Xenon Pharmaceuticals Inc (XENE) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Xenon Pharmaceuticals Inc. second-quarter 2015 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Ian Mortimer, Chief Financial Officer and Chief Operating Officer. Sir, please begin.

Great. Thanks, operator, and thanks, everyone, for joining us on our call and webcast today to discuss our financial and operating results for the second quarter of 2015. Joining me on today's call is Simon Pimstone, Xenon's President and CEO. Following the introduction, Simon will provide perspective on Xenon's progress, and then I will review the financial results for the quarter. After that, we will open up the call for your questions.

Please be advised that during this call, we will make a number of statements that are forward-looking, including statements about the sufficiency of our capital position to execute on our business objectives, the timing of IND or IND-equivalent submissions with regulatory agencies, the initiation of future clinical trials, the timing of and results from ongoing clinical trials and preclinical development activities, the commercial launch of Glybera in the European Union, our achievement of certain milestones under our collaboration agreements, the plans of our collaboration partners and their interactions with regulatory agencies, and the status and timing of additional product candidates and related development activities.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today's call. We undertake no obligation to publicly update any forward-looking statement.

So now, I will turn the call over to Simon.

Thank you, Ian. And good afternoon, everyone, and thanks for joining Xenon on our conference call and webcast today to go through our progress in Q2.

I would like to focus my comments on looking forward to our key potential milestones, as we continue to advance our partnered and proprietary pipeline programs, and also to leverage the potential of our Extreme Genetics platform and expertise in ion channel drug discovery. We anticipate continued progress across our product candidate pipeline, and believe that its diversity in therapeutic indications, diversity in drug targets, as well as in stages of development, is a major strength that helps us to continue to balance the risks and the opportunities inherent in the drug discovery and development process.

Since announcing the results of the Phase IIb trial of TV-45070 in patients with single knee osteoarthritis in the beginning of July, and the decision we made with our partner, Teva, not to continue to pursue this indication further, we have continued to focus on advancing our overall portfolio and general corporate strategy. With the exception of removing OA as a target indication for TV-45070, there have been no changes in our Company's fundamental areas of focus, and we look forward to continued advancement of our product candidate pipeline.

Our interest in the Nav1.7 target remains strong, and is at the core of our collaborations with both Teva and Genentech. Nav1.7 appears to play a critical role in pain signaling, and our focus with Teva remains in developing TV-45070 that targets both Nav1.7 and other sodium channels to treat conditions of chronic pain.

As we discussed several weeks ago, our analysis of the results of the first Phase IIb trial with TV-45070 conducted in patients with OA, suggested to Teva and us that the lack of observed efficacy in that trial may have been driven by insufficient drug exposure within the knee joints. In our opinion, the outcome of the OA trial does not impact the rationale or opportunity in neuropathic pain in any way. It's a very different pain mechanism compared with OA.

Teva and Xenon are fully committed to the development of TV-45070 for neuropathic pain indications. And a trial in over 300 patients with postherpetic neuralgia is currently underway, with data still expected in the second half of 2016, as per prior guidance.

Our partnership with Genentech to develop GDC-0276 and other orally-active selective small molecule inhibitors of Nav1.7 for the treatment of pain, is progressing well. We expect enrollment to be completed in the second half of this year in the expanded Phase I single and multi-ascending dose clinical trial for GDC-0276 in healthy volunteers, the trial that Genentech is funding and conducting.

There has also been a considerable effort in the collaboration focused on follow-on compounds and new chemistries targeting Nav1.7 with Genentech. We expect to be in a position later this year to provide a broader update regarding our Genentech collaboration. As a reminder, we also have a second pain-focused collaboration with Genentech focused on pain genetics, where we are making good progress towards identifying new and novel pain targets. And our goal is to identify our first target by the end of this year.

In our proprietary pipeline, our near-term focus is on XEN801, our SCD1 inhibitor being developed for the treatment of moderate to severe acne. We have completed all IND-enabling activities, including the required toxicology and CMC activities. And based on these, we anticipate filing the IND equivalent CTA application in Canada later this month. This will put us in a position to start the Phase I trial in the near-term. And if supported by the Phase I data, we plan to start a proof of concept Phase II clinical trial by the end of 2015 in patients with moderate to severe acne.

We decided to test clinically the hypothesis of inhibiting SCD1 or stearoyl Co-A desaturase topically with XEN801. We believe that we can have an impact on acne via two distinct mechanisms. Firstly, by reducing monounsaturated fatty acids, we hope to reduce the production of sebum lipids produced by sebaceous glands; and secondly, inhibition of SCD1 increases the production of retinoic acid endogenously, which can have an apoptotic affect on the sales of the sebaceous glands known as sebocytes.

Recently, we have tested this mechanism in human sebocyte cell lines. And in these experiments, XEN801 has demonstrated an ability to increase levels of a protein called NGAL in these cells. And NGAL is known to mediate sebocyte apoptosis. NGAL is increased to retinoic acid signaling. This supports a differentiated mechanism of XEN801 compared to other drugs approved and in development for acne. We expect results from the Phase II proof of concept portion of the XEN801 trial in 2016, as per prior guidance.

Our program to develop a potent and selective inhibitor of the sodium channel Nav1.7 for the treatment of the orphan disease, Dravet Syndrome, otherwise known as severe myoclonic epilepsy of infancy, is also progressing well. And we anticipate filing an IND in this program in 2016. Just recently, we have brought in-house an in vivo model of Dravet Syndrome, and we will be testing our Nav1.7 inhibitors in this model later this quarter.

We also have additional early drug discovery activities targeting other ion channel targets, which we expect to report on in more detail in the next few months. Our focus is on orphan channelopathies where we believe there is a genetically-defined population, which we can target in development.

Finally, I will provide a very quick update on Glybera. This is the first product whose active ingredient was derived from our platform to receive commercial approval. It's currently the only gene therapy product to receive approval in Europe. As I very specifically indicated for the treatment of a subset of adult patients diagnosed with the orphan lipid disorder known as lipoprotein lipase deficiency or LPLD, confirmed by genetic testing, these patients suffer from severe multiple episodes of pancreatitis despite dietary fat restriction.

Glybera was developed by our licensee uniQure Biopharma. It's been commercialized by uniQure's partner, Chiesi. Although we are not giving specific guidance about Glybera, we do understand that Chiesi has submitted price and reimbursement dossiers in key European countries to make Glybera accessible to patients who will provide additional information as we receive it.

Therefore, in summary, we believe our diverse product candidate pipeline is an important part of how we diversify risk, by reducing our dependence on any one single asset, and providing multiple near-term milestone opportunities. We do look forward to keeping you all updated on our progress.

And I would like to ask Ian now to review our financial performance for the quarter, and to review our 2015 and near-term upcoming milestones. Ian?

Thanks, Simon. I will provide a high-level overview of the second-quarter 2015 financial statements, and finish off with a review of the upcoming milestones.

For the quarter ended June 30, 2015, we reported total revenue of $4 million compared to $5.3 million for the same period in 2014. Revenue in both periods was primarily derived from Xenon's collaboration agreements with Teva and Genentech. The decrease of $1.3 million was primarily attributable to revenue recognized in the second quarter of 2014, relating to the upfront payment from our December 2011 Genentech agreement.

No such amounts were recognized in the current quarter, as the upfront payment was fully recognized by December 2014. The remaining decrease was due to less FTE funding from both Genentech and Teva, and a change in foreign exchange rate between the US and Canadian dollar.

Research and development expenses for the quarter ended June 30, 2015 were $3.7 million compared to $2.6 million for the same period in 2014. The increase of $1.1 million was primarily attributable to an increase in spending on our XEN801 and Nav1.7 sodium channel inhibitor programs, partially offset by decreases in Teva and Genentech collaboration expenses.

General and administrative expenses for the quarter ended June 30, 2015 were $2.1 million compared to $1.2 million in the same period in 2014. The increase was primarily attributable to additional expenses incurred as a public company.

On the financial statements, you will also see that we have now broken out general and administrative stock-based compensation expense. With our functional currency change to US dollars on January 1 of this year, certain options granted to directors and certain consultants are subject to liability accounting, with fair value calculated using the Black Scholes option pricing model.

So prior to January 1, these options were subject to equity accounting. Because of this, we have a G&A stock compensation recovery in the second quarter of 2015 of $1.9 million compared to an expense of $0.1 million in the same period of 2014. The change is primarily attributable to the change in the fair value of these liability classified options.

As you will have seen in the press release, we are restated our Q1 2015 numbers to reflect this technical non-cash accounting change. And obviously, this has absolutely no impact on our cash, our assets or revenue. Other income was $1 million for the three months ended June 30, 2015 as compared to other expense of $0.1 million for the three months ended June 30, 2014, a change of $1.1 million, and primarily attributable to unrealized foreign exchange gains.

Our net income for the quarter ended June 30, 2015 was $1.2 million compared to net income of $1.2 million for the same period in 2014. Net income was primarily attributable to the non-cash G&A stock comp recovery that I spoke about, and offset by lower revenue and higher R&D development expenses. We ended June 30, 2015 with $73.7 million in cash and cash equivalents and marketable securities, which we believe puts us in a strong financial position to execute on our key near-term business objectives.

And now let me recap what we believe will be a busy period for potential milestones throughout the remainder of 2015 and into 2016. Completing enrollment in the GDC-0276 Phase I trial being conducted by Genentech in the second half of 2015, and we are also working to identify novel pain targets emerging from our Genentech genetics collaboration.

We will advance XEN801 into clinical development, and if supported by the Phase I data, will also initiate a Phase II proof of concept study before the end of 2015 in moderate to severe acne patients. We will continue to make progress in our Dravet Syndrome Nav1.7 program, as well as we are working to identify our next target for drug discovery and development.

And lastly, we anticipate the commercial launch of Glybera in the EU by our licensee, uniQure's commercial partner, Chiesi.

So, as always, I would like to thank all of our stakeholders for your continuing interest and support. We continue to focus our internal resources on supporting our partners, as well as advancing the rest of our proprietary product pipeline. We intend to carefully manage our financial resources and operate efficiently. We believe we have a number of key near-term milestones, opportunities that we will look forward to communicating in the second half of 2015, and into 2016.

Operator, we will now open the call up for questions.

(Operator Instructions) John Newman, Canaccord Genuity.

Thanks for taking the question. I just wondered if you could talk about what you are looking to see in the current work that you are doing on the acne asset in order to be confident in moving that forward? Thank you.

John, it's Simon. Thanks for the question. And obviously, the program will be one we will speak a lot more about as the CTA is filed and we expect to hopefully approve, and we move into the clinic. I think what's critical in the first phase, in the Phase I, is obviously to determine tolerability of this topical application. This is a gel-based formulation for the drug product. It appears to have appeared -- performed well in our GLP toxicology program. And so we at Sydney are hopeful that we see a good tolerability in clinic.

Secondly, I think what is also going to be important is to get a sense of the pharmacokinetics of the drug itself, John, and looking particularly at how much drug gets into the skin, which we will be able to do through biopsies, and obviously what the associated plasma concentration is. That would be the Phase I part of the program, which we will be focusing on and starting this quarter.

As we have guided, and we continue to be on track for, if that goes well, and we show good tolerability, and we show appropriate PK, we expect to initiate our Phase II program this year, by the end of the year.

This will be a 12-week dosing period, placebo-controlled. And we will be looking at the study in about 125 to 150 patients with moderate to severe acne. And what we will be looking for is the change in the lesion counts at the end of the 12 weeks in dosing compared to baseline, and the difference between -- response between active and placebo-treated patients.

So, fairly standard -- in fact, very standard proof of concept study; a well-powered study for a Phase -- a preliminary Phase II. And I think we've built into the study the kinds of assumptions that this study should be able to give us an answer of whether this drug is working or not, John.

Okay, great. And then, one additional question -- and I joined the call a touch late, so I apologize if you've discussed this. I think you mentioned in the printed press release that you will be filing an IND for the Genentech asset, if I'm not mistaken. And I just wondered if you could give us any sense as to if and when you may be able to disclose more information about that indication? Thanks.

So I think what we've said, our guidance continues to be we expect to complete enrollment in the Phase I towards the end of this year. We will be providing updated guidance later in the year, John.

We are obviously in discussions with Genentech on next phases. We have not disclosed anything. And we are under confidentiality obligations, based on our agreement with them to keep confidential at the moment. The plans -- we don't have final plans at this point, and so there's really no disclosure for us to make.

We should be ironing out the next phase plans with Genentech over the next few months, and so our guidance has remained that we will be updating the market in the later part of the year on the plans. The -- what you may have referred to is the second collaboration we have is the genetics collaboration with Genentech. We are guiding and hopeful that we will be identifying another pain target.

As you may recall, we are studying families that don't feel pain, as well as families with excessive forms of spontaneous pain, to try and identify new pain targets for drug discovery. Obviously, Nav1.7 is a very important one. There may be others that we can identify in humans that when altered, either by a loss or a gain of function, can really alter human pain perception.

We've got some really interesting families that we are studying, to hope to identify a novel target or novel targets. And we expect to be able to do so this year. And that was probably the reference that you are referring to.

Okay, excellent. Thank you very much.

Thanks, John.

(Operator Instructions) At this time, I'm showing no further questions in queue. I would like to turn the call back over to Mr. Ian Mortimer for further remarks.

Great. Thanks, operator. And thanks, everyone, for joining us on the call today. And we look forward to keeping you informed of our progress throughout the year. We'll now end the call. Thank you, operator.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.