Today morning, Xenon Pharmaceutical (XENE) reported positive data from its XEN1101 Phase 1b transcranial magnetic stimulation (TMS) study. (LINK)

XEN1101 Demonstrates Statistically Significant Reduction in Corticospinal and Cortical Excitability as Measured by TMS-EMG and TMS-EEG

XEN1101 Demonstrates Greater Effect on TMS-EMG Resting Motor Threshold at Significantly Lower Dose When Compared to Historical Ezogabine Data

XEN1101 Phase 2 Clinical Trial in Adult Focal Seizures Expected to be Initiated in Fourth Quarter of 2018

The study Phase 1b was a randomized placebo controlled cross study that was intended to confirm the encouraging TMS findings from the previously announced Phase 1a pilot study of XEN1101.  As a reminder, the TMS model is a test used to determine whether a drug is active in the central nervous system (CNS) and whether it can dampen neuro-excitation, both being critical attributes for any anti-epileptic drug.  The Phase 1b data were highly encouraging, demonstrating statistically significant impacts on both motor response (EMG) and brain activity (EEG) relative to placebo.  Furthermore, these data also show an improved EMG response relative to the historical data with FDA approved anti-epileptic ezogabine (Potiga).  Just to be clear, these are not efficacy data, rather they are pharmacodynamic data, demonstrating positive indications of potential anti-epileptic drug activity.  But given that XEN1101 is mechanistically similar to ezogabine, with better TMS EMG data (albeit based on historical comparison), today’s data should strengthen our confidence of XEN1101’s chances for success as it moves into human efficacy phase 2 study.

As disclosed in the press release, XENE is planning on starting Phase 2 study in Q4 of this year. What the study looks like, has yet to be disclosed.  They did however state on their call that the Ph2 will include 3 doses of 1101, so based on that we can assume the Phase 2 will likely be with a descent size of patients.  The good thing about epilepsy studies, is that your endpoint, reduction in seizure burden, is usually relatively short, 8-12 weeks and we will anticipate the Phase 2 results by Q4 2019 if the patients recruiting went well.

I was disappointed that no one of the analysts on the call asked or tried to get more info regarding one of the most exciting catalysts, XENE’s plans for pediatric development in the KCNQ2 population. Back in their Q2 call, they mentioned they would have an update on their plans in this ultra-rare infantile indication in the “near term”.

I think our plan is to give sort of more fulsome color once we have some of the boxes checked on our side. So, we have had some preliminary interaction with the FDA, and we are very comfortable with that. At this point, we are not in a position to talk about the details of what a next step program would be for the product. We have got some work underway with KOLs and sites to determine sort of feasibility around some of the preliminary discussions we have had. We may or may not have to go back to the FDA. I think we’ll be in a very good position to update the street in the “very near term” on this. We are encouraged, we obviously are pursuing this based on preliminary discussions that have been held, but certainly we have a number of boxes still to check, which I think we can do in the near term to determine the next steps.

Keep in mind that XENE can pursue this indication with either XEN1101 or with ezogabine (where they now have orphan drug designation).  Interestingly in their XEN901 comments today, they mentioned their interest in pursuing another pediatric path with that asset. This is an opportunity that most investors aren’t focused on, but XEN901, like XEN1101/ezogabine, has a sound mechanistic rationale to treat another rare form of infantile epilepsy, SCN8A.  Clearly investors are focused on the KCNQ2 pediatric path, given the company’s “near term” comments, but we shouldn’t forget that XEN901 also has a similar potential path in kids.
 
Also, I found in the press release, hiding between the line that they may use TMS assay in the ongoing XEN901 study as well.

Based on experience with TMS in the XEN1101 studies, Xenon, along with its collaborators at King College, are exploring the use of the TMS assay in a small subset of a subjects in the ongoing XEN901 Phase 1 clinical trial.

This would provide an interesting look into its CNS drug activity. Unfortunately, no analyst on the call pushed them on this tidbit as well, so we don’t have anything to go on this stage other than their comments in the PR.  The full XEN901 data are expected later this year in Q4, at a medical conference as they mentioned.

Lastly, the stock has clearly had a spectacular year, and there has been some speculation that these XEN1101 TMS data may be a “sell the news” type of event.  I guess the TMS positive data was well anticipated and partially backed in the price these days. But I would highlight that although the stock has moved from $2.5 to $12 in less than a year, but all the invested capital from treasury offerings ($45M), from a biotech focused funds like VenBio, Vivo, Adage, etc. all came in between $8.00 and $10.  I don’t think these deep science funds stepped up with $10M+ investments thinking this was a quick 50% flip.  I think they all see this as a company with arguably the deepest epilepsy pipeline anywhere.

I wouldn’t be surprised if they are targeting the area of $20 -$23price tag for XENE before they start taking some profits. The most exciting catalyst in my opinion is the day the FDA will allow XENE to step up and enter a pediatric pivotal study in KCNQ2 with Ezogabine or XEN1101, which can be used as a registration study and their pipeline would suddenly have a Phase-3 asset on it, along with 2 other Phase-2 programs in adult partial onset epilepsy, and frankly add a tremendous value to the Xenon’s valuation. This is not even including the development of XEN007 (hemiplegic migraine) or XEN901 for SCN8A infantile epilepsy.  What’s a pipeline like that  worth?

 
What’s Next

The catalysts are lined up with so many events in the near future:

1. Update (very near term) regarding the FDA discussion & the pathway for KCNQ2
2. XEN1101 full Phase 1 data to be presented in Q4 2018
3. Initiation of XEN1101 Phase 2 study in Q4 2018
4. XEN901 Phase 1 data to be presented in Q4 2018
5. Initiation of XEN901 Ph2 study in Q1 2019
6. Update regarding XEN901 rare pediatric form of epilepsy like SCN8A

Disclosure: The author is long XENE