Ian Mortimer, CEO of Xenon, at the company's laboratory in Burnaby, B.C, on Dec. 1.Tijana Martin/The Globe and Mail
Canada’s most valuable drug developer is a B.C. company whose epilepsy treatment sharply reduces seizures in patients without causing an odd side effect from a similar drug shelved by GSK plc in 2017: turning patients’ skin blue. Now, Xenon Pharmaceuticals Inc. XENE-Q hopes to show its anti-seizure drug can do something else: Make depressed people happier.
The Burnaby company plans to develop antidepressant drugs based on its flagship molecule, XEN1101, after unveiling promising results last Monday from a proof-of-concept study involving 167 patients. Given the vast market for mood-altering drugs, investors bid up the stock, analysts increased share price targets and Xenon sold US$345-million of securities. Its stock closed Monday at $37.76, up 30 per cent since the start of last week.
Xenon, which sports a market capitalization of US$2.8-billion, has raised US$1.4-billion from investors over its life and spent US$250-million developing XEN1101. Further trials will cost more, but analysts also believe the company is a buyout target for Big Pharma. “We’ve surveyed investors, and this comes up as one of the top potential mergers and acquisitions plays” in biotech, said Jefferies analyst Andrew Tsai, who has a $60 stock-price target.
Xenon’s backstory is as compelling as the science behind its drug, which modulates the flow of potassium ions through electrical channels in the nervous system, tempering excessive brain activity that causes seizures. Like many biotechs, Xenon has faced several setbacks since its co-founding in 1996 by renowned University of British Columbia geneticist Michael Hayden and postdoctoral student Simon Pimstone, now chairman.
The fact that Xenon started in gene discovery, developed its own pain drugs but is now focused on neurological disorders with a molecule discovered by another company hints that things have not gone as planned (they rarely do in biotech). “There’s always some luck in this business,” CEO Ian Mortimer said. Dr. Pimstone added: “Biotech is a long game. It’s not for the faint of heart and requires immense resilience.”
Xenon’s roots trace back three decades to when Dr. Pimstone was introduced by chance in Vancouver to Dr. Hayden. They had common backgrounds: Both grew up in South Africa and traced their lineage to Jewish immigrants. Dr. Hayden’s father was the son of German Holocaust victims who migrated after the Second World War. Dr. Pimstone’s Lithuanian-born great-grandparents migrated in 1902. His grandfather and father became doctors; the latter taught Dr. Hayden medicine at the University of Cape Town. When they met, Dr. Hayden “asked, ‘Was your father Bernard Pimstone?’ I said yes and he said, ‘When can you start?’ ” Dr. Pimstone said.
Genetics was a hot area as scientists worked to sequence the human genome. Dr. Hayden, founder of UBC’s Centre for Molecular Medicine and Therapeutics and known for his work on Huntington’s disease, together with Dr. Pimstone won a competition to identify a gene that regulated the production of good cholesterol. Both had an entrepreneurial flair (Dr. Hayden has founded five companies) and went into business, initially to identify genes. Xenon Genetics, the company’s original name, was born. (Dr. Hayden was its first chief scientific officer and a director until 2022).
Xenon raised $70-million in 2000 and licensed rights to work from Dr. Hayden’s lab to a Dutch company to create Glybera, a gene therapy for lipoprotein lipase deficiency, a rare disorder. The drug was sold in Europe but pulled in 2017 due to weak demand.
Xenon focused on genetic mutations and in 2007 identified a defect in 17 people that caused them to feel little or no pain, even if they bit their tongues, got scalded, broke bones or gave birth. Xenon concluded that a sodium electrical channel in the nervous system played a key role in signalling pain. It set out to create drugs to block those channels for several pain-causing ailments.
Xenon partnered with giants Teva Pharmaceutical Industries Ltd. TEVJF and Genentech, Inc. to develop pain treatments for shingles and osteoarthritis and went public in 2014. But those programs failed or fizzled out. In March, 2017, Xenon’s stock plummeted when its drug for acne failed efficacy trials.
But Xenon’s work led to understanding of how nervous system electrical channels function and exploration of neurological conditions it could treat including epilepsy. “I would have much preferred for us to have been successful” with earlier efforts, Dr. Hayden said. “But we learned a lot. We didn’t fail and say, ‘Ok we’re done.’”
As Xenon looked for a path forward, Christopher Crean sought the same for a drug owned by Valeant Pharmaceuticals International Inc. Valeant had bought a biotech in 2005 with a promising molecule called ezogabine to treat epilepsy. Rather than focusing on sodium ions that went into the brain, ezogabine worked to regulate potassium coming out.
Ezogabine reduced seizures markedly but was not an ideal therapy: It had to be taken three times a day, causing side effects including fatigue and dizziness. It required a gradual buildup of dose strength. And, after years of use, it turned patients’ skin blue. The Valeant drug, marketed by GSK, was approved for sale in 2011 but regulators in 2013 ordered the drug carry label warnings about the discoloration and threat of vision changes. GSK discontinued it in 2017, blaming “very limited usage.”
Valeant knew ezogabine had problems early on and set out to find better alternatives using a similar approach but different chemistry. In 2006 it applied for a patent for a potassium ion channel drug that would not require graduated dosing and could be taken once-daily at night, minimizing the impact of side effects.
Then Valeant hired Michael Pearson as CEO in 2008. The former McKinsey & Co. consultant felt the struggling California company should only bet on commercially successful drugs, slash research and development spending and buy other drugmakers. Valeant pursued the strategy aggressively after merging with Canada’s Biovail Corp., redomiciling to Laval, Que., in 2010, until controversy beset the debt-laden company, now called Bausch Health Cos. Inc., in 2015. Mr. Pearson left in 2016.
North Carolina-based Mr. Crean set out to rescue the new, unproven epilepsy drug after Valeant laid him off in 2013 from his research director job with other local staff. Ezogabine “had been the wrong molecule for the right target,” Mr. Crean said. The new drug – the future XEN1101 – “was the better hammer for channel activation. Knowing the value of the asset, I wasn’t about to let it die behind the walls of Valeant.”
Valeant agreed to sell the drug to Mr. Crean in 2015 for so little that he funded it from his bank account, though he owed more if the molecule later succeeded. In pursuit of a partner he met Dr. Pimstone, then Xenon CEO, at an epilepsy conference in Madrid in June, 2016. “My feeling was their whole genetic story was failing” at Xenon as its partner programs stalled, Mr. Crean said. Xenon’s leaders liked what they saw: “We knew the drug had a great shot of working” and likely wouldn’t cause the same issues as ezogabine, said Mr. Mortimer, who was then chief financial officer.
Xenon bought it “at very favourable terms,” said Dr. Hayden, paying Mr. Crean $1.1-million up front in 2017 and picking up all rights from him and Valeant by 2020. Xenon’s full cost to buy XEN1101 will be just US$15-million if it gets to market.
But Xenon had to choose: Should it take XEN1101 into human trials, or XEN901, a sodium ion channel inhibitor for epilepsy it had developed in house? “We didn’t have unlimited resources,” said Mr. Mortimer, who became CEO in June, 2021. “We could only bet on one. Those were tough discussions.”
Xenon chose XEN1101, which would be the only potassium-channel drug on the market and sold XEN901, which would compete against other sodium blockers, to Neurocrine Biosciences Inc., for US$50-million plus further payments if the San Diego company advanced it successfully. In October, 2021, Xenon published results showing XEN1101 reduced seizures by more than 50 per cent after six months in adult patients that suffer from the most common form of epilepsy, focal onset seizures, and already take several drugs. The stock doubled. Follow-up results have shown seizure frequency drops further as patients keep taking XEN1101. Of those who have used it for 24 months, 23.6 per cent have been seizure-free for a year, Xenon announced Saturday. No one has turned blue.
Last month, Neurocrine reported XEN901 failed an efficacy trial. “Serendipitously it looks like a great decision” to choose XEN1101, said Bloom Burton analyst David Martin.
Xenon hopes XEN1101 continues to perform in expanded human studies and that it can help with depression, as ezogabine did. Last week’s results were mixed: While patients on the drug showed a statistically significant improvement in two mood surveys after six weeks, that was not the case on a third, the Montgomery-Asberg Depression rating scale.
Still, XEN1101 showed enough promise that Xenon thinks it could work as a stand-alone antidepressant and also help epilepsy patients who often suffer from depression. It will actively explore development to that end. Mr. Crean, meanwhile, says he’s satisfied he’s made “a significant contribution to medical innovation by not giving up the good fight” even if he couldn’t develop XEN1101 himself.