2023-03-15 11:21:27 ET
Summary
- Xenon Pharmaceuticals develops therapies for neurological disorders, with lead candidate drug XEN1101 aimed at treating epilepsy and major depressive disorder (MDD) by opening Kv7 potassium channels.
- XEN1101 is a newer medication that improves upon the Kv7 potassium channel mechanism used by ezogabine, with better potency, selectivity, and pharmacokinetics.
- XEN1101 is in a Phase 2 clinical trial (X-NOVA) with 150 patients to compare its efficacy with a placebo in improving depressive symptoms via MADRS, with results expected in Q3.
- Previously, ezogabine improved depression and hedonic capacity in a clinical trial, as shown by MADRS, QIDS-SR, SHAPS, and TEPS scores, as well as CGI-S and CGI-I scores. The drug was well-tolerated with no serious adverse effects reported.
- XEN1101's promising potential in epilepsy has been widely recognized, with Phase 3 trials underway. However, the upcoming Phase 2 MDD data in Q3 could change our perception of the drug for the better. As such, Xenon Pharmaceuticals remains a "Strong Buy".
Introduction
Xenon Pharmaceuticals ( XENE ) is a clinical-stage biopharmaceutical company that focuses on developing innovative therapies for neurological disorders. The company's lead candidate drug, XEN1101, is a Kv7 potassium channel opener designed to treat epilepsy and other neurological disorders, including major depressive disorder [MDD].
Xenon's pipeline (Xenon Pharmaceuticals)
The following article will highlight XEN1101's prospects in MDD.
Financials
Let's first review Xenon's latest financial highlights.
Xenon reported an increase in cash and cash equivalents and marketable securities, totaling $720.8 million as of December 31, 2022. The company expects to have enough cash to fund operations until 2026. However, no revenue was recognized in Q4 2022, and $9.4 million was recognized for the year ended 2022, compared to $18.4 million in 2021. Research and development expenses increased by $30.3 million, mainly due to the XEN1101 program, resulting in a net loss of $125.4 million for the year.
Kv7 Potassium Channel Mechanism Validated with Ezogabine
The Kv7 potassium channel mechanism has been proven effective in clinical trials using ezogabine, a medication that was approved by the US FDA in 2011 to treat focal seizures in adults. XEN1101 is a newer medication that is designed to improve upon ezogabine by being more potent, selective, and having better pharmacokinetics. Xenon believes XEN1101 does not have the same tissue pigmentation effects as ezogabine, which is a unique feature of the drug's composition.
In 2013, the US FDA issued a warning about ezogabine's safety, which included risks of retinal abnormalities, vision loss, and blue discoloration of certain body parts. It was unclear if these changes were reversible at the time, and the FDA recommended that patients taking the medication should have regular eye exams. In October 2015, the FDA revised its warning after reviewing additional safety reports. They found that retinal pigment changes associated with the drug did not appear to affect vision, and the skin discoloration was cosmetic without any serious side effects. However, the FDA required GSK to conduct a long-term observational study to gather more information about the drug's safety, including whether retinal pigment changes could cause long-term effects like vision loss. Due to poor market performance, GSK decided to discontinue the use of ezogabine in 2017.
XEN1101 Shows Promise as a Safe and Effective Treatment for Focal Seizures in Clinical Trials
XEN1101 has completed Phase 1 and Phase 1b clinical trials and a Phase 2b clinical trial called X-TOLE. The drug was found to be generally safe and well-tolerated at doses ranging from 5 to 30mg, with a once-daily dosing schedule supported by its PK profile. The Phase 1b study found that XEN1101 reduced corticospinal excitability, and helped determine the dose for the Phase 2b trial. In the X-TOLE trial, XEN1101 demonstrated a statistically significant and dose-dependent reduction in monthly focal seizure frequency when compared to placebo. It was generally well-tolerated, and most adverse events were mild or moderate. The majority of subjects who completed the double-blind period entered the open-label extension to evaluate the long-term safety, tolerability, and effectiveness of XEN1101.
There is no evidence of pigmentation effects related to XEN1101 in clinical reports. This is corroborated by preclinical data.
XEN1101 is a metabolically more stable Kv7 opener that cannot form the pigmented dimer and therefore is expected to have improved safety over retigabine.
KCNQ Potassium Channels as a Novel Target for Treating Anhedonia in Major Depressive Disorder: Preclinical & Clinical Evidence
Anhedonia , or the inability to experience pleasure, is a core symptom of major depressive disorder [MDD]. Recent preclinical evidence suggests that KCNQ-type voltage-gated potassium channels , the target of XEN1101, may be a promising molecular target for treating depression, as they play a critical role in regulating dopaminergic firing in the reward circuit. In a well-validated mouse model of depression called chronic social defeat stress [CSDS], replicating the mechanism of upregulating KCNQ3 potassium channels in the ventral tegmental area or using KCNQ-selective potassium channel opener ezogabine led to the reversal of depressive behaviors in susceptible mice.
Ezogabine Shows Promise in Treating Anhedonic Symptoms of MDD
In an open-label, single arm study on 18 medication-free individuals with MDD, researchers examined the effects of ezogabine on reward circuitry and clinical symptoms. The results showed that ezogabine led to a significant reduction in both depressive and anhedonic symptoms after ten weeks, suggesting that enhancing KCNQ channel activity in the reward circuit may represent a novel approach to treating depression, particularly anhedonia in MDD.
Ezogabine was also studied in a multicenter, parallel, double-blind, randomized placebo-controlled clinical trial. The study found that compared to a placebo, ezogabine showed significant improvement in depression as measured by MADRS (t=?4.04, df=213, p<0.001) and QIDS-SR scores (t=?3.1, df=213, p=0.002). The drug also improved hedonic capacity and the ability to anticipate pleasure as measured by SHAPS (t=?4.1, df=212, p<0.001) and TEPS scores (anticipatory subscale: t=3.4, df=213, p<0.001; consummatory subscale: t=2.0, df=213, p=0.05). The study also found significant benefit in terms of global illness severity (CGI-S, t=?2.2, df=214, p=0.026) and improvement (CGI-I, t=?2.9, df=214, p=0.004). The drug was well-tolerated, and no serious adverse effects were reported.
XEN1101 is a selective KCNQ potassium channel opener currently being developed as a treatment for epilepsy. Given the preclinical evidence linking KCNQ channels to depression, there is potential for XEN1101 to be repurposed for the treatment of MDD.
XEN1101 Evaluation in Phase 2 Trials for Major Depressive Disorder
Subsequent, XEN1101 is currently undergoing a Phase 2 clinical trial named X-NOVA with approximately 150 patients. The trial is randomized, double-blind, and placebo-controlled, with the aim of comparing the efficacy of XEN1101 to placebo in improving depressive symptoms via MADRS. The results are expected to be announced in Q3 2023. Additionally, an investigator-sponsored Phase 2 proof-of-concept study is being conducted in approximately 60 MDD patients to investigate the effect of XEN1101 on the brain reward circuit, as well as clinical measures of depression and anhedonia using functional MRI, MADRS, and SHAPS.
My Analysis & Recommendation
In light of the evidence, XEN1101 exhibits potential as an effective therapy for MDD, particularly anhedonia, with an encouraging safety profile. Depression represents a substantial market, and it is the most common psychiatric comorbidity associated with epilepsy. If XEN1101, with its distinctive mechanism of action, were to receive regulatory approval for both epilepsy and depression, I believe its value in treating epilepsy alone would experience a considerable upswing. While XEN1101's unique mechanism of action, safety profile, and focus on anhedonia could potentially differentiate it in the depression market, it may face greater challenges in that arena compared to epilepsy. This is because the depression market is already saturated with well-established treatments such as SSRIs, SNRIs, and atypical antidepressants.
Xenon's current enterprise value is approximately $1.5 billion, and its lead product candidate, XEN1101, is in Phase 3 clinical trials for epilepsy. XEN1101's development for epilepsy has been somewhat de-risked by the positive results from Phase 2 studies and similarities to the drug ezogabine. With its unique mechanism of action, XEN1101 is anticipated to generate anywhere from $500 million to $1 billion in peak annual revenue upon receiving regulatory approval for epilepsy. Furthermore, I consider the ongoing clinical trial aimed at treating MDD to be a wildcard, presenting a substantial upside potential and relatively low risk of downside. If the Phase 2 MDD data indicates a significant improvement in MARDS with no safety concerns, I believe it is likely that Xenon's valuation could potentially double due to the novel mechanism of action and its presumed impact on anhedonia, which is a crucial feature in depression. This is particularly noteworthy given that the depression market is projected to grow to $16 billion by 2027 . However, if the trial fails to meet its primary endpoint, I anticipate that Xenon's valuation could decrease by approximately 25%, as the current valuation does not account much for the MDD market. After evaluating the situation, I estimate that the likelihood of obtaining positive results is moderate to high, at around 60-70%.
Despite the time that has passed since Xenon first caught my attention at around $13/share in early 2020, my recommendation remains the same - Xenon is still a "Strong Buy."
Risks to Thesis
There are risks that could change my bullish stance on Xenon. One potential risk is the possibility of pigmentation effects associated with the drug, similar to those seen with its predecessor, ezogabine. However, preclinical data suggests that XEN1101 is metabolically more stable and cannot form the pigmented dimer, leading to improved safety over retigabine. Another risk is the potential for long-term side effects (e.g. urinary retention ) from XEN1101 treatment, as the drug is still in the clinical trial phase and has not been extensively studied. The Phase 2 trials for MDD will be significant in determining the effectiveness of XEN1101 for this indication. However, if the trial results are not positive, it could have negative implications for Xenon. Despite promising results in Phase 2 trials for epilepsy, the drug's effectiveness may not hold up in larger Phase 3 trials. It is crucial to closely monitor XEN1101's development and ongoing trial results to identify any potential risks, as while the available evidence shows potential, there is still much to learn.
For further details see:
Xenon May Have A Surprise In Store For Major Depressive Disorder