As Xenon Pharmaceuticals announced that azetukalner has reached the FDA for focal seizures, the company also disclosed the emergence of psychosis adverse events in psychiatric trials of the drug, triggering a temporary pause.
Shares of Xenon Pharmaceuticals tumbled 23% after the company disclosed a voluntary hold on psychiatry studies for its lead asset, prompted by episodes of psychosis among some patients in the wide-ranging clinical program.
At the same time, Xenon announced a new drug application (NDA) submission to the FDA for the asset, azetukalner (AZK), in focal onset seizures (FOS)—a filing that CEO Ian Mortimer heralded as a major milestone for the company during a call with investors on Thursday afternoon. This would put the FDA’s decision date in September 2027, according to Jefferies analysts.
But the good news was not enough to stop the decline of shares to $44.27 in premarket trading Friday, compared to $57.35 at close Thursday.
“If you look at other drugs that are used for depression, they do cause serious adverse events, sometimes in keeping with this along the lines of psychosis, sometimes other issues,” Chief Medical Officer Chris Kenney told investors on the Thursday call. “We don’t think that this is something that prevents this drug moving forward. We view this pause as temporary. We’re going to make some adjustments and then go forward.”
Analysts agreed with Kenney’s assertion that events like this are commonly found with approved drugs for conditions like major depressive disorder (MDD), the focus of one of the paused trials.
“We believe the aftermarket move down is overblown given similar incidence rates of psychosis have been reported on label of blockbuster antidepressants like Zoloft and Wellbutrin but no black box warning issued,” William Blair wrote Friday morning.
The FDA has been notified of the company’s psychiatry plans but Xenon expects to be able to continue the study with existing patients without intervention from the regulator, Mortimer said.
A class problem?
While the events raise some concerns for the epilepsy indication, William Blair thinks the therapy’s efficacy will outweigh the risks. The drug achieved a 42.7% placebo-normalized improvement on median monthly seizure frequency in a Phase 3 trial, which the firm called “a truly remarkable result in a highly refractory population.”
The therapy offers a single pill option with no titration, has no drug-to-drug interactions and an easy daily-dosing schedule, the analyst noted. This “will truly turn the impressive profile of azetukalner into a blockbuster product in FOS.”
Jefferies in a Thursday note puts sales estimates for the epilepsy indication at $2 billion-plus.
Azetukalner is a KV7 potassium channel opener designed to open potassium channels in the central nervous system to reduce excessive neuronal firing, which contributes to several neurological and psychiatric disorders.
Xenon is not the only company to run into challenges with this modality. Earlier this month, Biohaven’s Kv7 potassium channel agonist opakalim (BHV-7000) was placed on a partial clinical hold by the FDA to allow assessment of potential human risk from a metabolite identified during rodent testing.
This event, and now Xenon’s voluntary pause, may spook investors, William Blair acknowledged.
“However, Xenon management emphasized, and we agree, that it does not believe the situations are related and does not view the latest developments as evidence of broader Kv7 activator class safety issues,” the firm said.
No obvious answer
Earlier studies in depression, such as Xenon’s proof-of-concept X-NOVA study, had a “benign” safety profile with a lower incidence of adverse events than was seen in the epilepsy trials, Kenney explained.
One patient each in the X-TOLE and X-TOLE2 trials for FOS experienced psychosis events. The side effect was also seen in healthy volunteers in an early Phase 1 epilepsy study, analysts pointed out.
But as the therapy has moved into Phase 3 for depression, more neuropsychiatric adverse events have emerged, including confusion, aphasia—a condition that leads to difficulty speaking—and ataxia, or a lack of control over voluntary muscle movements. Kenney said these events have been “captured under the broad preferred term of psychosis.” The events were mostly mild or moderate, he added.
“It’s important to note that the neuropsychiatric events seen in epilepsy or psychiatry are short in duration and reversible, without any long-term sequelae,” Kenney said.
Xenon executives suggested that the events may simply be showing up now, after not being seen in the Phase 2 trial, because the Phase 3 has a larger patient population.
Nevertheless, Xenon is pausing enrollment in the MDD trial and a study of bipolar depression and making adjustments to the dosing schedule, which the company believes could be contributing to the events given their dose-dependent nature.
“Based on work across the AZK program and consistent with other CNS drugs broadly, dose escalation can often have an impact on improving tolerability, and we are evaluating this as an option in our psychiatry program,” Kenney said.
The challenge for Xenon is that the events appear to be fairly random and rare, meaning there is no obvious patient characteristics or risk factors that have been identified. “So far, there isn’t anything that’s leaping out from the data that gives us an obvious answer,” Kenney said.
Xenon plans to share more about the plan in the coming months. But for now, the Phase 3 X-NOVA2 study in MDD will close to new enrollment with the existing 360 patients and a topline readout will likely arrive in the first quarter of 2027. This is an update from the previous estimate of the first half of 2027, William Blair pointed out. The company had originally planned to enroll 450 patients but the firm believes the current population will still show a meaningful result.
Kenney agreed. “Completion of X-NOVA2 will give us a good look at the overall clinical benefit in an MDD patient population and a fuller understanding of the adverse event profile.”
