Xenon Pharmaceuticals Inc. (XENE) Q4 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to your Xenon 2016 Fourth Quarter and Fiscal Year 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 is being recorded. I would now like to turn the call over to Jodi Regts. You may begin.

Good afternoon. Thank you for joining us on our call and webcast to discuss Xenon’s financial and operating results for the year ended December 31, 2016. 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, the timing of IND or IND equivalent submissions with regulatory agencies, the initiation of future clinical trials, potential efficacy, future development plans, and commercial potential of our and our collaborators product candidates, the timing of and results from ongoing clinical trials and preclinical development activities, our ability to achieve certain milestones in both our proprietary and partner development program. The plans of our collaboration partners and their interactions with regulatory agencies, the results of our research and development efforts, 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 2016 results and the accompanying Annual Report on Form 10-K will be made available under the Investors Sections of our website at xenon-pharma.com and filed with the SEC and SEDAR. Now I’d like to turn the call over to Simon.

Thank you, Jodi and good afternoon everyone. And thank you for joining our conference call today. 2016, was a year of accomplishments and productivity for Xenon which we ultimately laid the groundwork for significant progress and important value creating [indiscernible] opportunities which we anticipate in 2017. To build a differentiated business model that includes proprietary as well as partnered programs, which has enabled advancements of a diversified pipeline of product candidates. Our strategy provides us with multiple short-term goal emerging from our expertise and ion channelopathies as well in human genetics which allows us to select novel targets with high human relevance and to discover or develop highly selective and differentiated modulators of these targets. In 2016, we advanced our pipeline, supported our partnerships, moved our proprietary programs forward and strengthened our financial position while continuing to operate in a highly capital efficient manner. Today we’re engaged in the next important phase of our corporate history driven by the maturation of our pipeline and our strategic interest in expanding our proprietary programs into additional orphan indication with focus on CNS disorders. Some of this future pipeline expansion could come either from our own internal research efforts or through the in-licensing our acquisition of other product candidates that represent a good strategic fit with our portfolio. We expect 2017 will be a data rich period, we’re looking forward to a number of important inflection points. To briefly summarize in terms of clinical milestones. We look forward to top line data from our XEN801 Phase 2 clinical trial and patients with moderate to severe acne towards the end of this month. We expect top line read out from the Phase 2b clinical trial of TV-45070 and post-herpetic neuralgia or PHN which is being conducted our partner Teva around mid-year. We anticipate our collaborator Genentech will advance our Nav1.7 pain program into Phase 2 clinical trials in 2017. We also expect to file an IND or IND equivalent in the fourth quarter of this year for XEN901, a novel Nav9.1 inhibitor for the treatment of Epilepsy. Each of these key events is the potential to contribute to the meaningful growth of our company. I’ll start with an update on our proprietary programs beginning with our lead wholly owned acne product XEN801 for which we expect top line Phase 2 data towards the end of March. XEN801 is a highly differentiated product for the treatment of moderate to severe acne based on a novel mechanism of action. XEN801 is a selective small molecule inhibitor of Co-A desaturase-1, or SCD1 which is an enzyme involved in lipid synthesis that is expressed in sebaceous glands in the skin. XEN801 is topically administered in a gel form. It is differentiated from currently marketed products as a result of its duel mechanism of actions firstly by reducing the production of lipids produced by sebaceous gland and second by using apoptosis, cell death of the sebaceous gland essentially limiting the factory of lipid production in the skin. Enrolment of 165 subject is being completed in the XEN801 Phase 2 clinical trial which is a randomized double blind multi-center and vehicle-controlled parallel group study design to evaluate the efficacy safety, tolerability and systemic exposure of XEN801 for the treatment of moderate to severe facial acne. Patient supply a gel formulation of XEN801 or vehicle placebo topically to their face once a day in the evening for 12 weeks with a full week follow-up. The primary efficacy endpoint is the percent change in total both inflammatory and non-inflammatory lesion counts from baseline to week 12. Secondly endpoints include separate efficacy assessments of inflammatory lesion counts of non-inflammatory lesion counts and Investigated Global Assessment or IGA measures. As we’ve noted before acne is a large and underserved market, in which we believe new treatments especially safe and effective topical non-antibiotic approaches are needed. We’re pleased that we continue to see a keen interest in our XEN801 program from both investors and pharmaceutical companies with a dermatology focus driven by an interest in SCD1 as a novel target, with a novel and unique mechanism of action focused on reducing the production of sebum lipids. As we think about the opportunity for XEN801 in acne, we plan to evaluate the optimal pathforward in a data driven manner based on the outcome of the current Phase 2 trial and the overall strategic focus of our company. We’re committed to continuing to invest in our XEN801 program to support its continued advancement in the clinic, while in parallel, we make slow partnering options. Indeed it’s the data from the current Phase 2 clinical trial supports further clinical development, we expect that the next stage of development of XEN801 will be a Phase 2b file for which we’ve already developed clinical plan. We seek to ensure that there are no unnecessary delays in the clinical advancement of XEN801 and drug product is being manufactured at risk to enable advancements to Phase 2b as soon as possible. We anticipate that we could initiate the Phase 2b trial as soon as Q3. As I noted, our decisions of our next steps in our acne program will be data, resource and strategically driven, we’re very much looking forward to evaluating the Phase 2a data in a few weeks and planning for the programs potential future. Continuing the discussion of our proprietary programs and our strong interest in the area of S disorders. We’re also excited about the progress we’re making in developing a potent and selective inhibitor of the sodium channel Nav1.6 for the treatment of seizure disorders including rare, ray intractable childhood epilepsies such as SCN8A or Nav1.6 gain a function epilepsy. Sodium channels appear to play a key role in neuro-excitation and neuro-inhibition in the central nervous system. And Nav1.6 is the most highly expressed sodium channel in the hyper dexterity parameter pathways in the brain. So we believe this is a very compelling and differentiated target. We’re pleased to have identified a drug development candidate within our Nav1.6 program now called XEN901 to the treatment of epilepsies including rare childhood epilepsies. As we noted in our discussion last quarter, we’ve also generated additional pre-clinical data which support the treatment of adults partial onset epilepsy with XEN901. In these studies, we studied the ability of our selective Nav1.6 inhibitor compounds to protect wild-type mice from seizures in the maximal electoral shock seizure or MES animal model. The MES assay has been well validated against non-anti-epileptic drugs and is believed to provide a good assessment of the potential activity in adults partial on set epilepsies. MES induced seizures in wild-type mice were reduced by XEN801 at a potent and dose dependent manner similar to that seeing in SCN8A gain-of-function mice. This suggests that the efficacy of Nav1.6 selective inhibitors may not be limited to patients with SCN8A gain-of-function mutations and could also include more prevalent epilepsy disorders. We’re excited about the progress within our CNS focus Nav1.6 program and we’re looking forward to filing an IND or IND equivalent in the fourth quarter of this year. I’ll now discuss the upcoming 2017 milestones emerging from our collaborative programs and our partnerships with Genentech and Teva which are focused on the development of novel inhibitors of the sodium channel Nav1.7, for the potential treatment of pain. Nav1.7 is considered one of the most important pain related targets in the bi-pharmaceutical industry today. The importance of this target illustrates how much the scientific and medical community has learned about how mutations in a gene targets function can have such a profound effect on human disease and how understanding these mutations can lead to potentially promising pathways for therapeutic intervention. There is a tremendous amount of human genetic data supporting the validation of Nav1.7 as a pain target and we’re especially fortunate to have two promising partnerships focused on developing novel and innovative pain treatments. Another value driving event anticipated around mid-2017 will be the data readout from the Phase 2-b trial of TV-45070 and PHN. We’re collaborating with Teva on developing this topical sodium channel blocker for peripheral applications now being tested in patients with post-herpetic neuralgia. TV-45070 targets Nav1.7 as well as other sodium channels to treat conditions of chronic pain. Teva is conducting a randomized double-blind placebo controlled Phase 2b trial in patients with PHN with 264 complete as expected. The primary endpoint is the change from baseline in the numeric rating scale to week four and the secondary endpoints included 30% and 50% responder rates, quality of life and safety. As per prior guidance top line results from this ongoing PHN clinical trial are expected in mid-2017. We’re now strategically alliance with Genentech, we’re focused on developing orally active, highly selective small molecule inhibitors of Nav1.7 for the treatment of pain. Genentech advanced two compounds into development and is now completed its Phase 1 clinical trials. Genentech is indicated that it intends to focus its ongoing development efforts on GDC-0310 based on clinical and pre-clinical data supporting this candidate as a differentiated product. Pending the results of an assessment of ongoing pre-clinical work Genentech is guided that it anticipates initiating Phase 2 clinical trial in 2017, for the potential treatment of pain. We’re excited about this important mid-term event not only because we’re eligible to receive a milestone payment when the first patient is treated, but because we believe commencement of the Phase 2 development will hope to establish a leading position for Genentech within the Nav1.7 pain market. As I noted in the beginning of my comments, we believe that 2017 has the potential to be an extraordinary year in Xenon’s progress filled with important milestone opportunities and multiple potential value inflection points. Each of these key events, has the potential to have an meaningful impact on the growth of our company. We believe that our business model of leveraging financially well-structured partnerships to participate in large market indication such as pain combined with our focus on rare or orphan neurological indications in our proprietary programs such as severe childhood epilepsy disorders is a major strength. We intend to build on this business model and explore additional opportunities including potentially strategically augmenting our portfolio in the CNS area with additional valuable assets either sourced from our own internal research or external opportunities. Our corporate vision is to continue to pursue multiple diverse therapeutic and commercial opportunities, manage risk and maximize opportunities for success. With our strong balance sheet and the potential for an additional $32.5 million more in potential milestone payments over the next 24 months, we believe that we’re well position to achieve on near term goals. Before turning the call up to your questions. I would like to ask Ian to review our financial results for 2016. Ian?

Thanks Simon. For the year ended December 31, 2016 we reported total revenue of $1.8 million as compares to $15.6 million for 2015. Revenue in both years is primarily derived from our collaboration agreements with Teva and Genentech. The decrease of $13.8 million was primarily attributable to revenue recognized related to the upfront payment from the collaborative development and license agreement with Teva, which was fully recognized by December, 2015 as well as revenue related to the upfront payment from the March, 2014 genetics collaborative agreement with Genentech which was fully recognized by March, 2016. And the remaining decreased was due to less full time equivalent funding from Genentech as we shifted our resources from supporting collaborations into our proprietary programs. Research and development expenses for the year ended December 31, 2016 were $19.8 million and this compares to $15.2 million for the same period in 2015. The increase of $4.7 million is primarily attributable to increase in spending on our XEN901 program, this is our Nav1.6 sodium channel inhibitor program as well as XEN801, which entered Phase 2 clinical development in February of last year. This is partially offset by a decrease in Genentech collaboration expenses. General and administrative expenses for the year were $6.8 million and this compares to $9.8 million in 2015, during 2015 we had $1.7 million expense which was recognized due to a fair value adjustment upon the reclassification of stock option awards granted to directors and certain consultations to liability classification. The remaining decreases to one-time severance cost resulting from an internal reorganization and acceleration of stock-based compensation expense for certain consultants that occurred in 2015. Other income for the year ended December 31, 2016 was $1.8 million compared to other expenses of $6.4 million in 2015 and this change of $8.2 million is primarily driven by unrealized foreign exchange gains in 2016 arising from the translation of Canadian denominated balances to US Dollars as compared to unrealized foreign exchange losses for the same period in 2015. The net loss for the year ended December 31, 2016 was $23 million compared to $15.8 million for 2015. And the change was primarily attributable to lower revenue, higher R&D expenses partially offset by lower G&A expenses and the change in unrealized foreign exchange gains and losses. We ended the year December 31, 2016 with $64.1 million in cash, cash equivalents and marketable securities. This compares to $58.7 million at the end of 2015 and we believe this puts us in a strong financial position to execute on our key near term business objectives. And just to recap on Simon’s earlier comments, we continue to manage our financial resources efficiently to support the advancement and expansion of our proprietary product pipeline either from our own internal research efforts or through in-licensing. We’re excited about the multiple milestone opportunities from our internal pipeline and from that of our partners anticipated in the remainder of 2017. So that concludes the prepared remarks. Operator, we’ll now open up the call for questions.

[Operator Instructions] and our first question comes from the line of Steve Willey from Stifel. Your line is open.

I guess as we think about the upcoming acne data readout, there is obviously some efficacy benchmarks that have been established with a couple of recent Phase 2 data sets, just wondering Simon I guess as you look at the baseline patient characteristics of the patients in XEN801 study, can you at least maybe just directionally comment as to how comparable those patients might be relative to the baselines of patients enrol in some of these other Phase 2 studies. Specifically with respect to just the baseline inflammatory, non-inflammatory lesions and IGA scores.

Thanks Steve. So Steve obviously we don’t have the final information on what the actual baseline lesions count although, we’re part of the top line release. But we can say is in terms of our inclusion criteria, these were patients that met criteria for moderate to severe acne, so in terms of inflammatory lesions 25 to 75 inflammatory lesions and in terms of non-inflammatory lesions 20 to 120 and that of IGA score of greater equal to three and looking for a two point drop. So we’re very comfortable with the inclusion criteria in terms of the patient characteristic meeting to moderate to severe acne definition. Where exactly they lie in the scale in terms of the actual baseline counts, we don’t have that information at this point but that’ll obviously be part of our release in the near term.

Understood and then just on GDC-0310, the Genentech part Nav1.7, in the press release it talks about pending assessment of both the Phase 1 data and also ongoing in vivo studies, is there anything that you can say about just the nature of the ongoing in vivo studies of those just kind of your basic tox related studies.

So these are tox studies that Genentech are concluding to support the submission for Phase 2, again we don’t have any specific concerns, those studies need to complete run their course, we’re probably a few months away from that. The exact timing on when Genentech will make their decision we don’t have that data, obviously we’ll update when we know, but we certainly are very encouraged by their ongoing guidance that they expect to start the Phase 2 trial in 2017, so there are just tox studies to support that submission Steve.

Understood and then just one last one on XEN901. I guess looking forward a little bit presuming that the work that you do and how these looks okay from a safety and tolerability perspective. Now knowing that you have potential activity in both some of the rare pediatric seizures as well as the adult partial seizures. Just wondering if you’ve kind of made any kind of decision at this point as to which of those patient populations you would pursue first from a proof of concept perspective or could you possibly pursue both in parallel as well. Thanks.

Thanks Steve. Historically the FDA for these current anti-epileptic drugs has required safety and initial proof of concept and other population before going into pediatrics. I think what is obviously changing is there may well be some opportunities to develop drugs like this in, that are quite well suited or specifically well suited to certain pediatric populations and so history doesn’t necessarily predict what the agency is going to allow going forward. I think we can achieve quite safely that we’ll and we’d want to initiate development in an adult population for safety initial adult volunteer study. I think that is going to be a requirement, I’m quite certain about that although we haven’t had that discussion with the agency. I think what the Phase 2 program looks like I think really is going to depend on interactions with the agency and what we see in the Phase 1. So there is a possibility obviously that we could do some parallel tracking, historically as I said adults have always had to precede the pediatric development program but our obvious interest and we certainly believe that off the families with these 8A gain-of-function would be to enter the pediatric population for development as quicker as we can, but obviously as safely as we can as well. So I don’t know the specific answer for you today, we obviously want to try and get into their pediatric population quickly, but it will need to be done safely and it will need to be done in consultation with the agencies. But certainly the first Phase 1 you will see, I’m absolutely certain will be an adult human volunteer study.

Great, thanks for taking the questions.

Thank you and our next question comes from the line of Hugo Ong from Jefferies. Your line is open.

Maybe first on XEN801, if the Phase 2a data is positive with the subsequent Phase 2b trial also be done in the same clinical sites in Canada and when would you need to run trials in the US?

Hugo, thanks. I know it’s most likely that would be filing an IND for the initiation of the Phase 2b and whether this is solely US based or primarily US based, I don’t know. But certainly it would be primarily, if not solely a US based trial. So yes, we would be submitting an IND, we would be looking to run most or all of these sites out of the US for the next phase of development.

Okay, got it. And maybe for TV-45070 can you talk about how enrolment is going for the Phase 2b trial?

Thanks, Hugo. No the timelines that we’ve just reiterated we feel very good about enrolment is going well. It took a number of months into the study to sort of get to that steady state. Teva’s done an absolutely fantastic job in bringing patients into the study, so we’re comfortable as we sit today with guidance that the study will top line around mid-year, so Hugo. Enrolment has gone well particularly over the last few months and we feel comfortable on this guidance.

Okay, got it and then maybe lastly on the Genentech collaboration. So now that Genentech has selected 0310 as the candidate for Phase 2, will we get to see any publications or presentations on the Phase 1 data either for 0310 or 0276?

I can’t speak for Genentech specifically Hugo, it hasn’t been their practice as we understand it to present Phase 1 data. I would doubt that present at certainly before the Phase 2 reads, but it’s really not been the historical practice and had given us no indication or reason to believe they will be presenting the Phase 1. I think at minimum we’ll know from them that 310 has adequate safety, tolerability, pharmacokinetics to support the Phase 2 trial, but I wouldn’t expect going into the Phase 2. We’ll see details overview presented on the Phase 1. For either of the compounds.

Got it. Okay, thanks for taking my questions and looking forward to the Phase 2 data.

As are we. Thanks Hugo.

Thank you. And our next question comes from the line of Louis Chen from Guggenheim. Your line is open.

So first question I had here is, if you could help us explain what do you think establishes proof of concept for the dual mechanism of action for XEN801 and then secondly, can you provide more color on the market opportunity for epilepsy program and how this fits into your strategic vision for the company going forward and then lastly, just how should we think about OpEx for 2017 and the quarterly progression of that spend. Thanks.

Thanks, Louis. So let me start off with the dual mechanism of action. We’ve talked about this before around the 801 drug product is having a probable dual mechanism that being a reduction in lipid synthesis and secondly inducer of sebocyte to apoptosis and I’ll address each of those. We haven’t actually measured lipid production in human skin but we certainly do know the role of SCD1 and this is well established as a very important lipid synthetic enzyme converting saturated to monounsaturated fatty acids. These monounsaturated fatty acids or MUFAs form the substrates of the lipids in the skin, the cholesteryl ester, wax esters and triglycerides, key skin lipids. And so I think that’s a well-recognized mechanism for ACD1 similarly by the way for Demerus [ph] product ACC inhibitor, the reduction in the production the fatty acids that are known to be precursors of lipids that are formed in the skin. On the second mechanism being the apoptotic mechanism, we’ve certainly done some work ourselves in human sebocytes experiments where we actually apply XEN801 to the medium and we can actually look at markers of apoptosis in particular caspase cleavage proteins and Caspase-3 and we see a significant up regulation of those in the human sebocytes, we also interestingly see a two to three folds up regulation of transcriptional factors in the retinoid signaling pathway and in particular Engel or Lipocalin. And so we certainly believe there is an apoptotic effect, we’re seeing markers of that in human skin cell experiments and we believe at least to the best of our experimental knowledge today that it’s being driven through a retinoid signaling mechanism. We do know of course from pre-clinical studies Louis when you dose 801 in animals topically, you do see a significant 50% to 70% decrease in the size and number of sebaceous gland. We also know if you knock this gene out in a mouse, you do see marks atrophy of sebaceous glands. So we think this apoptotic mechanism has been quite well established with SCD1 antagonism and as I said I think the lipid modifying effects I think is quite well established for both our target SCD1 as well as Demerus [ph] targets ACC. In terms of, does that answer your question on the 801 mechanism?

Yes, thank you.

So the next question was on the market opportunity for epilepsy, of course I’m not going to answer your question 100% because it does depend and it does depend of course on the degrees of efficacy in the different pediatric or adult epilepsy populations that we’re looking to treat and so, one can come up with any kind of assumption today. Of course, UCB [ph] have made a very attractive markets with drugs likely [indiscernible] in the adults form of epilepsy and so there’s very good evidence today of drugs being billion dollar market opportunities for more common forms of epilepsy despite the fair amount of genericization in the market, these are drugs that clearly can differentiate and of course in the pediatric epilepsy space, we’ll see where companies like GW Pharma go with Dravet and Zogenix with Dravet and if infirming product, but we think a drug that has a high efficacy can come on to a good price in the pediatric epilepsies of course, one of the reasons we’re so interested in these genetic subset is because we believe we have the potential and probably the greatest potential to have a significant impact on the natural history of the disease and that really remains the holy grail in anti-epileptic drug developments, these drugs that are on the market today, treat seizures, they can reduce seizures by 30% or 40%, but in the severe pediatric epilepsies that still leaves these children with a very high seizure burden. So they’re certainly while there may be some subject that do become seizure free, the majority of pediatric kids with severe forms of epilepsy with current gold standard drugs including those that have been in development now, still have a pretty significant seizure burden. We think modulating the genetic cause of the disease with an inhibitor of [indiscernible] caused by a gain-of-function mutation in the channel we’re looking to block, we think there really is a potential with early intervention of modifying the cause of the disease and obviously if you can show that, your pricing potential would be quite differentiated. So Louis I think, the long one to answer your simple question is it really depends on the degree of efficacy in the pediatric subset, we think we could get a high degree of efficacy given the mechanism in the adult population drug certainly that have been shown to work well, have a high opportunity to price in the plus or minus speciality pharma in the 10,000 to 20,000 the year range and have commanded good market share despite this being a somewhat generic market. There’s still a very significant burden of disease in patients with seizure disorders despite a number of drugs that are available. So I hope that answers your questions. It’s certainly as best as I can today.

Yes, that’s great. Thanks and what about the OpEx.

Right, Ian will answer that.

So on the OpEx, Louis we don’t specifically give guidance, but I can give you some color that will help you out. So historically just in the split between R&D and G&A expenses. It’s been about 75-25 split for us, but it just gives you bit of an idea how to break down that top line and then if you look at our burn over the last one to two quarters and you forecast that forward, I think is a good place to start, that gives us kind of entering in 2017 with more than two years of cash based on that burn rate and obviously that’s been covering all of our XEN801 development. Simon mentioned that we’ve been doing manufacturing to prepare for Phase 2b but obviously that’s included in that and so our planning for Phase 2b as well as all of the work on XEN901 and those expenses are going to increase this year as we think about all of the CMC and GLT talks work to prepare for filing an IND. And then we have a base level of discovery spend that we have at the organization as well. What that wouldn’t include is the fully funded Phase 2b study for 801. Simon mentioned in this remarks, I think we’ve done a lot of work on what that study would look like, we do need to finalize that in order to finalize the cost on that, so that would be something in addition to kind of our base level of burn that we can give guidance at a future point. The only other thing I would mention is, I know you asked specifically OpEx but on the revenue side, there are milestone payments up to $32.5 million, that could come in over the next 12 to 18 months, both in our partnered programs that’s two milestone payments one from Genentech on the start of Phase 2 and one from Teva on the start of Phase 2 in the TV-45070 study.

Okay, thank you.

Thank you. And our next question comes from the line of John Newman from Canaccord. Your line is open.

I had a couple, the first one is, on the acne study. I’m just wondering how do you differentiate between [indiscernible] scaring versus a non-inflammatory lesion that is really clear to differentiation there perhaps there is something [indiscernible] keeps the patients out. And I also wondered if, during the study there are mechanisms built in at which you can encourage patient to be compliant and apply the gel [indiscernible] product that they are happy to apply the gel in most cases. And also I think I saw on the press release, perhaps for the first time that you mentioned the indication for the Genentech program would be a pain based indication, I don’t know if you can elaborate at all on, what type of cream that might be. Thanks.

Thanks John, let me answer that one first. Yes so certainly the expectation is the Phase 2 for Genentech would be in a pain indication, the drug’s been developed for pain, the actual specific indication has not been disclosed. So we’re not at liberty at this point to discuss details around what the Genentech clinical plans look like, we’re excited to be able to disclose that when we can. We certainly have been part of those discussion and have a good understanding of what Genentech is looking to do. So I just can’t elaborate further at this point. On the acne questions, on the compliance question. I think John I can’t think of anything absolutely sort of specific to a compliance. I would say, the gel appears to be cosmetically attractive it dries quickly, it’s applied once a day, twice a day, it’s applied in the evening not in the morning. So this is at a time when patients don’t have to put on makeup, they’re not going out, they’ll do this a couple of hours of before bed time in cases where females will remove their makeup first. So I think those are factors which in our minds should certainly aid compliance, but what are the tactics one can do specifically other than send SMS reminders to patients few times a day which we don’t do. I think this is, it’s quite standard, the study. So I do think compliance will be good, we obviously don’t know that specifically today and it’s really going to be a question for patients as part of the study, but it’s I’d expect it will be good certainly should be better than twice a day application and we believe should be better than a morning application given some of the points that I’ve made. In terms of differentiating non-inflammatory lesions from scars, part of the exclusion criteria are of course of course other skin conditions of the face, other than acne. So the dermatologist obviously are experienced dermatologist, they also get specific training as part of the study protocol in lesion counting. They would exclude patients who have any other conditions that are thought to be non-acne, two or more active nodular lesions is another exclusion criteria, excessive facial hair that could interfere with evaluation is an exclusion criteria. So there are a number of other anatomical diagnoses certainly that could preclude a patient’s participation in the study that is obviously left to the dermatologist, based on their experience and their training as part of the study protocol. So I hope I’ve answered your questions.

Yes and thank you very much.

Thank you. [Operator Instructions]. Our next question comes from the line of David Martin from Bloombertin [ph]. Your line is open.

The first one is, since Teva might take 45070 into DPN as well as PHN. I’m wondering whether we might see some publications of pre-clinical studies 45070 in DPN.

Yes, Dave so just to be clear. Teva’s has not given guidance on the next phase of development I think obviously DPN is an attractive indication for any company for approval for neuropathic pain program, so we don’t have any specifics from them on what that trial will look like, I think it’s reasonable enough to say that PHN is probably not going to be the approvable endpoint, it’s an indication that most pharma companies today are using for Phase 2, but not for Phase 3, but what the final approvable endpoint is for Teva is still something that has, will they need to make a decision? Teva of course is a company, larger market sort of interest and so clearly PDN or DPN will be an area that they will certainly explore and look at carefully and I think represents a very good Phase 3 opportunity for this product. We certainly have no immediate plans to release data on the pre-clinical programs or models, I don’t know if Teva has but I don’t believe they have - not communicated to us at this point, but I do think once we have data in hand around mid-year, then together with Teva, I think we will map out sort of strategy for the program around communications and I don’t think it’s inconceivable but we will have a plan, which could include presentation of pre-clinical data. I think what we have certainly said publicly before David, is we’ve conducted a number of neuropathic pain model with topical TV-45070 and with very good efficacy observed across multiple neuropathic indications, but at what point we and Teva will publish that I think will be determined by a broader communication strategy, which we’ll finalize with data in hand. Ian, anything you wanted to add? All right, thanks Dave. I think hopefully that answers your questions best as I can.

Okay, I’ve got another question. For XEN801 you commented on the once daily dosing, I’m just wondering what drove the choice of that dosing interval, with that residents [ph] time on the skin that you saw in Phase 1 or why not twice a day?

Thanks Dave. Look we did, well just quite unusual about the Phase 1, well firstly before I get to Phase 1, we did lot of work in animal model predicting human PK. And of course, well there is no obvious animal model of acne, we did study XEN801 in rodent models particularly and in many pig models for PK purposes which I think is well accepted to be a, as best surrogate as we have today to predict human transdermal and dermal skin exposure and based on the many pig PK as well as efficacy work, we required comfortable that once a day provided adequate concentrations of the drug in the skin, well above the IC90 and in fact probably above the IC100 or the concentration of drug required to completely inhibit SCD1. So we went into the human Phase 1 study with q.d. dosing and of course did human biopsies as part of that study and confirmed very good dermal levels of the drug in the skin off the very careful cleaning and tight stripping of the skin to remove excess drug on the skin surface and we were able to measure drug concentrations. And as I mentioned, we got levels that were well above the predicted IC90. We have an IC50 for this molecule when you measure SCD1 activity in human sebocytes of around 10 nanomolar and the average skin concentration in humans in the back in the Phase 1 was around micromolar. Now again one last point is that the back typically would underestimate exposure in the face, so for drugs typically the face is more [indiscernible], if you look at the literature, three to five fold on the numbers cited. We don’t know that to definitively be the case for this drug, we’ve not measured exposure in the face per se, but certainly the biopsies in the back, were above the predicted IC90 and in fact, probably an underestimate of the exposure in the face. So q.d. dosing certainly seem to give us good exposure in the skin, while at the same time and equally importantly there is very little plasma exposure, so of course potential systemic liabilities we think are significantly limited with q.d. dosing as well.

Okay, thanks. One last questions, if I may. It seems the selection of the lead for the Nav1.6 program took a little longer than expected. Did you have some criteria for the leads that were challenging to achieve? Did you ultimately achieve those criteria or have you relaxed your requirements?

Now that’s a great question, no we did achieve our criteria, but it took a bit longer to achieve. Looks, I say this all the time the discovery is not a highly predictable science and it’s not always that easy to get very accurate projections from an early discovery stage into a selection of a development stage. I think much more predictable around timelines around clinical development and I think that’s just well accepted and understood. So I think they the issue Dave really was, it just took us longer to get to what we needed to get to which was a really selective Nav1.6 inhibitor with a right kind of therapeutic index, tested across multiple species for safety pre-clinically before the GLT tox program and we were able to achieve what we set out to achieve with XEN901, but it did take us some months longer than it was, it initially predicted earlier on in the discovery stage. So I think that is really how this came to be.

So there wasn’t one particular challenge that stood out, what it was it just?

No I mean I can cite 100 challenges in optimizing chemistries against from any target including sodium channels. You know look we have set ourselves a bar, which is obviously selectivity of sodium channels against other sodium channels. So all sodium channel blockers on the market today are non-selective against sub types in the family. For us it is very important if we want to get a drug like this in the central nervous system across the blood brain barrier, that we have very good selectivity over neuronal express sodium channels and cardiac express sodium channels. And so we did, we set ourselves a high bar, so I think to answer your question that’s an obvious bar that just takes time to get over and then of course it’s all the other properties that one needs to optimize for a brain exposure, just the right amount optimize out drug interaction liabilities, all those kinds of things. So it’s really, there was nothing I would specific other than the requirements to get a good degree of selectivity that is specific for this program and we’ve landed up with a very high degree of selectivity against other sodium channels.

Okay, thank you.

Yes, pleasure. Dave.

Thank you. I’m showing no further questions, I’d like to turn the call back over to Jodi Regts for closing remarks.

Thank you. Thanks everyone for joining us today. We look forward to keeping you informed of our progress throughout the year. Operator, we will now end the call.