Xenon Pharmaceuticals Inc. (XENE) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 Xenon Pharmaceuticals Inc. Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Jodi Regts. Please go ahead.

Thank you. Good afternoon. Thank you for joining us on our call and webcast to discuss our third quarter 2020 financial and operating results. Joining me on today's call are, Dr. Simon Pimstone, Xenon's Chief Executive Officer; and Ian Mortimer, Xenon's President and Chief Financial Officer. Following this introduction, Simon will give an overview of Xenon's clinical programs, and then Ian will provide some high-level financial commentary. 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 regarding the anticipated impact and timing of the COVID-19 pandemic on our business, research and clinical development plans and time lines and results of operations, the timing of and results from clinical trials and preclinical development activities, including those related to XEN496, XEN1101, XEN007 and other proprietary products and those related to NBI-921352, FX301 and other partnered product candidates; the potential efficacy, safety profile, future development plans, addressable market, regulatory success and commercial potential of our proprietary and partnered product candidates; the anticipated timing of investigational new drug or IND or IND-equivalent submissions and the initiation of future clinical trials for our proprietary products and those related to our other partner candidates; the efficacy of our clinical trial designs; our ability to successfully develop and achieve milestones in our proprietary development programs; the timing and results of our interactions with regulators; the potential to advance certain of our product candidates directly into Phase II or later-stage clinical trials; the timing and anticipated enrollment in our clinical trials; the progress and potential of our other ongoing development programs; the potential receipt of milestone payments and royalties from our collaborators; our expectation of having sufficient cash to fund operations into 2023 and the timing of potential publication or presentation of future clinical data. 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 the results of Xenon's third quarter of 2020 and the accompanying quarterly report on Form 10-Q 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 would like to turn the call over to Simon.

Thank you, Jodi, and good afternoon, and thank you, everyone, for joining us today. I hope everyone is staying well. At Xenon, despite the ongoing serious second wave of the global COVID-19 pandemic, which is certainly placing pressure on everyone and in particular in clinical recruitment, we continue to progress advancing our proprietary neurology product candidates into mid to late-stage clinical development. We have made important adjustments to our business in order to respond and react to COVID's impact on our business. And with many factors outside of our control, we've been closely assessing the potential impacts of this COVID-19 second wave to our clinical programs, and we'll provide some further updates to program and cash guidance today. I'll be starting by providing a brief status report on each of our proprietary and partnered programs with a focus on XEN1101 and XEN496. First, XEN1101, which is a differentiated next-generation Kv7 potassium channel modulator currently in our Phase II b X-TOLE clinical trial in the U.S., Canada and Europe. Briefly, this trial is a randomized, double-blind, placebo-controlled multicenter study to evaluate the clinical efficacy, safety and tolerability of XEN1101 administered as adjunctive treatment in approximately 300 adult patients with focal epilepsy. The primary end point is the median percent change in monthly focal seizure frequency from baseline compared to treatment period of active versus placebo. Within the X-TOLE study and as many other companies are experiencing, this is an extremely challenging environment in which to provide guidance as COVID-19 is resulting in regular changes in clinic screening and in-patient perspectives on committing to longer-term studies that require monitoring and interaction with medical staff. In the early stages of the COVID-19 pandemic, we experienced a significant decrease in patient screening and randomization. In response, we implemented several risk mitigation strategies that resulted more recently in a positive uptick in patient screening and randomization. We expanded the X-TOLE clinical trial to include a number of new sites in both existing and new jurisdictions, and many of these new sites have recently initiated patient screening. While we are pleased to see more positive trends in enrollment recently, these rates are still short of pre-COVID levels, and we are modeling that patient enrollment will likely continue at this reduced level for the remainder of the year. Therefore, while we believe our presence in multiple jurisdictions with new sites opening will certainly help to mitigate the risks of delay presented by COVID-19, we anticipate that patient randomization will be completed in the first half of 2021. And with an 8-week dosing period and follow-up, we are now guiding that top line data is anticipated in the third quarter of 2021. This guidance is based on the recovery in patient's enrollment rates we have seen over the past few months but with a more cautious outlook for the coming months until we have better visibility into the second wave of the pandemic and its resulting impacts. It is important to emphasize that despite these trying circumstances, we remain confident in the conduct of the study and in the integrity of the data as captured by electronic diary. And we do not believe COVID-19 will have any impact on the final efficacy results of the study. To-date, dropout rates remain lower than modeled, and we continue to see excellent continuation into the open-label portion of the study. Although we are laser-focused on the X-TOLE study, this year we have completed additional primary market research and detailed work around the focal epilepsy market. And we remain very excited about XEN1101 and the role it could play in that focal epilepsy market, with its novel mechanism of action, its PK characteristics and other potentially beneficial pharmaceutical properties, we believe XEN1101 has the potential to be significantly differentiated in the marketplace. We look forward to sharing more of our research with you over the coming months. Next, I'd like to turn to XEN496, which is a Kv7 potassium channel modulator that contains the active pharmaceutical ingredient, ezogabine also known as retigabine, that we have reformulated and are developing as a treatment for a rare pediatric neurodevelopmental disorder called KCNQ2 developmental and epileptic encephalopathy or KCNQ2-DEE, which is a severe pediatric condition for which no medicine has yet been approved. Over the past quarter, we have made considerable progress toward our goal to initiate a Phase III clinical trial examining XEN496 in patients with KCNQ2-DEE. In addition to a Fast Track designation and Orphan Drug Designation for XEN496 for the treatment of KCNQ2-DEE, we received a positive opinion from the EMA, which recommends the granting of an orphan medicinal product designation in Europe for XEN496 for the treatment of KCNQ2-DEE. In addition, the FDA has completed its review of the clinical trial protocol. And based on this, we expect to initiate our Phase III EPIK clinical trial in pediatric patients with KCNQ2-DEE before year-end. This EPIK study is designed as a randomized, double-blind, placebo-controlled parallel group multicenter clinical trial to evaluate the efficacy, safety and tolerability of XEN496 administered as adjunctive treatment in approximately 40 pediatric patients aged one month to less than six years with KCNQ2-DEE. Eligible subjects will be randomized on a 1:1 basis to receive either XEN496 or placebo for approximately 15 weeks, which includes the titration period and a 12-week maintenance period. The primary end point is the percent change from baseline in monthly countable motor seizure frequency during the blinded treatment period as recorded by caregivers in a daily seizure diary. We continue to work closely with the medical community, genetic testing companies and patient advocacy groups to identify potential patients for our EPIK study. This marks an extremely important milestone for Xenon with the first of our proprietary product candidates now poised to enter a Phase III clinical trial and we look forward to initiating the trial before year-end. Turning now to XEN007, with the active ingredient flunarizine, which is a CNS-acting calcium channel modulator that modulates Cav2.1 and T-type calcium channels. The physician-led Phase II proof-of-concept study is examining the potential clinical efficacy, safety and tolerability of XEN007 as an adjunctive treatment in pediatric patients diagnosed with treatment-resistant childhood absence epilepsy or CAE. We continue to work with our collaborators and anticipate that a presentation of interim data collected from a small number of patients initially enrolled is expected to be presented in a poster presentation at AES 2020, the Virtual Annual Meeting of the American Epilepsy Society to be held in December 2020. Due to the impact of COVID-19, we now expect the top line results from a larger data set will be available by the middle of next year. Depending on the final results, CAE may represent a potential orphan indication for future development of XEN007. Turning briefly to our partnered programs, we have an ongoing collaboration with Neurocrine Biosciences to develop treatments for epilepsy. Neurocrine has an exclusive license to XEN901, now known as NBI-921352, a clinical stage selective Nav1.6 sodium channel inhibitor with potential SCN8A developmental and epileptic encephalopathy otherwise known as SCN8A-DEE as well as other forms of epilepsy. We provided an update last month indicating that the FDA had provided feedback on the IND application submitted by Neurocrine in support of a Phase II clinical trial in pediatric SCN8A-DEE patients. As part of its review of the IND, the FDA is requesting additional nonclinical data to support dose justification in this pediatric study. We are supporting Neurocrine as it engages with the FDA to address the feedback received with the goal of initiating a Phase II clinical trial in 2021. In parallel with this interaction, Neurocrine is advancing clinical plans to develop NBI-921352 for the treatment of adult focal epilepsy. Moving now to our partnership with Flexion Therapeutics, who acquired the global rights to develop and commercialize XEN402, an Nav 1.7 inhibitor known as funapide. FX301 consists of XEN402 formulated for extended release from a flexion proprietary thermosensitive hydrogel for administration as a peripheral nerve block for control of post-operative pain. Flexion has made good progress and anticipates filing an IND application in the first half of 2021 to support a proof-of-concept clinical trial in patients undergoing bunionectomy. Results from that trial could potentially be available in late 2021, and we look forward to keeping you updated on this partnered program. At this point, I would like to also take the opportunity to welcome Patrick Machado to Xenon's Board of Directors. Pat brings deep biotech experience and a great track record of strong business leadership having overseen finance, business development and legal functions over more than 20 years of a very impressive career. Many of you may know Pat as the Co-founder and CFO, CBO and later Board Member of Medivation until its acquisition for approximately $14 billion by Pfizer in 2016. More recently, Pat served on the Board of Principia Biopharma, which was recently acquired by Sanofi. I believe Pat will add tremendous value to our Board as we continue to advance multiple mid to late-stage neurology-focused clinical development programs. Before turning the call over to Ian, I'll close by saying that I remain excited and optimistic about the important milestone events ahead for Xenon. I genuinely believe we have one of the most promising epilepsy pipelines currently in development. The clinical programs have been addressed today, but Xenon also has an exciting pipeline of nonclinical programs, which we expect to present in more detail in the future. At this point, I'll ask Ian to recap our financial position and provide some closing commentary before opening up the call to your questions. Thank you. Ian?

Thanks, Simon. And thanks, everyone, for joining us today. While we acknowledge the impacts of the COVID-19 pandemic, we continue to manage our business prudently. And as a result, we're in a very sound financial position today to support Xenon's business objectives and to advance our clinical development programs. As of September 30, 2020, cash and cash equivalents and marketable securities were $190.9 million compared to $141.4 million as of December 31, 2019. Based on our current assumptions, which include fully supporting the planned clinical development of XEN1101, XEN496 and XEN007, we have updated our cash runway guidance to reflect that we anticipate having sufficient cash to fund operations into 2023. And this excludes any revenue generated from existing partnerships or potential new partnering arrangements. As a reminder, our previous cash runway guidance was into 2022. And given our prudent balance sheet and expense management, we're extending this runway guidance for full year today into 2023. Therefore, we continue to have a lot of flexibility as we manage our business and continue to advance our product candidates. The other specific details from this quarter's financial statements are covered in today's press release and our 10-Q filings, so I won't repeat those details here. But I will summarize our upcoming key milestone events. We expect to initiate the EPIK Phase III clinical trial examining XEN496 efficacy and tolerability in KCNQ2-DEE by the end of this year. This is a significant achievement as we advance this precision medicine product candidate into our first Phase III clinical trial. We anticipate the patient randomization within our Phase IIb X-TOLE clinical trial, examining XEN1101 in adult focal epilepsy, will be completed in the first half of 2021 with top line data anticipated in the third quarter of 2021. We also expect to provide an update before the end of this year with respect to an expanded clinical development for XEN1101 in a non-epilepsy indication, and this will be driven by strong scientific and mechanistic rationale. From our physician-led Phase II open-label study in the treatment of resistant childhood absence epilepsy with XEN007, we look forward to presenting interim data from a small data set in a poster session at AES in a few weeks' time, with top line results from a larger data set expected to be available by the middle of next year. We'll continue to work with Neurocrine to address regulatory feedback with the goal of initiating a Phase II clinical trial with NBI-921352 in 2021 with progress supporting a milestone payment for Xenon of up to $25 million. And we anticipate that our partner Flexion will file an IND application in the first half of 2021 to support a proof-of-concept clinical trial with FX301 in patients undergoing bunionectomy with results potentially available in late 2021. We have the opportunity to earn milestone payments of up to $9 million through the initiation of a Phase II proof-of-concept clinical trial, and we have only received $500,000 of these amounts to date. So in summary, importantly, we believe we have the cash runway to support the business objectives as we've outlined today, and we continue to make prudent business and spending decisions to manage through these unprecedented times. So on behalf of the entire Xenon team, we look forward to updating you on our progress over the coming months. And at this time, operator, we can open the call up for questions.

[Operator Instructions] Your first question comes from Andrew Tsai, Jefferies.

Thanks for taking my questions. My first one is on 496, congrats on the progress on that. So it turns out that another company recently reported some positive data on another rare epilepsy indication, CDKL5, and the placebo response was pretty low. So I was wondering if those results were baked into your powering assumptions for 496. And separately, even though you're enrolling patients who are fairly young, I think younger than six in the study, I'm wondering how refractory these patients might be - basically, what I'm trying to get at is - if it's possible that your study could potentially see a similar low kind of placebo response rate?

Yeah, Andrew, it's Simon. I'll take a stab and hand over to Ian. That's an excellent question. Of course, it's encouraging to see that placebo obviously being a critical variable in these studies in how we power and the assumptions we built in. It's important to note, of course that there has not been a study done before in patients with KCNQ2 developmental epilepsy. So we can never ever draw a conclusion from one indication to another and say this is how they behave. I think it's also fair to say that across the pediatric developmental epilepsy studies, you've mentioned one, of course, fintepla with Zogenix, epidiolex in Dravet and some other studies that have been published. You know, that placebo response rate can be quite variable. In fact, in some cases on placebo, kids have got worse over time. There has been no improvement. And in other cases, it's in the 10% to 20% range. I think in general, we would assume that in the younger patient population, the placebo rates would likely be on the lower side. Of course, you've got parental bias in that situation as it relates to placebo because they are the ones that are actually collecting the data. It's not the kid itself. But certainly, from a behavioral standpoint, I think a very young patient is less likely to have an observable placebo response to a drug. So I think as we think about placebo rates, it's probably, to some degree, also in the anticipation of parents drawing their conclusions. But look, I think we haven't designed the study, Andrew, in a way that has a very - that has a definitive placebo rate. These studies are designed to hit a p-value based on a certain differential between your placebo and active arms and what that percent seizure frequency reduction is. And so it allows you to have a successful trial. If a placebo rate is 0, 5%, 10% and 15% in a disorder like this, of course, your active response rate has to go up accordingly to - with the same delta to meet your p-value. So a long-winded way of saying it's encouraging to see in these studies. But we do know there's placebo variability, and we don't have an absolute number built into the study design from a statistical standpoint. That placebo response rate can float. But of course, the higher it gets, the higher your active response rate has to be relative to that placebo for your p-value to be met. So I think we've given ourselves room. I think it's the right model, it's the right stats. But a lot depends, at the end of the day, what your placebo rate looks like. We just don't know.

Right, makes sense. Is it possible for me to ask a follow-up or should I -

We'll be happy. While you're on the line, go ahead.

Okay. I mean I'm just thinking out loud here for 1101. Unfortunately, COVID of course, has impacted the timing of the readout. But I'm personally wondering if there's some kind of silver lining to that because if I were to assume first patient was enrolled treated long ago has moved on to the open-label phase, by the time actual read out in Q3 2021, could we get a glimpse of this long-term data from the open-label extension phase? I'm asking only because as it relates to the pigmentation effect potential of this.

Great. Ian, do you want to tackle that one?

Sure. Yeah, I mean it's a good point. We will definitely have more patients with exposure to drug for longer periods of time, that's absolutely accurate. And we're seeing - we've mentioned a couple of times on previous calls just on the high rate, very, very high rate of patients going from the double-blind portion into the open-label extension portion. So yeah, we will continue to have a large body of data of patients on the study. That's important for our safety database as well as if we think about the future development of the product. I mean specifically on the pigmentation, a couple of comments. One, I think we've been very clear with this, but it's worth stating that we don't believe that 1101 has any pigmentation risk just based on the chemistry. We haven't seen it in any of our work pre-clinically. And - but I will mention that, that pigmentation risk that was seen with ezogabine, was on longer-term dosing. But you raised a good point. And the more experience in longer-term data we have with 1101, the better.

I have said also, Andrew, before, one of the observations with ezogabine, which of course had a pigmentation risk was, in about 1% to 2% of subjects in the clinical studies, they develop what's known as chromaturia, so it's pigmentation of the urine. And so again, if there are a decent number of subjects that we have completed on OLE, we'll have that data set. So while Ian is absolutely correct, pigmentation of the skin and eye may take longer to set in, in the majority of patients. Not all, some were within a year. The urine was another finding that could be an early biomarker, so to speak. And of course, we're looking for that as part of our safety data set.

Fantastic. Okay, thank you.

Sure.

[Operator Instructions] Your next question comes from Yatin Suneja, Guggenheim.

Hi, this is Eddie on for Yatin. Thanks for taking the question. I was wondering if you could give us an update on the X-TOLE study. You previously said that like over 90% of the patients are rolling over into the OLE and you've seen blinded safety data and discontinuation rates that are low. If you have an update on that, given any updated enrollment? And then a follow-up.

Yes. Eddie, Simon here. Same comment as before. We're seeing - as we've said we continue to seeing the same trends, low dropout rates, low discontinuation rates in the study and we are in the very high rollover into OLE, 90s percent range and above, which we've had for a while and which continues. So we've not seen any impact of that - those trends through COVID.

Got you. And then for the Neurocrine asset, given that you're going to have sort of potentially different timing on the IND, given there's additional studies for the pediatric, can you give us a sense of when you expect to record those payments given that there's - like when the timing of those INDs could be filed for both adult and pediatric indications?

So we've guided with Neurocrine that we believe the molecule can get into a Phase II clinical trial in 2021. I think based on the interaction with the agency on the pediatric side, which we've been really clear, we don't believe there's any read-through to the adult study. But we'll have feedback and interaction with the agency over the next couple of months. So we'll have better information and clarity on guidance there. So but we do believe we can get into Phase II clinical development in 2021. As it relates to the payments, so the milestone payments, it's up to $25 million. If the adult study is first, then it would be a $10 million milestone payment. And then if pediatric follows, then there's a top-up to the $25 million, so an additional $15 million. If the pediatric study start - that IND is cleared first, then it's a $25 million payment with no secondary payment on the adult IND. So that's the way it works. I will remind you that there is a combination breakdown between equity and cash in the milestone payments. So those would be recognized as those events take place in 2021.

Great. Thank you.

Your next question comes from Paul Matteis, Stifel.

Hi, this is Katie on for Paul. We just had a quick follow-up from us on 1101. We were wondering if you could provide any further details on the new risk mitigation strategies you have implemented for the 1101 trial. And how this affects your confidence in the continuation of the data? Thanks.

Yeah, great. I mean I think that has a number of elements. The one element is risk mitigation to ensure the study conduct maintains its integrity. And the second element is risk mitigation strategies to optimize screening, randomization effect of the recruitment. So on the latter, that is - we are tackling this in different ways. Of course, the primary way is to ensure we've got more sites that are open and more sites that are screening. So we've been extremely active over the last six months in initiating sites. That continues. And a number of sites - new sites have opened, others are opening. New sites are screening already. And so that work is under way. And new sites are being opened from a risk mitigation strategy, not just in a single geography but across different geographies because you can imagine, with COVID, there are very different responses country-to-country. You might have seen, for example, in the north of Italy recently, they've literally shut borders down and people coming in and out. So we have to anticipate these types of waves coming and going over the next few months in order to really manage that risk. We have some sites in North America and some across different European jurisdictions. We also are optimizing recruitment through marketing efforts, advertising efforts, working with referring physicians, those types of things that one will typically do in a study like this. Direct-to-patient advertising through websites, search engine optimization, those are the kind of activities that we have always done, but which we are doubling down on now to drive so-called patient traffic to the clinical sites. I don't think there's a stone unturned and I just - I've been myself involved in calls with the CROs. I think everything is being done in that regard. In terms of the first bucket, which is the integrity of the study, we really are focusing on how to ensure accurate data continues to be obtained at the right timing and in the right way. The e-diary, we actually - it turns out, we're extremely fortunate. This was a nuance in the study. It's not been done in focal epilepsy. And so the primary end point is obtained electronically. That is going well. We're getting - obviously, that data gets loaded in real time. And that's why I mentioned in my notes I think we feel very, very confident on the integrity of that data set, and that being our primary end point is absolutely key. We've also changed the study in ways that allow for more home monitoring and home visitations. So outside of just the typical tele-health type visits, there are nurse visits that are built in for parameters that need to be measured, blood that needs to be taken. And of course, most importantly, we've set up delivery systems to allow drug to be delivered, active or placebo, a study drug to be delivered to the patient at their doorstep. Avoiding them having to actually come into the clinic, which is usually what's done, to pick up the study drug every certain number of weeks. So again, I think we've done absolutely everything in our power to ensure the ongoing smooth operation of the study. And we're not seeing, again, in testament to this, any material changes in dropout rates of the study due to how the study is functioning as it relates to COVID. So the study is as it was pre-COVID in how patients are remaining in the study. And so we're comfortable in the conduct of the study and the integrity of the data. So we feel good about where the study is, and significant emphasis has been placed on that in the company.

Okay. Great. Thank you so much.

Pleasure.

And your next question comes from Tim Lugo with William Blair.

Hello. Thanks for taking my question. For EPIK, how long are the baseline seizures going to be recorded? And given the natural history, how variable do you expect that baseline seizure rate to be?

Do you want to jump in, Ian, and I'll follow?

Yeah. Thanks, Tim. So the baseline period is eight weeks and then there's, with ezogabine, just like when the drug was used as an adult tablet, there's a titration period. That can take up to 24 days, and then there's 12 weeks of maintenance. So that's how you should think about the study and then there'd be a titration down, but also an open-label extension. In terms of the variability, so yes, we will likely see considerable variability in terms of number of seizures coming into the study. It's one of the reasons there's two ways that we're stratifying randomization, so both by age. And I know you and others have looked at data and not surprising in some of the younger populations, at least in the case reports, is that they've had a much more significant response when we look at that data cut by age. But we're also stratifying by seizure frequency. So we'll do everything we can to get a balance between the active and placebo arm.

I think the other point Tim - its Simon here. It's just there will be obviously screening, so patients in terms of the variability, will have to have certain or anticipated to have certain seizures anticipated to have certain seizure at baseline. And then as Ian said, the baseline period will be the objective assessment of that. These parents generally know their kids pretty well. So we also think the pre-screening, so to speak, should translate pretty well. Yes, there is variability but a lot of these patients are having daily seizures and certainly a number of seizures a week. And generally, in a younger age group, that doesn't just stop for months on end. So there might be variability numerically, but I think they cross a certain threshold, and there might be variability above that. But it's less likely that they're seizure free for two months and then have paroxysms of multiple seizures. So we'll - we've put a long enough baseline period in for that very reason. And, as Ian said, stratifying by seizure number to accommodate variability that occurs in that baseline period.

Understood. And maybe my one follow-up, how many AEDs are being allowed, kind of concomitant therapies?

I think it's one or more. So we're not precluding kids who've had - who are on one, two, three, four, they're all in, but there have to have been at least one because this is a refractory population.

Okay. Thank you.

Yeah.

And your next question comes from Laura Chico, Wedbush Securities.

Hi, this is Kenneth Shield on for Laura Chico. Thanks for taking our question. So you mentioned Italy, but we're also seeing Germany and France moving toward lockdowns and its increasing COVID-19 cases. With this in mind, can you remind us where the newest European sites are based within X-TOLE study?

Yes. We haven't disclosed all of the geographies. What I can say is we're in, if I'm not mistaken - new sites are in about four or five different countries. And so we think we've mitigated that risk maximally. There's only so much we can do. We're not going to every European jurisdiction. But actually, it's five European countries where new sites have or will be open soon.

Yeah. The only thing I add is about - in rough, rough terms, it's about almost an even split between sites between North America and Europe.

And about an even split in randomization as well so far across Europe and the U.S. or North America.

Okay. Thank you. And then Ian, perhaps a question for you. Could you help us understand how we should think about the cadence of expenses in 2021? You'll starting the XEN496 study and then X-TOLE study should be wind down. So how should we think about the general trajectory? Thank you.

Yeah, good question. So if I annualize our 2020 numbers, we get OpEx at about $60 million and that's been pretty consistent over the last little while. And as you mentioned, that's - obviously, the X-TOLE study is up and running. And we've been ramping up spend more recently on EPIK and getting ready with CRO and CMC and other costs to get ready for the 496 study. So I do expect OpEx will go up in 2021 as EPIK is fully running into Phase III. And then you're right toward the end of 2021, the X-TOLE costs will come down. I think the - we'll - and there'll be a bit of a gap between those Phase II costs and Phase III as we get ready for an end of Phase II meeting with the agency and then get ready for Phase III that would be initiated in 2022. So you can expect from kind of our run rate in 2020 that the costs in 2021 will go up once we're fully funding the 496 EPIK study.

Okay. Thanks so much.

And your last question comes from Marc Goodman, SVB Leerink.

Talk about the data that you're going to have at the upcoming AES, the interim data on 007. Is this going to be efficacy data, safety data, both or what are we looking for?

Yeah. And we'll have - so let me just say, we haven't actually seen the final abstracts because it's been compiled by our academic collaborator, the institution where it's being run, Marc. So I have to be a bit cautious in that regard. This is a small data set. It's the first few patients that this investigator completed on when the abstract was submitted. And it will probably be heavily weighted toward efficacy, but I'm sure they'll have safety, tolerability data in there as well. So I think you'll get both. You certainly will get efficacy. And I'm assuming there'll be tolerability and safety data in addition. I have not seen the final draft, the update because it's been updated since the original skeleton abstract was submitted, but I have not seen the final go-to press abstract yet. It should be hitting us in days.

And one other question [indiscernible] - just wondering your thoughts on the launch of that product, obviously, in the space that you're going to be playing in soon. So what are your thoughts?

Yeah, look, I mean we look hard at the drug. I think this is a drug that clearly has had a very good effect in focal epilepsy. We - probably, the best effect size seen of any of the drugs launched today, achieving about a 50% plus or minus median seizure frequency reduction, which is at least 10% better than the rest of the pack. I think the sort of the obvious challenge with the drug is its dose titration requirement because of the DRESS risk, which is the idiosyncratic eosinophilic - hypereosinophilic syndrome. And it takes six to eight weeks to titrate the drug to a steady maintenance dose. That is a commercial challenge because any refractory patient, that is a long time to get to a steady state, if that's required for the effect that's observed. So assuming the efficacy data was based on the drug fully titrated, that's what we know. 50% reduction is seen at - once you have a patient on long enough. What that looks like over the couple of months in titration, hard to know. I don't - have not seen that data. And I think it's all going to be down to sort of the competitive landscape and what's available. That's not an ideal characteristic of an anti-seizure medicine. But of course, if the drug works well, there's a very good place for it. I can't speak about the launch dynamics at this point, Marc. I think it's maybe a bit too early, but we're watching that closely and see what uptake is like. Look, there's still a refractory patient population despite a number of drugs in this space, and that's why we and others are still excited by focal epilepsy. We certainly have not seen that drug as a factor in our clinical trial from a competitive perspective. So that's at least an observation, but we'll continue to watch the market closely. Ian, do you have anything to add?

No.

Okay.

And your last question comes from Serge Belanger, Needham.

Hey, thanks for the question. This is Tian on for Serge. Just two quick ones. I guess the first one for 496 and EPIK. Do you guys have any update on the size selection process? Has that been completed? And I guess in terms of the location, is it going to be mostly focused on U.S. or a mixture of U.S. and EU?

Yeah, a good question. So we've spent the better part of this year with our CRO doing kind of what you would expect in terms of feasibility and site selection. And so we've been working with sites identifying them, seeing the types of patients that they're seeing, and if they have KCNQ2-DEE patients under their care. So we definitely have identified a number of sites that will be in the trial. It will be - I would - and that's never a completed objective. We're always looking at sites, but we do definitely have a list of sites that would be the early ones that will be initiated and the early ones for patient enrollment that will happen in the near term. In terms of geography and location, the first sites to be initiated will be in the U.S., but they'll definitely given the rare condition, there'll definitely be sites that we'll be looking at outside of the U.S. We just had a positive opinion on orphan drug designation out of Europe. That helps us in terms of as we think about both development, but the commercial opportunity in Europe as well. So absolutely, we'll be looking outside of the U.S. to leading investigators and KOLs, both in Europe and likely other parts of the world as well.

I'll just add, in terms of site numbers, we don't have a fixed number at this point, but we probably are in the 30 plus or minus range, and we'll see where we land. But as Ian said, it's going to be a bit of a moving target as numbers unfold. But we're actually very encouraged. There's a lot of interest in the study. It's the first real precision medicine trial in infant and pediatric epilepsy. There is certainly good anecdotal support and support from KOLs of the utility of this drug when it was used off label. These are six sick patients. And so there's certainly a lot of site interest and no competition essentially in terms of clinical trials for this patient population because it's a genetically defined patient subset and there are no other trials ongoing. So we think things look good. We'll probably have two to three dozen sites at the end of the day. And as Ian said, probably we'll be across North America and Europe.

Great. Thank you.

Pleasure.

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