Xenon Pharmaceuticals Inc (XENE) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Xenon Pharmaceuticals' Fiscal Year 2017 Earnings Conference Call. (Operator Instructions) I would now like to turn the conference over to Ms. Jodi Regts. Ms. Regts you may begin.

Thank you. Good afternoon. Thank you for joining us on our call and webcast to discuss our financial and operating results for the year ended December 31st, 2017. Joining me on today's call are Dr. Simon Pimstone, Xenon's President and Chief Executive Officer, and Ian Mortimer, Xenon's Chief Financial Officer and Chief Operating Officer.

Following this introduction, Simon will provide perspective on Xenon's progress, and then Ian will review our financial results. After that, we will open up the call to 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 and our ability to operate in a capital efficient manner; our expectations regarding the sufficiency of our cash to fund operations into mid-2019; the timing of IND or IND equivalent submissions with regulatory agencies; the initiation of future clinical trials, the potential efficacy, future development plans, and commercial potential of our and our collaborators product candidate; the timing of and results from ongoing clinical trials and pre-clinical development activities; our ability to achieve certain milestones in both our proprietary and partner development programs; the plans of our collaboration partners and their interactions with regulatory agencies; the results of our research and development efforts; the anticipated termination of our collaboration agreement with Teva, along with the anticipated receipt of the exempted release order from the Ontario Securities Commission; the effectiveness of the transfer and assignment of 1 million commons shares of Xenon to us by Teva; 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 statements. Today's press release summarizing our 2017 results and the accompanying Annual Report on Form 10-K will be made available under the Investors section of our website at www.xenon-pharma.com and filed with the SEC and on SEDAR.

Now, I'd like to turn the call over to Simon.

Many thanks, Jodi, and good afternoon everyone. I'll start with some overall perspective on 2017, focusing on our proprietary CNS-focused product candidates and our prospects for 2018, and then provide some additional color on our achievements to date and anticipated milestones for the near future.

The last six months have been a period of important focus for Xenon, and we've made excellent recent clinical progress with our product candidates. Our neurology-focused development pipeline is at a very exciting juncture with key milestone events over the next three to six months.

XEN1101 and XEN901, our two proprietary epilepsy products that are currently in clinical development, both have unique mechanisms of action, and we believe they have a number of additional attractive properties that could represent important therapeutic advances and differentiation from existing anti-epileptic drugs.

In addition, today, we are very excited to announce the addition to our pipeline of a novel neurology-focused ion channel inhibitor, XEN007, a CNS acting calcium channel modulator believed to be without cardiovascular effects, containing the active ingredient flunarizine. We have received FDA orphan-drug designation for XEN007 for the treatment of hemiplegic migraine, a rare and severe form of migraine with strong heritable components. To potentially expedite the development of XEN007, we have entered into certain agreements that provide us with access to clinical and regulatory data and manufacturing support, which may allow us to advance this product candidate either on our own or in partnership directly into a Phase 2 clinical trial, which we believe could start in 2018.

Now, I would like to provide more color on our achievements and anticipated milestones in our proprietary CNS-focused development programs. We are very pleased with our progress in advancing XEN1101, a Kv7.2 potassium channel opener being developed for the treatment of epilepsy, including treatment-resistant adults and pediatric focal seizures, orphan epilepsy disorders such as Lennox-Gastaut syndrome or LGS, and rare ultra-orphan pediatric forms of epilepsy such as EIEE7, an early infantile epileptic encephalopathy associated with mutations in the KCNQ2 gene that cause loss of function in the Kv7.2 potassium channel, and potentially other neurological disorders as well.

In October 2017, we initiated a randomized double-blind placebo-controlled Phase 1 clinical trial to evaluate the safety, tolerability, and pharmacokinetics of both single ascending or SAD and multiple ascending or MAD of XEN1101 in healthy subjects. The XEN1101 Phase 1 clinical trial includes Phase 1a and Phase 1b components including the pharmacodynamic biomarker read-outs from transcranial magnetic stimulation or TMS study designed to assess XEN1101's ability and potency to modulate cortical excitability, thereby, demonstrating activity in the target CNS tissue.

We are pleased to report that we have now completed Phase 1a pilot TMS study in eight healthy subjects. And based on the data, we have already initiated a double blind placebo-controlled randomized crossover Phase 1b TMS study in 15 healthy subjects which we expect to complete in Q2.

We are very excited to be presenting interim Phase 1 results including preliminary pharmacokinetic, tolerability, and safety data from 42 subjects along with the read-outs from the Phase 1a pilot TMS study at the 14th EILAT Conference on New Antiepileptic Drugs and Devices to be held in Madrid, Spain in May 2018. Preclinically, XEN1101 has demonstrated significantly improved potency and selectivity when compared to the first generation Kv7.2 modulator, ezogabine. XEN1101 also showed an improved pharmacokinetic profile in in-vivo testing and a far better predicted human PK compared with ezogabine.

We anticipate that XEN1101 has the potential for once daily oral dosing, which we believe is a major advantage over the three times oral daily dosing regimen of ezogabine. And because of this, it could yield improved CNS tolerability for XEN1101 over what was observed with ezogabine. Furthermore, XEN1101 is chemically stable, does not form chemical dimers and does not undergo a color change on oxidation, unlike ezogabine. Therefore, pigmentation changes observed with ezogabine are not expected with XEN1101.

The TMS data will be an important PD read-out out for XEN1101. Certain other anti-epileptic drugs, including ezogabine, have shown an effect in the TMS model that the positive TMS read-outs would provide a preliminary indication of a pharmacodynamic effect and validation that XEN1101 is getting to the intended target in the brain. For these reasons, we believe that our interim Phase 1 data package to be presented in May represents important de-risking points in our XEN1101 program and will provide critical information to shape future clinical development.

We expect to follow with the release of the complete XEN1101 Phase 1 results including the Phase 1b crossover TMS data in the second half of 2018. We anticipate at that time initiating a Phase 2 proof-of-concept trial in an adult focal seizure or possibly LGS indication by yearend. At the same time, we also intend to explore a parallel plan to advance the XEN1101 into rate ultra-orphan pediatric forms of epilepsy as soon as feasible thereafter.

We are equally excited about the progress we are making on XEN901. XEN901 is a potent, highly selective Nav1.6 sodium channel inhibitor being developed by Xenon for the treatment of epilepsy, including treatment-resistant adults and pediatric focal seizures; orphan disorders such as LGS; as well as rate ultra-orphan pediatric forms of epilepsy such as EIEE13, an early infantile epileptic encephalopathy caused by gain of function mutations in the SCN8A gene that encodes the Nav1.6 sodium channel.

We presented preclinical data in a poster at the American Epilepsy Society Meeting in December that suggests that Nav1.6 is the primary driver of efficacy for voltage-gated sodium channel targeted AEDs. By selectively targeting Nav1.6, it is anticipated that XEN901 may achieve the efficacy conferred by non-selective sodium channel AEDs, but with an improved therapeutic index.

As we recently announced in February, we initiated a randomized double-blind placebo-controlled Phase 1 clinical trial to evaluate XEN901 safety, tolerability, and pharmacokinetics in both single and multi-ascending dose cohorts of approximately 64 healthy subjects in total. The first cohort has now been dosed. Upon completion of the Phase 1 clinical trial, a read-out of results is anticipated in the second half of 2018 followed by a Phase 2 proof-of-concept trial evaluating XEN901's efficacy as a treatment for adult focal seizures or possibly LGS.

We also intend to pursue a parallel plan to advance XEN901 into rare ultra-orphan pediatric forms of epilepsy, such as EIEE13, as soon as feasible thereafter. We believe that XEN901 is the only highly selective Nav1.6 sodium channel inhibitor currently in the clinic and could provide robust clinical efficacy with an improved safety profile over other sodium channel blocker AEDs.

With two anti-epileptic therapeutics in clinical development, each highly validated and with novel mechanisms of action, we believe we are advancing our strategy to become a leader in the development of therapeutically-differentiated alternatives to the anti-epileptic medications currently available including for orphan and ultra-orphan epilepsy indications.

Non-selective sodium channel inhibitors are broadly used for the treatment of focal seizures and first generation ezogabine was also approved for focal seizures. But these drugs have been limited by the narrow therapeutic window. We anticipate that XEN1101 and XEN901 could represent important new treatments for epilepsy with better therapeutic indices due to the improved target selectivity.

In addition to XEN1101 and XEN901, within our preclinical discovery team, we continue to build upon the knowledge amassed from these clinical candidates and are doing extensive work with ion channel drug targets to advance promising neurology candidates. In addition to working on Nav1.6 backup compounds with unique chemistries for our XEN901 program, we are also exploring the benefits of Nav1.6, Nav1.2 dual-acting inhibitor program that has the potential to be another unique and differentiated mechanism for the treatment of epilepsy.

In addition, we're leveraging learnings and our understanding of the underlying genetics of severe childhood epilepsies to develop Nav1.1 potentiator, which we believe could present a potential treatment for Dravet syndrome. We anticipate this preclinical work could yield new development candidates in 2018 or 2019, and we look forward to keeping you apprised of our progress as we seek to build an industry-leading pipeline of highly differentiated and mechanistically-driven epilepsy assets.

In addition to XEN1101 and XEN901, we are announcing today that we have added a third proprietary product to our ion-channel based CNS clinical portfolio. XEN007, the active ingredient of which is flunarizine, is a CNS-acting calcium channel blocker that directly modulates Cav2.1, which is a critical calcium channel implicated in the pathophysiology of hemiplegic migraine or HM, a rare and debilitating neurological disorder afflicting approximately 60,000 people in the U.S.

Flunarizine has been used outside of the U.S. in the prevention of chronic migraine and it's been reported to have clinical benefits in a number of hemiplegic migraine case studies as well as in vertigo. A calcium channel Cav1.2 is the target for XEN's 007 and is one of three genes that have been implicated in hemiplegic migraine, all of which promotes excessive glutamatergic excitatory neurotransmission leading to cortical spreading depression which mediates the progressive symptoms characteristic of hemiplegic migraine.

Our clinical development plans include a proposed strategy to develop XEN007 as the first treatment specifically approved for hemiplegic migraine anywhere in the world. Xenon has received orphan-drug designation from the U.S. Food and Drug Administration for XEN007 for the treatment of hemiplegic migraine. In addition, we have entered into certain agreements in order to access regulatory files and manufacturing support to potentially enable the accelerated clinical development of XEN007 directly into a Phase 2 clinical trial.

I'd like to take a moment to provide some more detail on the genetics of hemiplegic migraine supporting the mechanism of action of XEN007 for the treatment of this disorder. Hemiplegic migraine patients may have mutations in one of three causal ion channel genes with the most common being mutations in CACNA1A, the gene that encodes for Cav or Cav2.1.

These mutations caused gain-of-function in Cav2.1, increasing its activity, and thereby, enhanced excitatory neuro-transmission. This increase in Cav2.1 activity is, therefore, thought to play a causal role in hemiplegic migraine. In contrast, the suppression of the channel activity by XEN007 both in hemiplegic migraine patients with or without mutant Cav2.1 has the potential to dampen the excessive excitatory neuro-transmission and treat hemiplegic migraine. These genetic causes of hemiplegic migraine support the XEN007 as a well-suited molecule and potential treatment for hemiplegic migraine. And this has been confirmed by multiple hemiplegic migraine case study reports, including numerous subjects treated with flunarizine as well as our reports from prescribing KOLs.

We are currently examining various development strategies for XEN007 with key opinion leaders and leading clinicians. We have built a strong network of relationships in the HM community and are synthesizing their inputs in order to finalize the clinical protocol and prepare for regulatory submissions and feedback. In addition, we have developed an online forum of hemiplegic migraine patients, now consisting of over 300 patients who are teaching us about this orphan disorder and providing data, which we intend to leverage in support of our clinical trial plans.

In addition to hemiplegic migraine, we believe there may be other neurological disorders where a calcium channel blocker may be beneficial and we are considering these future development ideas in both adults and in pediatric populations. While we are developing plans to advance this product into a potential Phase 2 trial ourselves, we are also exploring options for potential partnerships for XEN007.

In summary, we intend to continue to progress in 2018 with a sharp focus on advancing our proprietary pipeline of novel CNS-focused product candidates. Looking ahead to key clinical data points, we expect to present interim XEN1101 Phase 1 data and a read-out from our pilot TMS study in May. As noted, we believe that the Phase 1 data package for XEN1101 represents an important point of validation as we hope to have both PK and PD validation to support our future development plans in patient populations in support of XEN1101 Phase 2 clinical trial initiation by yearend.

In the second half of this year, we also anticipate having completed the XEN901 Phase 1 clinical trial to be followed by a Phase 2 proof-of-concept trial. In addition, we continue to evaluate opportunities to expand our pipeline of novel ion channel modulators to both our internal research efforts and our ongoing assessment of promising external product opportunities.

In our partnered programs, our ongoing collaboration with Genentech focused on developing novel inhibitors of Nav1.7 for the treatment of pain is continuing. Genentech has completed a Phase 1 clinical trial for GDC-0310, which is an oral selective Nav1.7 small molecule inhibitor developed for the potential treatment of pain. Guidance around the future clinical development of GDC-0310 will be updated once ongoing preclinical studies are completed and the final results are analyzed by Genentech. Overall, we believe we've made excellent progress so far this year, and we look ahead to a number of value creating milestone events in the near-term.

Now, I'd like to turn this over to Ian to summarize our financial results for 2017 and discuss other corporate matters. Ian?

Thanks, Simon. I'll provide some high level comments on our 2017 year-end financial statements, and I'll also provide some details on our announcement today on the termination of our license agreement with Teva and the anticipated cancellation of 1 million Xenon common shares.

So, starting with our financials, cash and cash equivalents and marketable securities as of December 31, 2017 were $43.7 million, and this compares to $64.1 million as of December 31, 2016. As revenue was not material for the year ended December 31, 2017, I'll focus my income statement comments on expenses.

Research and development expenses for the year ended December 31, 2017 were $25.6 million, this compares to $19.8 million for the same period in 2016. The increase of $5.7 million was primarily attributable to spending on XEN1101, which was acquired in April 2017 as well as increase spending on preclinical discovery and other internal programs as well as on XEN901. This was partially offset by a decrease in XEN801 expenses, a product candidate that is no longer being developed as well as a decrease in collaboration expenses.

General and administrative expenses for the year ended December 31, 2017 were $7.3 million compared to $6.8 million for the same period in 2016. The increase of $0.5 million is primarily attributable to increased costs for business development activities and salaries and benefits. Other income for the year ended December 31, 2017 was $1.9 million and did not change significantly as compared to $1.8 million for the same period in 2016.

So, overall, the net loss for the year ended December 31, 2017 is $30.7 million compared to $23 million for the same period in 2016. The change is primarily attributable to lower revenue, higher R&D expenses, as well as higher G&A expenses.

We continue to prudently manage our cash resources to optimize our financial flexibility and optionality. Based on our current assumptions, which include fully supporting the plan clinical development of XEN1101 and XEN901, we anticipate having sufficient cash to fund operations into mid-2019. This excludes any revenue generated from existing partnerships or any new partnering arrangements or revenue.

We also announced in our year-end results today the Xenon and Teva have entered into an agreement to terminate by mutual agreement our collaborative development and license agreement. We mutually agreed to terminate the collaboration after Teva had informed us that it no longer intends to develop TV-4570. This was expected after the TV-4570 clinical read-out last year.

Subject to our receipt of an order from the Ontario Securities Commission, a key term of our termination agreement is that Teva has agreed to transfer and assign 1 million common shares of Xenon that they currently hold. We will then cancel these million shares and have 1 million fewer shares outstanding post-transaction. Teva will also return or assign to us certain intellectual property and know-how including certain patent rights and regulatory filings as part of the termination.

We believe this is a very good business solution for us. Subject to our receipt of the order from the Ontario Securities Commission, all rights and IP are returned to Xenon, and we will cancel 1 million Xenon common shares. This transaction decreases our shares outstanding by approximately 5.5%, which is accretive to all shareholders.

So, in summary and to build on Simon's comments, we're focusing our resources on our proprietary programs and intend to drive our epilepsy programs forward in order to create important value-creating an inflection points for Xenon. We plan to continue to operate efficiently and strategically manage our resources and our cash runway. 2018 promises to be a very year -- a year of very important progress as we're poised to reach key milestone events.

We are excited to be presenting interim Phase 1 data from our XEN1101 trial, including the results from a pilot TMS pharmacodynamic study at the EILAT Conference in mid-May. And as noted, we believe these interim results, which build upon the preclinical data and relevant benchmarks from ezogabine, an earlier generation Kv7 opener, are important de-risking data for our XEN1101 program as we'll be able to answer early questions around PK, drug exposure, and importantly, the activity of XEN1101 on CNS cortical hyperexcitability, a feature observed with current marketed anti-epileptic drugs.

We'll also continue our work to determine the optimal path forward for XEN007. We're excited by the prospects of our proprietary programs as well as our partner program with Genentech, and we look forward to keeping you updated on our progress throughout 2018.

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

(Operator Instructions) Our first question comes from the line of Maury Raycroft with Jefferies.

So to start, I'm wondering for the eight patients that you mentioned have completed the study, do you have all the data from these patients? Are you still accumulating data? And then, were there any positive or negative gating factors that allowed you to continue testing any additional 15 patients? And if so, can you discuss some of those?

Yes, Maury, it's Simon. Obviously, anticipated a question like this would be of interest. We have most of the data from that pilot study. We haven't fully QAed and QCed the study. And so, we really aren't in a position today to be able to disclose the data. But obviously this -- the data we got was informative for us and allowed us to model and optimize the crossover study that was then initiated and we've already started that dosing as indicated. So, we're very excited by the program.

We're very excited by the study. We think it's a very interesting pharmacodynamic readout relevant because of what was seen and published on ezogabine; so direct mechanistic relevance to the potassium channel mechanism. But I just want to be cautious at this point. This is not a QA, QC data and we'll -- we'd prefer to announce that data once that database is fully locked and cleaned, which will be over the coming weeks. And we chose to announce it at a very important epilepsy meeting thereafter in Madrid.

Got it. Very good. And for the - when you present data in May, will we be able to benchmark to historical ezogabine data that's out there? And I guess what are some of the measures that we would be able to compare to with the historical ezogabine data? I've seen some data on resting motor threshold and active motor threshold (multiple speakers) --

The answer, Maury, is yes. We'll be able to report on exactly what was reported in the [Osiman] paper, which was a 2016 reference on ezogabine reminding you that ezogabine was tested at a single dose at 400 milligrams. This was the highest dose for ezogabine. And you may recall the paradigm was that t.i.d. dosing regimen for the drug, 400 milligrams t.i.d. was the highest dose associated with quite significant AEs. So, we think we'll have much lower doses, but we'll have to -- we will be able to compare directly with ezogabine and using the resting motor threshold.

We also will be monitoring and measuring the effects of the drug on the EEG parameters as well as most motor threshold. So, we will have an expanded report compared to what was initially reported with ezogabine. If you go to the literature, EEG was measured with a number of other anti-epileptic drugs actually including sodium channel modulators like lacosamide and lamotrigine. And so, there's quite a literature now on both EMG with ezogabine, same mechanism as 1101, but also EEG measures with other anti-epileptic drugs. And we'll be able to compare and contrast what we see with other drugs in the literature.

Got it. That's helpful. And you mentioned the 400-mg dose for ezogabine. And I think some of the non-human primate data out there for 1101 [shift], and that's for the prior 1101 data. And if you can comment on the dose range that you could be looking for with 1101.

Yes, we can't make a speculation as to what the likely predicted dose will be for Phase 2 going forward. Our prediction going into the study, which we're very hopeful for is that 1101 hasn't affected about one-tenth of the dose that ezogabine has across multiple different in vivo models. And so obviously, there will be interest to look in our TMS study based on doses we used, whether we see similar effects at lower doses than was observed in ezogabine. Of course, that would be in keeping with what our predictions would be based on the in vivo data. But we can't speculate at this point.

Yes, I think the other issue is just around -- yes, we will be updating in where we are with exposure in the Phase 1 study. So it won't just be TMS, we'll also have a good sense based on our dosage for 1101, what the human PK looks like relative to what was observed with ezogabine. And we'll try and have a bit of a PK, PD understanding. Although, the numbers are fairly small in the pilot study; whereas in the crossover, it's a single dose that has been selected. And these individuals are either treated on active or drug with a single dose -- sorry active or placebo. They then washed out and then they crossed over into the other arm. And just to remind you, Maury, these are volunteers subjects, these are not patients.

Got it, yes. Thank you. And last question is on XEN007, sounds very interesting. The question is do you have IP around this molecule or flunarizine? Or is there any licensing agreement with Janssen or other IP holders? And then for flunarizine being the active ingredient in 007, is there something else in the drug that may improve the drug's function?

Yes, so quite a few questions there. We are looking obviously at an orphan protection strategy for an orphan indication for flunarizine in the U.S. We have some other ideas about IP. I don't want to disclose those on -- today but we certainly are looking at other mechanisms and ways to protect the drug from ongoing life cycle management perspective. We've got some good ideas, which we think will play out.

We have entered into license agreements, which provide us with exclusive access to cross-reference regulatory and clinical data. So, we have a very good position on that. The reason to do that is obviously to try and limit the amount of preclinical and early clinical work that would need to be done, rather be able to cross-reference a very large body of clinical and regulatory data in the rest of world. We have an exclusive position on that cross referencing. We also have an exclusive manufacturing arrangement, although it maybe that's protective because the drug can be manufactured in different ways, at least by different folks. But we do have -- at least we put in place I think a lot of protections.

The orphan strategy would be the focus going in. Seven years plus six months will be any pediatric extension. And -- but we are looking at other IP routes that may actually provide long -- even longer term intellectual property protection. We just don't want to go into that detail at this point.

Our next question comes from the line of Stephen Willey of Stifel. Your line is now open.

Hi, this is Philomena Kamya in for Stephen Willey. Thanks for taking our questions. I just have a couple of questions on the data that we're going to receive in May. So, this is the -- we're going to be receiving TMS data from the eight healthy subjects, that's correct, just from the eight healthy subjects?

That's correct. You're also going to be receiving an overview of the Phase 1 study interim. And just to explain the reasons we've run an initial cohort in a powder and capsule formulation. We have a solid dosage form being developed, which will be added into the Phase 1, but we're going to be reporting on the powder and capsule formulation in the first form of the Phase 1.

So, yes, Philomena, the way to think about it is we've -- it's all under one protocol, but there's a Phase 1a and 1b component. And this is an interim read on the 1a. So in addition to the eight subjects that have gone through a pilot TMS study, there were 42 subjects where we'll have data on PK safety and tolerability.

So, in terms of drug exposure in PK and trying to look at therapeutic index, we'll be able to have that data analyzed and presented in May as well. And then the eight subjects on the on the pilot TMS is really informed us on the design of the 1b component which Simon kind of, reviewed in detail that this is double-blind placebo-control 15 healthy subjects that's ongoing right now. So, that data won't be available by May but it will be available a little bit later this year.

Perfect. And in terms of running the parallel clinical trials in the pediatric population, so this will be in parallel to the Phase 2 -- potentially the Phase 2 trial for 1101, correct?

You mean the parallel pediatric or the -- you're referring to -- you're not referring to the TMS now, you're talking about a different parallel pediatric program from the adult program?

That is correct.

Yes, I mean, Philomena, we're finalizing our Phase 2 plans. I would say at this point we don't have it finally inked. We expect over the coming weeks or a couple of months, we'll have that done. There are a few ways we can go with this based on the mechanism. Of course, ezogabine, the first generation product was approved in adult focal seizures. It's the largest number of patients. There's probably half a million refractory focal seizure patients adults in the U.S., probably 50,000 to 100,000 pediatric adolescents with refractory focal seizures. And we have a solid dosage form that formulation-wise is already well-suited.

Of course, the other options for us, which we're exploring might be an orphan strategy and probably top of that list would be Lennox-Gastaut syndrome. This is a complex epilepsy phenotype but it's a very interesting one; more common in Dravet, less common in focal seizures. It's about 4% to 5% of childhood epilepsy. These are patients that present with a complex of seizures, tonic seizures, atonic seizures that quite substantial intellectual developmental delay and impairment.

But it's a very interesting model because it's an orphan form of epilepsy but it occurs both in childhood as well as in adults. And so, the potential to do the traditional step-down approach could be taken with an orphan strategy like Lennox-Gastaut. With it, by the way, is a very high unmet medical need. So, these individuals are very poorly treated with the existing AEDs.

The third strategy, and you can see this is complex, but the strategy is a truly ultra-orphan strategy where we focus on these infant epilepsies such as EIEE7, which is the loss of function in this particular sodium channel, KCNQ2 gene mutations, and this drug modulates the M-current, upregulates this particular channel.

It may be that we can run these parallels in some degree in these programs -- some degree in parallel. We probably wouldn't run two adult programs, so we'd make a choice of focal or LGS. We'll probably be in a good position in the next couple of months to be actually announcing where we will be heading. And then the key decision is really how readily do you go into the very young pediatric population such as the ultra-orphan EIEE7.

And I think that's going to be a discussion with the FDA in parts as well. We'll clearly need a very different formulation; one that is soluble, able to get it to kids in a solution form. That work still has to be completed. It has started but it's not completed. There still is a requirement to do juvenile toxicology to go into the very young. So, the infant population may not be, from a timing standpoint, run exactly parallel with an adult strategy out the gate as we need to optimize formulation and juvenile tox.

But we certainly would like to engage the FDA with the adult Phase 1 safety in hand without tox in hand. And, remember, we were just finishing also the four-month tox to support the next phase of developments. So [in-life] is done, but we haven't yet done juvenile tox. So that will likely be a requirement before we start any very young pediatric development works.

So, in summary, I think what you're likely to see is a commitment to a Phase 2 program, which is in an adult population likely LGS or focal seizures with a traditional step-down strategy to adolescence, or maybe even including that in the protocol as our toxicology may cover some of those age groups, and fairly soon thereafter to get into a pediatric population, obviously pending the completion of juvenile tox and formulation development work and FDA discussions on what those trials would look like.

OK, perfect. And if I could just squeeze in one more question about the preclinical work on the potentiator. So if I heard correctly, it's a Nav1.7, Nav1.2 dual acting compound --

No, 1.6, 1.2 dual acting.

1.6?

Yes.

OK, perfect. Thank you for the clarification.

Yes. No problem. And that's a backup program. As I alluded to, we've got a number of backup activities, that's one. We have a Nav1.1 potentiator, and we're guiding at this point that we do expect development candidates to come out of that work over the 2018, 2019 period.

Perfect. Thank you for taking our questions.

Not at all.

Our next question comes from the line of David Martin of Bloom Burton. Your line is now open.

Hi there, it's [Tonia] on the line on for David. Just a couple of questions cross-related to the flunarizine, the XEN007 program. If you can maybe give us a bit more information on the history of the drug, why was it not approved in the U.S. And then if your license is an exclusive license on the data or not?

Yes. So, I'll answer the second question first. We have an exclusive license to reference the data for U.S. development. On the second question, probably a bit more complicated. We think it's -- so this drug is being around now for -- actually a few decades. It was developed by Janssen, trade name as Sibelium worldwide. It's been generic for a number of years. And we think that the reason this drug is never coming to the U.S. is precisely because it has been a generic compound in the rest of world. And we think that really no one has considered an orphan strategy for the product.

When you go to the literature, we think hemiplegic migraine is a distinct syndrome. It's got genetic etiologies. Unlike common migraine, it's much more severe. These patients have hemiplegic attacks. They have motor weakness, they have sensory abnormalities. It's one of the complex forms of migraine that it's own distinct entity. And there's a fair bit of data now in the -- and actually it has its own ICD code as well. There's quite a bit of data in the literature including case reports as well as observational study reported on 13 hemiplegic migraine patients showing a significant effect of the drug in reducing the frequency of hemiplegic attacks in these subjects. Now, there's never been a controlled randomized study done. So, just put some caution around it but actually quite a lot in the literature around the use of flunarizine and in patients with hemiplegic migraine.

Interestingly, there is a fairly wide use in the U.S. for patients with hemiplegic migraine of a drug known as verapamil, which is a calcium channel blocker. The problem is it's a cardiac calcium channel blocker. It's used off-label. No drug has been tested in HM, but the calcium channel mechanism is validated through the genetics of the disorder and the fact that flunarizine is used in these patients in the rest of the world for hemiplegic migraine as mostly the first-line treatment. And in the U.S., the majority of patients with hemiplegic migraine are on verapamil, the calcium channel blocker which is a cardiac acting inhibitor.

Flunarizine, as we've already stated, does not have cardiac potentiation. It's a CNS-acting Cav2.1 inhibitor. We think very well-suited to this orphan indication. But the reason this hasn't been developed is I don't think anyone has thought about an orphan strategy such as hemiplegic migraine for the drug.

OK. And in terms of the target Cav1.2, are there any other companies developing compound targeting it for migraine or any other indication?

Not to our knowledge. Not to our knowledge.

I'm showing no further questions at this time. I would like to turn the call back over to Jodi for closing remarks.

Thank you for joining us today. We look forward to providing updates on our progress. Operator, we will now end the call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program. You may now disconnect. Everyone have a great day.