearing completion of enrollment for the Phase 3 X-TOLE3 study in all countries except Japan, and this study would support regulatory submissions outside the U.S. Enrollment is also ongoing in our Phase 3 EXACT study, which would support label expansion to primary generalized tonic-clonic seizures. Additionally, we’re excited to initiate our Phase 3b X-FIRST study in Q1 2027, which will look at AZK as the first add-on treatment for patients with low seizure burden and earlier in their treatment journey.

This will be a U.S.-based, multicenter, open-label study with a 52-week treatment period in patients who are significantly less refractory compared with the X-TOLE and X-TOLE2 study populations. AZK will be added into the treatment regimens of patients who are on a stable dose of either a generic SV2A or sodium channel blocker. Over the course of the open-label study, we will be looking at seizure reduction from baseline and periods of seizure freedom, among other endpoints.

In sharing the study plans with HCPs, we’ve heard significant enthusiasm for this study and appreciation for our commitment to adding to AZK’s already significant and impressive body of scientific evidence. Now I’d like to turn to Darren to provide an update on our commercial buildout, go-to-launch plans for AZK in focal seizures, and momentum with healthcare providers.

Darren Klein (Chief Commercial Officer)

Thanks, Chris, and good afternoon, everyone. It’s been a busy and exciting few months for our team as we continue to make meaningful progress across three commercial priorities: one, sharpening our launch strategy; building the organization and infrastructure to execute it; and engaging with physicians and payers to understand what will matter most for AZK’s adoption. We’re aiming to set a new standard for focal epilepsy launches and to become a strong partner that the epilepsy community can count on for years to come.

I’ll start with what we’re hearing from physicians because those conversations continue to be the strongest driver of our confidence in AZK’s commercial potential. Enthusiasm about AZK’s use in epilepsy remains clear and consistent. Epileptologists and neurologists continue to reinforce their strong belief in AZK’s differentiated efficacy and ease-of-use attributes. They recognize that even in early-line treatment settings, patients can experience significant AEs, including mood-related AEs, with standard-of-care ASMs, and they are comfortable with AZK’s safety and tolerability profile that has remained consistent over 1,500 patient-years of exposure.

Their excitement for the innovation AZK is bringing to the category was reiterated at the EEC meeting, in recent ad boards, in market research, and in individual meetings as we continue to connect with the group of physicians who drive the vast majority of branded ASM prescribing. With AZK’s exciting profile, ensuring awareness, access, and advocacy remains essential, and we continue to focus on learning from and building relationships with physicians. We are currently in the midst of completing several general neurologist ad boards, and their feedback has been consistent in every meeting. They see compelling efficacy, a safety profile they are comfortable with and that has advantages over other ASMs they currently prescribe, and meaningful practical advantages—particularly the ability to start at an efficacious dose without titration or adjustments for drug–drug interactions.

They also value the flexibility of four efficacious doses. It gives them options to tailor treatment to a patient’s seizure burden and where that patient is in their treatment journey, and to adjust as needed. Our plans for X-FIRST have also been very well received, as we view this study as core to our strategy with general neurologists who see the majority of patients in this specific phase of their epilepsy journey. General neurologists are used to adding on ASMs for patients who do not become seizure free with monotherapy, but they express frustration that they do not have higher-efficacy options that are also easy to add on top of first- or second-line monotherapy. We believe this study can provide more compelling evidence to potentially support adoption in this important setting, building on the efficacy, safety, and ease-of-use attributes physicians already recognize in AZK.

Finally, the neurologists have also provided excellent insight into ways we can support them and their practices to ensure that when an AZK prescription is written that is covered by the patient’s insurance, that they can access and start the medication easily, and that they can stay on the medication without disruptions. All of these insights continue to drive our commercial model and how we are building our infrastructure. More specifically, we are sharpening our focus on simplicity for the patient and HCP, in alignment with the ease of use already attributed to the AZK profile.

We’re aiming to provide as frictionless of an experience as possible, and this is shaping our pharmacy strategy and the support and services we will provide to physicians and patients. We’re approaching this as an opportunity to do things differently, and we’re looking beyond epilepsy for ideas and drawing on technologies and specialty services that weren’t available during prior epilepsy launches. At the same time, we’re grounding every decision in our understanding of this community because innovation only matters if it makes the experience better for physicians and patients.

We are also nearing selection for our specialty pharmacy network, and we continue to have regular, productive interactions with payers. The feedback from this important stakeholder has also been very supportive. They recognize the novelty of AZK’s profile and the significant unmet need that remain in epilepsy. We also recognize that broad payer coverage will take time following commercial availability. We’re planning for that reality while working to shorten the timeline wherever we can, and one concrete step is investing early in our field payer team.

We plan to deploy that team early next year, expanding our reach with payers well ahead of potential approval and launch. Alongside our pharmacy and patient support capabilities, that work is central to our access strategy. Finally, we’re preparing for AES in December, which we expect to be Xenon Pharmaceuticals’ largest presence at the meeting to date. We anticipate multiple new AZK data presentations, a significantly expanded booth presence, and a large team meeting directly with hundreds of healthcare professionals and patient advocates. We view this as a vitally important meeting for deepening our already-strong relationships with physicians and the broader epilepsy community.

To close, we’re making excellent progress on both the strategy and the execution required for a successful launch. Our confidence rests on two things: the positive reaction to AZK’s profile from healthcare professionals, patient advocates, and payers, and the differentiated commercial capabilities we’re building around it. We believe the combination of efficacy, a consistent safety profile across studies, a novel mechanism, and ease of use gives AZK a compelling foundation.

Our job is to match that profile with an equally thoughtful experience for physicians and patients from the first prescription through ongoing treatment. I’ll now turn the call over to Tucker to review the financials and our upcoming milestones. Tucker.

Ian Mortimer (President and Chief Executive Officer)

Thanks, Darren, and good afternoon, everyone. We entered Q3 with cash, cash equivalents, and marketable securities of $1.2 billion, which, based on our current operating plans, provides cash to fund operations into 2029. Given our strong balance sheet, we are well positioned to support AZK’s US launch, multiple registration programs for ACK, the advancement of our pain pipeline through Phase 2 proof‑of‑concept study, and the advancement of other early‑stage research and development programs.

I would refer you to our press release and 10‑Q filed today for further details on our financial results. Overall, it is an extremely exciting time at Xenon Pharmaceuticals. We are maintaining strong momentum toward our first commercial launch and across our promising pipeline of epilepsy, neuropsychiatry, and pain. Over the next few months we expect multiple important milestones, including the acceptance of our NDA submission, sharing multiple new AZK presentations at AES, announcing topline Ex‑NOVA 2 data in MDD, determining next steps for our broader psychiatry program, and progressing our pain programs to Phase 2 proof‑of‑concept studies while planning for future studies in chronic pain disorders.

And of course, we remain resolutely focused on scaling the organization and putting the infrastructure and launch plans in place to set a new standard for launches in focal seizures. We remain very optimistic about the opportunity ahead as we transition to a fully integrated commercial‑stage company. With that, we can open the call up for questions. Operator.

Kate (Conference Operator)

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 request you limit yourselves to one question, and you can rejoin the queue for additional questions. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Paul Matthews with CFIL. Your line is open.

Emily (Analyst at CFIL)

Hi, this is Emily on for Paul. We were just wondering, operationally, how long do you think it’ll take to implement any protocol adjustments after you unblind the Ex‑NOVA 2 data? And what might those changes potentially look like for those psychiatry programs? Thank you.

Ian Mortimer (President and Chief Executive Officer)

Thanks, Emily. Chris, can I pass that one to you just to talk through kind of how we’re thinking? And we didn’t do it on today’s call, Emily, but we did in September—just talking about some of the work we’ve done on dose escalation—so Chris can talk about that. And then we talked today that we would engage with FDA post Ex‑NOVA 2, but he can walk you through the next steps.

Chris Kenney (Chief Medical Officer)

Yeah, thanks, Ian. Hi, Emily. So we’ve been doing a lot of thinking about this, as you can imagine. What we want to do is we want to see the topline Ex‑NOVA 2 data to confirm the path that we think we’re about to take. So that’ll be next month. From that point, we’ve already mentioned that we made this pause voluntarily in concert with the DSMB, so we want to share the topline data with DSMB, show them our proposal to go forward. And the other thing that we mentioned in our prepared remarks was that we want to interact with FDA as well.

So that will take a little bit of time, but not a lot. We’re not publicly guiding towards anything, but you can be sure that we’re going to move as quickly as we possibly can.

Emily (Analyst at CFIL)

Great, thank you.

Kate (Conference Operator)

Your next question comes from the line of Tessa Romero with J.P. Morgan. Your line is open.

Tessa Romero (Analyst at J.P. Morgan)

Hi, Ian and team. Thanks so much for taking our questions. So, given what you know now, how much of a priority are your neuropsychiatry initiatives at Xenon given all your efforts in maximizing the value of AZK in epilepsy? And what would you really need to see in Ex‑NOVA 2 to move the program forward in neuropsych? Thank you.

Ian Mortimer (President and Chief Executive Officer)

Thanks, Tess. I’m happy to take that one. I think we often talk about our business, and you see us sometimes set out our disclosures. We think about AZK in epilepsy, AZK in psychiatry, and then the kind of emerging pain portfolio and some of the preclinical assets even earlier stage. We have a huge amount of information on AZK in epilepsy, and we’re full steam ahead. The benefits of having such clarity in our Phase II X‑TOLE studies, we were able to early invest in things like field medical, bring on Darren and his leadership team early, and then obviously with the strong results with X‑TOLE 2 and now filing the NDA.

So nothing is slowing us down there. As we move to psychiatry, which is kind of the central part to your question, we just know less, right? We have less data with AZK in psychiatry. We believe that KV7 modulation, and AZK specifically, have antidepressant effects. We need to unblind these data. I’m really pleased that the team was able to accelerate the Ex‑NOVA results from Q1 into December, so next month we’re going to have unblinded data, and I think those data need to stand on their own.

And if we have a really compelling profile in terms of benefit‑risk when we unblind those data, then we have the balance sheet and the capabilities to continue to develop AZK in psychiatry. If the data don’t support future development, then we’ll cross that bridge when we get there.

Tessa Romero (Analyst at J.P. Morgan)

Thanks, Ian. See you soon.

Kate (Conference Operator)

Your next question comes from the line of Joseph Thom with Ted Collin. Your line is open.

Joseph Thom (Analyst at Ted Collin)

Hi there. Good afternoon. Thank you for taking my questions. Maybe on the X‑First early‑action study, given the open‑label nature, how will you be assessing kind of clinical meaningfulness of the seizure reductions and the seizure‑freedom rates that you are seeing? And maybe relative to the prior pivotal studies, are you going to expand the sites to include more primary care physicians and general neurologists so that they can get the experience and you’re really seeing these early patients, or are you going to stick to the epileptologist community?

Thank you.

Ian Mortimer (President and Chief Executive Officer)

Thanks, Joe. I think it’s a really good question. I’ll start and give you a little bit of my perspective, and then Chris can talk about some of the operational—kind of where we’re going to target in terms of the different types of sites, how we would maybe think about seeing data, including seizure freedom and, obviously with it being open‑label, how we just think about looking at those data. And then I really want Darren to weigh in. I think this is probably one of the most important studies for Darren and his team, as we’ll start to see some data early in the launch period.

But I do want to remind people, if we look at the X‑TOLE and X‑TOLE 2 studies—and I think this is becoming common in focal seizure studies—we’re getting very refractory patients in those studies. So the average patient, the kind of median patient in both those studies, had had the disease for about 20 years. They had failed six prior anti‑seizure medicines. The majority of them were on three background medications, and then they were getting exposure to AZK.

As a reminder, close to 60% of patients in X‑TOLE 2 had exposure to—think about this as a commercial medicine. We believe that the profile, the mechanism, really lends itself to be earlier in the treatment paradigm, and this study really sets us up to start generating data and experience with the physicians that are seeing those patients earlier in their treatment journey. So that’s why we’ve been thinking about this study as this first add‑on study for quite some time, and we’re really excited to be getting up and running. The study is fully designed and will be up and running in the first quarter of next year. But maybe, Chris, you can just go into a little bit more detail on the types of physicians we’re targeting, and then, Darren, about just the value of these data.

Chris Kenney (Chief Medical Officer)

Sure. So, I mean, just to build on what Ian said, operationally it’s very consistent with what he just said. These patients who have fewer seizures at baseline are more typical for what would be seen with a general neurologist as opposed to an epileptologist. And so that’s out in the real world once this drug is approved. And in the meantime, with this study, we’re also targeting sites that are likewise kind of more geared towards general neurology compared to the X‑TOLE and the X‑TOLE 2 studies.

I’ll turn it to Darren to talk about value.

Darren Klein (Chief Commercial Officer)

Yeah, and we’ve talked a lot about this. If you look at the profile of AZK, and particularly on top of the X‑TOLE 2 data Ian’s outlined, not only is the efficacy and safety—particularly efficacy—setting a new bar, but our ease‑of‑use attributes. And when we go talk to—particularly, as I alluded to in the call—we’re spending a lot of time with general neurologists, and this is the community where this type of data will really reflect this kind of ability for them to incorporate it into their practice.

If they think about patients that continue to be refractory and they can’t manage on a single or second monotherapy before referring their patients, they’ve said to us they’d love another option. And when they look at our profile, this only, I think, endorses why we’re so enthusiastic about X‑First. If you think historically about UCB and the LEV study—the KEEPER study that they did historically—that was really kind of a game changer for them, as their profile somewhat looked like AZK’s, and that kind of really jump‑started the use in the general neuros. And they started their trial much later in the lifecycle than we are. So I think all those add up to a great opportunity for us to get that experience, the data, and really make a push much earlier than historically has been done in the general neuro audience.

Joseph Thom (Analyst at Ted Collin)

Perfect. Thank you very much.

Kate (Conference Operator)

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

Andrew Tsai (Analyst at Jefferies)

Hi. Thanks for the nice set of updates. I wanted to ask on the NaV1.7 dataset that you shared—it’s like 90%+ receptor occupancy, which is above the 75% threshold needed to be pain‑free. So how confident are you guys now that you do have something superior, full stop—maybe more superior than the NaV1.8? And then the safety profile also looked really good to me. There was one case of severe syncope. So is it fair to rule out syncope being a drug‑related AE, though, or is that something we might need to pay attention to as you move into larger studies?

Thank you.

Ian Mortimer (President and Chief Executive Officer)

Thanks, Andrew. I’m happy to take the first one, and then Chris, maybe you can just walk through the patient that had the syncope and a little bit of the background, because I think we’re very comfortable that we’re not seeing the autonomic effects that we’re seeing with prior molecules. Yeah. You know, Andrew, I think you’ve heard a lot from us on this target. Obviously, we know it incredibly well. We’ve always felt that NAV1.7 is one of the strongest targets, and we believe it, at least based on the genetics, has a superior profile to NAV1.8, because in NAV1.7 you see these loss-of-function and gain-of-function populations.

So it really has exquisite genetics associated with it. It’s just been a very, very challenging target, and we’ve walked through a number of times on why we believe previous approaches have had challenges and have failed. And so we now have a molecule with a profile that’s never been tested, and we really hope for the first time will mimic the human genetics. As you outlined, more than 75% receptor occupancy, and we feel we can get even higher than that, especially at the higher dose that we look to use in our phase two proof-of-concept study. So we believe that for the very first time, we’ll be able to answer the question: can we pharmacologically mimic the human genetics by creating an opportunity for a novel analgesic?

So I think it’s really exciting times. And then you combine that phase one data with what we’re seeing in non-human primates, where we got in certain models, in the capsaicin heat model, up to 100% reduction. Again, really hasn’t been seen with other approaches. So I think it’s an exciting time for the field, and we’re excited to get this into a proof-of-concept study. You raise a good question on safety, though. We’re very comfortable we’re not seeing the autonomic effects. But because you raised that one patient or healthy subject that had syncope, Chris should just walk us through that case study.

Chris Kenney (Chief Medical Officer)

Yeah, I want to do that, but I also just want to make sure that everyone understands this rationale of talking about 75%. So there’s a couple families where there’s complete loss of function in one allele and then partial loss of function in the other. And when you look in vitro, there’s about a 75% loss of in vitro function of NAV1.7. Those patients do not feel any pain. And so we talk about this 75%, but it’s important to keep in mind that this is in the presence of a patient not feeling any noxious pain.

And so our receptor occupancies, whether you look peripherally or centrally, are well above that. But that may not necessarily be needed. To answer your question directly about the patient, this was a patient who had some degree of orthostatic hypotension at baseline and then did have a syncopal event in the context of orthostatic hypotension, but the event occurred well after you would expect based upon drug levels. And so I’m not at all convinced that this is related to drug. So we’re pretty convinced, whether you’re looking in animal models or humans, that we’re not seeing the autonomic effects with M1701 that have been seen by the historical compounds.

Andrew Tsai (Analyst at Jefferies)

Thanks. Very good.

Ian Mortimer (President and Chief Executive Officer)

Thanks, Chris. Thanks, Andrew.

Kate (Conference Operator)

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

Brian Skorney (Analyst at Baird)

Hey, good afternoon, everyone. Thank you for taking the question. I guess I’m just wondering if you can talk at all to any qualitative measures in the 1701 SAD/MAD study, like PROs, or I guess in this case, like HVROs. Maybe the best one could hope for would still be very anecdotal, but would you think there would potentially be something that could be picked up in terms of the participants feeling or not feeling? Like, I don’t think I’d feel any difference if I just took ibuprofen if I wasn’t in pain, but I’m sure I would feel 5 mg of oxycodone.

Obviously those are different mechanisms, but is there any sort of evaluation of participant sense in the MAD? And I also think NAV1.7 is really important for olfactory sense, and people with loss-of-function mutations can’t smell. Would you expect this to occur on treatment in healthy volunteers, and did you see any sort of interruption in olfactory sense? Thanks.

Ian Mortimer (President and Chief Executive Officer)

Thanks, Brian. Chris, I can start, but give your kind of detailed perspective here. Yeah, maybe we can just hit your last one. So what Brian’s referring to is that some of these patients that have loss of function in NAV1.7 that don’t feel pain also have anosmia, so they don’t smell. And that’s based on where NAV1.7 is expressed in the olfactory bulb, as Brian mentioned. So, Brian, one of the things we did look at was you can actually do these smell tests.

And the problem is, like any of these tests, there was just a lot of variability. So we looked at it in detail, and we just didn’t feel, again, that that should be gating if we have the profile that meets our TPP for the program moving forward. So we did look at that as a potential marker in phase one for a cohort of patients, but we decided not to pursue that. But, Chris, maybe you can just provide your perspective on any kind of qualitative stuff from phase one.

Chris Kenney (Chief Medical Officer)

Yeah, I mean, I think you’re looking for some kind of a readout that there could be a pharmacodynamic effect, and other people—maybe it was you—brought up the idea that maybe venipuncture was less painful, these sorts of things. I mean, we’re not really systematically collecting that data, so I don’t really think we’ve seen anything. And then as far as the olfactory function, I think, again, you’re looking for any evidence that there could be a PD effect, but we didn’t see that as an adverse event.

Next question.

Kate (Conference Operator)

Your next question comes from the line of Corey Casimov with Evercore. Your line is open.

Addie (Analyst at Evercore ISI)

Hi, this is Addie on for Corey. I wanted to ask, in your discussions with physicians, where do you believe AZK would be placed in the clinic in FOS epilepsy right now—or in a way, how much can it move up in the treatment cycle without the earlier-line study program?

Ian Mortimer (President and Chief Executive Officer)

Thanks, Addie. I can just start and maybe put into context why we’re doing the X First study, and then Darren is best suited to answer that question. So one of the things that in treating focal seizures that lines up really well is medical practice and also the payer environment. So if you’re a newly diagnosed patient, you’re going to be on a generic monotherapy. So today we would see the SV2A used—so drugs like levetiracetam—or maybe a sodium channel inhibitor, so drugs historically like Vimpat or Lamictal.

And again, if they’re not getting good seizure control, or there’s tolerability issues, often patients are moving to another monotherapy—so call that kind of a second line. And again, if they tried an SV2A and maybe they’re having some mood issues, then likely they would move to a sodium channel inhibitor. And then after that, as the drugs are starting to be added, that’s where you can at least historically see these branded medicines show up. So probably less so today just because the only branded medicine that’s available is generally used by the epileptologists and not the general neurologists. But we believe a branded medicine with the right profile, that’s where it’s going to start to be used. And that was kind of the reason of the X First study. But Darren should provide his perspective just on where AZK should move up, because as we answered earlier, I think the clinical trial population is materially different than where the commercial population will end up.

Darren Klein (Chief Commercial Officer)

Yeah, that’s exactly right. And I think if, you know, you look at the X-TOL and X-TOL 2 trial patient population—again, we’ve referenced it several times—it’s the most refractory patient population ever trialed. And so the efficacy speaks for itself there. And really, for the epileptology community who see these patients every single day, they couldn’t be more excited because of the data. It’s a new mechanism of action. They’re not stacking on, as Ian said, another SV2A or sodium channel or any other mechanism.

And so we anticipate—and a reminder that it will be almost a decade when we are launching that the last branded ASM was approved—cenobamate. So we know there are a lot of refractory patients that will be looking for a new treatment. And so that’s where, if you think about kind of stage of launch, where we anticipate the excitement to be and the uptake to be initially. But over time, and particularly as I’ve stated, based on the profile of AZK and the ease of use, the more we get in front of general neurologists, the more excitement they have.

And so I think it’s a couple of kind of converging points: this medicine, the ease of use, the data, it’s the right time. Doing the X First trial will expose it to a larger set of these general neurologists with these less refractory patients—what we call partially controlled—and we do anticipate it moving up earlier lines of treatment, again historically much faster than other anti-seizure medications.

Addie (Analyst at Evercore ISI)

Thank you.

Kate (Conference Operator)

Your next question comes from the line of Miles Minter with William Blair. Your line is open.

John (Analyst at William Blair)

Hey team, this is John on for Miles. Thanks so much for taking our question. I was wondering if you could give us any more color on how you were able to move X-TOL 2 data up one to three months to December. Is this faster data cleaning or something else here? Thanks.

Ian Mortimer (President and Chief Executive Officer)

Thanks, John. Chris, can I pass this one to you?

Chris Kenney (Chief Medical Officer)

Yeah, sure. Thanks for the question, John. I mean, we just, you know, we took a look at the timelines and we worked on trying to cut every sort of unnecessary step out, and we were able to pull in the timelines into this year. So the team’s working really hard as a unit, and I’m proud of them being able to pull this off.

Kate (Conference Operator)

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

Kevin (Analyst at RBC Capital Markets)

Hi guys, this is Kevin on for Brian. Thank you for taking our questions. Maybe back on the adjunctive study for AZK, how are you thinking about dose selection in this population, just given the profile of AZK to date? And what has the FDA feedback been on the protocol features you talked about? Sounds like the protocols were designed, so just curious if anything in particular regulators wanted to see in this setting. Thank you.

Ian Mortimer (President and Chief Executive Officer)

Sure. Thanks, Kevin. I’m happy to start and then, Chris and Darren, you guys can add your perspective. So, Kevin, one of the things that we’ve talked about, we don’t have all of the details for the Xfirst trial design that we provided publicly. That’ll come as we get ready to initiate the study. But I can give you a little bit of color here that I think will help answer your question. So, as you know, historically we have looked at four different doses, so 10, 15, 20 and 20 milligrams. As you look across the Xtol and the Xtol 2 program, and we have, and we’ve talked about this publicly, is that all four of those doses we’ve submitted as part of the NDA and we believe that that flexibility is really important for prescribers. The likelihood, as we’ve done all of our market research and talked to hundreds of epileptologists and general neurologists, and the way that they’re trained, is that they will likely start on a lower dose to begin with.

And that is also part of as we’re thinking about what the recommended starting dose is, we’ve taken all of that into consideration. I’ll also mention when we look at things like the 10 and the 15 milligram dose and we compare that to placebo, they’re really indistinguishable with placebo when you look at the adverse event profile, so very placebo-like and benign. On the safety profile, you know, many of these physicians start because they have to titrate drugs, start lower and then move up. So all of these things are really consistent with us starting lower.

So if you think about the Xfirst study, again, we want to see as best we can to really mimic clinical practice. These are patients earlier in their treatment journey on one background medication. And this would be an add-on to that. And so we’d start at a dose that these physicians would likely use as etocellner in the real world. So think about that as we’re kind of bringing Xfirst together or we’ve written the protocol. Chris, I don’t know if you have any comments specifically on FDA and kind of the protocol.

And then, Darren, just on kind of thinking about how we continue to educate prescribers on how to use the Z2 counter, which I think is going to be critically important. So, Chris, with you?

Chris Kenney (Chief Medical Officer)

Yeah, not much to say with FDA. As we mentioned in the prepared remarks, it’s a Phase 3b/4 study. And so we’ll submit the protocol to FDA. They’ll have an opportunity to provide feedback. But I’m not expecting, you know, there was no kind of formal FDA interaction, nor am I expecting to hear from them. They’re pretty familiar with the compound, as are we. So yeah, very different than kind of a Phase 3 program.

Darren Klein (Chief Commercial Officer)

And just to kind of follow up on just the kind of commercial implication to our customers. And I think, you know, Ian hit the nail on the head. I mean, these physicians are—particularly epileptologists and the general neurologists take kind of direction from the epileptologists—is this kind of low and slow approach that we constantly hear. And again, if the epileptologist, these patients are refractory on multiple ASMs. And so when introducing a new one, they want to make sure that it’s tolerable with their other medications.

And so when they look at the data, they see the 15 and even the 10 as a reasonable place to start. And I think that will resonate. And then, you know, then when do you dose escalate? Because I think, you know, a lot of physicians, particularly epileptologists, have the notion of, you know, another seizure is one seizure too many. And so the ability to dose escalate from 15 to 20, for example, and we give them the opportunity or the option to do that with our clinical trial data and also having four doses available to them. So I think, I think over time you’ll see a comfort level also increase on starting doses when they get more experience and familiarity.

But I think it’s, you know, we really do have a very elegant data package tied to the proper starting dose and the ability to escalate as physicians get more comfortable.

Kate (Conference Operator)

Your next question comes from the line of Mark Goodman with Leerink Partners. Your line is open.

Valentin (Analyst at Leerink Partners)

Hello. Thank you for taking my question. This is Valentin from Mark Goodman. So you’ve talked at length about the Xnova 2 data in December. I guess beyond the primary endpoint, I’m just curious, which result would you expect to give the most clarity on the differentiated profile in depression? And when should we expect additional data following this initial readout in December? Thank you.

Ian Mortimer (President and Chief Executive Officer)

Thanks for the question. Yeah, I’m happy to take it, Chris. And then if I’ve missed anything, please jump in. Yeah. As you know, when we unblind a Phase 3 clinical trial, there’s always a balance on how much data analysis we can get done at top line versus additional analyses after that. But I think if you’ve looked at our previous disclosures, either in the epilepsy program or if you go back to the Exnova study, I think we will have enough information at top line to give you a really good feel of the overall benefit-risk profile of the drug and then we can talk about next steps from there.

So obviously the primary endpoint is week 6, HAMD-17. I think one of the key secondary endpoints that we’d be looking at even at top line is on anhedonia, because we do think that that’s a differentiating feature of this mechanism that is measured