Xenon stock plunges as B.C. drug developer pauses enrolment in depression study

Xenon Pharmaceuticals Inc. XENE-Q stock sold off sharply Friday after the B.C. drug developer said it was temporarily halting enrolment in a late-stage human trial to see if its lead drug candidate, which has proven effective in reducing seizures for people with epilepsy, would also work as an antidepressant.

The Nasdaq-listed stock was down 29 per cent in midday trading, changing hands for US40.60 a share, after closing Thursday at US$57.35.

Xenon, one of Canada’s most valuable public biotechnology development companies by market capitalization, said late Thursday it was pausing enrolment in the efficacy trial studying the drug’s effects on major depressive disorder after the drug was found to trigger a small number of adverse events in some patients.

Those side effects were mostly mild or moderate, CEO Ian Mortimer said on a conference call with analysts Thursday, and “consistent with the known profile” of the drug. Chief medical officer Chris Kenney said a “small percentage of patients” experienced adverse effects, including confusion, aphasia and ataxia. One patient suffered from psychosis. Dr. Kenney said those side effects did not last long.

The setback overshadowed news Thursday that Xenon had submitted a new drug application (NDA) to the U.S. Food and Drug Administration for approval to take azetukalner to market to treat the most common type of epileptic seizures. Xenon signalled in March it would proceed with the application this year after reporting strong clinical data showing a meaningful reduction in seizures among people who took the drug.

“Our NDA submission is a significant milestone for Xenon as we continue to work toward the potential approval and launch of our first product,” Mr. Mortimer said. If approved it would be the 15^th therapy developed in B.C.’s teeming biotechnology sector to win regulatory approval, according to industry association Life Sciences B.C.

The sell-off erased all gains since Xenon announced the positive epilepsy results and prompted several analysts to cut their share-price targets.

That included RBC Capital Markets analyst Brian Abrahams, who lowered his target to US$70 from US$81 per share. “While this is disappointing, we believe that risk/benefit in psychiatry had always been less certain given prior safety observations and likely more modest benefits, and importantly, we do not believe this should impact the main value-driving epilepsy indication” or affect its expected market launch next year, Mr. Abrahams said in a research note.

He added that the commercial opportunity in psychiatry was “a bit more diminished,” but that Xenon, which has enough data to publish efficacy results in one of its psychiatry trials, still has a “path forward” to take the drug to market to treat depression.

Xenon reported in March that patients in the 380-person trial taking a 25-mg daily dose of azetukalner over a 12-week period experienced a 53.2-per-cent median reduction in seizures. That was 42.7 percentage points better than those who took placebos.

The numbers improved on Xenon’s last human trial, reported in 2021. Among those from the earlier trial who kept taking the drug, more than half experienced a 90-per-cent-plus reduction in the number of seizures over a multiyear period, and 11 per cent had no seizures at all.

Analysts and doctors have strong hopes for azetukalner as an epilepsy treatment: It doesn’t require gradual increases in dosing over several weeks, as other epilepsy treatments do, and was tested on patients who were the most resistant to other treatments. Patients take the drug at night to minimize the impact of side effects, which can include dizziness, headaches and sleepiness.

Xenon raised more than $1-billion in equity in March on the heels of the positive results and has been ramping up operations as it prepares to take the epilepsy drug to market.

Xenon, co-founded by renowned researcher Michael Hayden and former CEO Simon Pimstone in 1996, started in gene discovery, later shifting focus to developing pain drugs. It went public in 2014, and the stock plummeted three years later after partner programs with drug giants failed or fizzled out. It acquired rights in 2017 to azetukalner, which had been developed by Valeant Pharmaceuticals International, now called Bausch Health Cos. Inc.