Dive Brief:
- Shares of high-flying Xenon Pharmaceuticals fell by as much as 30% Friday morning following an announcement that it has paused enrollment in trials evaluating its lead drug in people with depression. Called azetukalner, the medicine is being reviewed by the Food and Drug Administration for a type of seizure disorder.
- Vancouver, Canada-based Xenon said it stopped recruitment following the appearance of “neuropsychiatric adverse events” that weren’t seen in earlier testing in depression. The trials will continue with the currently enrolled population and produce data in early 2027.
- Xenon’s valuation had swelled to more than $5 billion on the progress of azetukalner, a drug that’s made the company a top acquisition candidate to some Wall Street analysts. The stock sell-off indicates investors are now discounting any chance of success in depression, but several analysts argued in published notes that the FDA probably won’t be as concerned about the adverse events in epilepsy patients.
Dive Insight:
Xenon said the unspecified adverse events were “consistent” with azetukalner’s known safety profile and mechanism, but didn’t appear in a Phase 2 depression study. Exposing the therapy to many more patients in a larger Phase 3 study may have been the reason those effects materialized, the company said.
On a call with analysts, Xenon executives noted that the events were “mild to moderate in nature, short in duration, and reversible,” wrote William Blair analyst Myles Minter. Moreover, the company emphasized in its release that the pause should be temporary and it will look at “potential dosing modifications to help mitigate these adverse events.”
The ongoing X-NOVA2 trial in major depressive disorder has enrolled 80% of the necessary patients to be able to detect a “clinically meaningful” benefit, Xenon said.
The news about the depression trial pause came alongside an announcement that the FDA had begun reviewing azetukalner in focal seizures, which affect one side of the body. Investors had been encouraged by pivotal data in that disorder, which exceeded expectations and led to a run-up in share price.
Executives “remain very confident in the product profile of azetukalner” in epilepsy because of “strong efficacy and safety data and a consistent safety profile across over 1,500 patient-years of data,” said Chris Kenney, Xenon’s chief medical officer, in a statement.
Analysts argued that the safety findings in depression should have no impact on the FDA review because other approved and widely used epilepsy drugs carry the risk of even more serious side effects. Some depression drugs, too, have gotten to market despite an association with tough side effects.
Still, Xenon shares sank to levels last seen before the epilepsy data were released, prompting TD Cowen analyst Joseph Thome to describe the sell-off as “overdone.” RBC Capital Markets analyst Brian Abrahams concurred, estimating that in epilepsy, azetukalner could achieve $1.7 billion in annual sales, and writing in a client note, “we would be buyers on any weakness” in the share price.
