Xenon – P1 data provide more de-risking

To me, the main challenge in today’s biotech market is finding good quality assets with attractive valuations. There are definitely a lot of promising programs out there but valuations are often hard to justify as they reflect limited development risk and unrealistic commercial potential. From a risk/reward standpoint, it is hard to get excited about valuations of >$0.5B for companies before clinical proof of concept and $2-5B for clinically validated programs.

From that perspective, Xenon (XENE) is a market anomaly, with two promising clinical stage programs, a robust discovery platform and a market cap of just under $100M. Its two epilepsy programs, XEN1101 (Kv7 opener) and XEN901 (Nav1.6 inhibitor), are still in P1 but at the current levels the upside potential is too significant to ignore.

Not the typical CNS programs

XEN1101 and XEN901 do not have the typical risk profile seen with other P1 CNS programs, they are de-risked on multiple fronts:

  • Genetic validation in humans – Mutations in Kv7.2 and Nav1.6 are associated with severe forms of epilepsy in humans
  • Pharmacologic validation in humans – There are approved anti-epileptic drugs that have overlapping MOAs with XEN1101 and XEN901
  • “Precision medicine” regulatory route – XEN1101 and XEN901 may be pursued in biomarker-defined populations which represent a fast route to market with a high likelihood of success

Selectivity and safety profile as key differentiators  

XEN1101 was designed based on clinical experience with ezogabine (Potiga), an FDA approved Kv7 opener with proven clinical efficacy that was withdrawn from the market due to safety concerns. XEN1101 is more potent and does not seem to dimerize or bind melanin (seen as the primary liability with ezogabine as it leads skin and eye pigmentation). It also has a better PK profile that should support daily dosing vs. thrice daily with ezogabine.

For XEN901, the primary differentiation from older Nav blockers lies in the selectivity towards Nav1.6, which is thought to be a primary driver of seizures. XEN901’s potency and selectivity led to a dramatically improved therapeutic window in mice (see figure below), which will hopefully translate to the clinic. According to Xenon, XEN901 is the only Nav1.6-selective molecule in development.


P1 data further provide more de-risking

Earlier this month, Xenon presented P1 data for XEN1101 and XEN901. The drugs appear safe, have a favorable PK profile, and exposure is at the predicted efficacy range at relatively low doses.

For XEN1101, there are even hints of biological activity using brain imaging tests that had been reported with ezogabine. Interestingly and with the caveat of cross-trial comparisons, XEN1101 demonstrated a stronger imaging signal than what is reported with ezogabine at 20-fold lower dose. The company plans to present imaging data for additional healthy volunteers as well as safety data for repeated dosing. Assuming no safety issues arise, an efficacy P2 is expected to start towards the end of the year.

Potential utility for XEN1101 in ALS

Kv7 is garnering attention as a target for ALS, following the launch of QurAlis, which is also developing a next-gen Kv7 opener. QurAlis’s scientific founders identified Kv7 as a potential target in patient-derived cells (published here) and used ezogabine to demonstrate their hypothesis (see figure below).  Data on QurAlis’s Kv7 opener are limited but Xenon appears to be 2-3 years ahead and could pursue ALS as a second indication.


Source: Cell Rep. 2014 Apr 10; 7(1): 1–11.

Upside potential

As a small cap biotech, Xenon comes with all the usual risks (no clinical proof of concept, long timelines, high rate of cash burn etc.) but at a valuation of $100M these are risks I am happy to take. Commercial potential for a new anti-epileptic drug with a favorable safety profile is in the $400M-$500M range, not including the orphan indications that could add additional ~$150M per indication. If safety data for XEN1101 and XEN901 continue to look clean (long term safety data is expected by YE18), it is hard for me to envision Xenon staying independent at these levels.

Portfolio updates

I am adding a third position in Xenon following the recent P1 data and the imaging signal. I am also adding Endocyte (ECYT) and selling Avexis (AVXS) following the Novartis acquisition.

Portfolio holdings – May 28, 2018

biotech portfolio - after changes - 28-5-2018

biotech etfs - 28-5-2018

156 thoughts on “Xenon – P1 data provide more de-risking

  1. Christian, may not be too late on a dip tomorrow. On the crystal ball question I guess you can say that Insider Trading is a good crystal ball.


  2. Ohad; here is my list of GT companies:

    1. With manufacturing facility:

    2 With Manufacturing facility in progress – in operation in 2019

    3. No info about (someone can help perhaps)


  3. Hi Ohad,

    Thanks for sharing your great insights and knowledge.

    In the next generation IPF (ideopathic pulmonary fibrosis) drug space, do you think any company (e.g. FGEN, GLPG, PFSCF) has a differentiated product AND an attractive valuation?




  4. Ohad is XENE still value or fairly priced or over priced now at around 23m shares outstanding and 210m market cap? Prior to May shares totaled around 14m then they sold 3.4 atm in the May atm now they do another 3.4m atm equaling, yea, 23m shares give or take.

    Also do you have thoughts on KDMN gvhd and ipf?

    thanks as always


  5. Don, just saw an announcement that XENE has entered into a new agreement with Steiffel for $50M ATM equity offering sales. Where did you get your numbers for ATM offerings in May and July? Also Ohad in his last post on XENE had indicated $450-500M as fair valuation so I guess we have a long way to go ?.


  6. Hey Ohad
    what are the implications of the PICI and UCSF car-t/crispr engineering discovery for he companies in your portfolio. Seems innovation is happening a such a speed ha entire pipelines may be obsolete before hey even get to ph2 or ph3, and that the drug lifecycle is going to get shorter and shorter…. great for patients, harder for companies…


  7. Hi Ohad,

    You mentioned DNLI was not cheap at current price in the beginning of this year. What’s the reasonable entry point you would consider to get in? Thanks!


  8. Hi Ohad
    I no longer see LPTX listed in the Pontifax portfolio.
    Can you talk about the company ?



  9. Ohad
    we were joking recently about using placebo as an effective drug. Actually some are already working on that idea 🙂
    “Modulation of anti-tumor immunity by the brain’s reward system”
    Tamar L Ben-Shaanan, at al
    Nature Communications; Volume 9, Article number: 2723 (2018)

    They assign the placebo effect in many studies to the activation of the immune system by stimulating the brain. So they had an elegant experiment – delivered the gene hM3D(Gq) via AAV virus vectors, which trigger intra-cellular cascade that leads to neuronal activation of the reward system. Results – reduction of the tumor size and weight compared to mice injected with not activated AVV virus, i.e viruses without targeted gene encoding.
    Probably no value as a single agent, but it can be used as a an immuno-modulator in any treatment arm to compensate for the placebo effect in the control arm.
    Fun article worth reading, showing some unexpected use of AAV vectors …


  10. Hi Ohad
    Why do you think GNCA having difficulty to find a partner despite the innovative approach?
    Too early ,not enough evidence?



  11. Hey Ohad,
    Exciting news this morning regarding CAPR – they have entered an agreement with the US military to use their exosomes as in the field therapeutic stabilizer to reduce morbidity of soldiers. This, if successful, might open a large market and change the way trauma injuries are treated.


  12. Andre (FCSC) – I think it makes sense as a small highly speculative hedge but the way the stock behaves and the recent tiny fundraising is very disconcerting.

    Dave (SNSS) – Yep, there was a lot of excitement but the recent safety turned everybody sour on the stock. No new data so hard to say

    Christian (AVEO) – Given everything going on in RCC, potential generic competition, short patent life and the lack of clear superiority data I don’t plan on adding.

    DAn (MBVX) – I don’t know if their discovery capabilities are that differentiated from other approaches, antibody discovery has become a commodity now and people are focusing on next gen platforms. Their lead program should generate data this or next year, radio immunotherapy is gaining steam based on ECYT and AAA but whole antibodies may not be the ideal delivery tool.

    andre – Thanks. Eventually every company strives to have its own facility. Important for short term supply but in the long run the industry may be better served with large CMO (like other biologics)

    Anna (FGEN, GLPG, PFSCF) – I really like Autotaxin as a target so I guess I’ll have to go with GLPG’s drug, I also like FGEN’s IPF data and the panc cancer data are also intriguing and provocative. Valuation is a different story…

    don (XENE) – Yes, I still think it’s a good long term buy.

    KDMN – Data are too sparse imo

    DAn – Agree about pace of scientific innovation, may not necessarilly be the case for drug development. I am not familiar with a breakthrough technology that hasn’t undergone a long incubation period, sometimes even a decade long (gene therapy, CARs, siRNA). I hope gene editing will be different but I certainly don’t expect that based on past experience.

    Cloud (DNLI) – Hard to say… What I do know that without clinical poc, the stock
    is not anywhere close to what I consider as an attractive entry point.

    eugene p mcmahon jr (LPTX) – Indeed , I still prefer not to comment as I am not following them.

    andre – Very interesting and provocative, not sure how much of that translates
    to humans but I don’t think anybody will argue against psychological/emotional elements as contributing factors in many diseases.

    Al (MGTA) – Yes they do interest me because they are trying to reinvigorate a field that hasn’t seen a lot of innovation in decades. Not sure they have the clinical data to prove their claims but the direction is cool (SCT is a very powerful, potentially curative therapy).

    BLCM – Still following them, less interested now given all the developments in switches and modulators of CARs.

    Alex (GNCA) – No idea, I thought their platform is really neat.



  13. Ohad
    PTCT is now GT company with completed pivotal trail in AADC and two other Ph1 trails – in FA and Angelman Syndrome. All that from the proposed acquisition of Agilis. Plus they already have a broad pipeline in CNS (dravet, SMA, Aniridia)

    It look PTCT will fit now well in your GT – CNS focused portfolio.
    Just perfect – one stock checks two boxes. 🙂
    I didn’t like PTCT because of the questionable DMD drug, but this acquisition looks a game changer for me.


  14. Hi Ohad,

    Thanks for answering my question. I came across 2 companies with pipeline in the crowded ADHD market, namely KemPharm (KMPH) and SUPN. KemPharm is headed by Travis Mickle, Ph.D. who developed Vyvance while working at New River (sold to Shire). Current pipeline priority is KP-415, a prodrug designed to “address unmet needs with currently marketed methylphenidate ADHD treatments, including earlier onset (at 30 minutes), longer duration (>=13 hours) and consistency of the therapeutic effect”, and “the possibility of a lower abuse potential”. Shire has first right of refusal for KP-415 due to possible patent dispute (Vyvance and KP-415 are invented by same person). Insiders own 20% and institutions own ~36%. Recent data readout was positive.

    The other company, SUPN, also has an ADHD drug candidate in its pipeline that might have a >=$1 billion potential. Institutional ownership is >90%, but some insiders are unloading shares. Do you think either company has de-risked and differentiated products in ADHD? How about their current valuations?

    With regard to ECYT, do you think their platform is applicable to other cancer types besides prostate cancer? Why or why not? Many thanks.


  15. Hey Ohad
    is it time to look at TRVN again? market cap $100M / cash on hand I think is $60M.
    Their migraine program passed ph1 and is about to go into ph2. Novel MOA hat seems okay regarding side effects / risks. They also just hired a solid scientist with proven CNS career as CSO.
    Thanks for your opinion?


  16. I was looking at the ADVM corporate presentation which states they have $247M cash as of May 2018 which is sufficient to fund clinical programs into end of 2019. How do you burn that much cash with no active Phase2 or Phase3 programs?
    Also, would appreciate your insight into the PARP space. Appears both CLVS and TSRO are undervalued. Thx.


  17. Hi Ohad,

    I have a question with valuations in biotech. For example, the commercial potential number you calculated here, how did you arrive at that number? Is that an estimate of peak sales? Do you agree with applying a multiple to peak sales to get an estimate as to what a company should be valued at? I have heard 3x peak sales being thrown around as a rough way to arrive at a market cap. for a biotech, but I know each company will have many idiosyncrasies you have to account for. Appreciate any insight. Always learn a lot from you.


  18. Hey Ohad,

    What do you think are the implications /potential of gamma-delta T cells? Another innovation coming to the fore (that ends to be tested). GammaDelta Therapeutics seems to have put together a strong team, and GILD just partnered with Gadeta. The advantaged of gamma-delta T cells (supposedly) is their sensitivity and rapidity of action – they can respond to “stress antigens” and may recognize an array of different diseases or conditions very early on. They may also work off the shelf and not need to be personalized for each patient.

    Takeda is a lead investor in GammaDelta Tx, which raised $100M last year. But they still have a way to go before entering the clinic. GILD enter the field, and I would expect other large companies to do the same.



  19. Regarding my previous post:
    I am an investor in MBIO and I wonder if you have a take about how smaller first-gem CAR T or I/O companies (BLCM, TPIV, Adaptimmune, etc) will be able to compete with GILD and keep up with the pace of innovation without being blocked out.
    Do you think that companies will use the new discoveries for their own research and worry about IP and licensing of the IP at a later stage? It seems that this is the route that AVXS and ABEO chose (they only recently agreed or amended a license with RGNX). ABEO is also using CRISPR technology for one of their early stage programs, and I do not think they have licenses any of the IP, which is still in contention between the Charpentier camp and MIT.


  20. Ohad

    You had added ECYT a couple months ago. With several drugs such as zytiga and xtandi already approved for prostate cancer and a generic zytiga coming to market soon will there be much room for a new treatment if there Phase 111 is successful. With a 300% rise in the stock price this year and a market cap of 1 billion, the valuation appears rich.

    Thanks for all you do Ohad. Your track record speaks for itself.


  21. Ohad thoughts on $mgtx at this level?

    I see they have fast track for xlrp while agtc and nite do not….is their delivery different?

    Plus I think they are the only public Gene bio targeting xerostomia.

    I’m in

    Also fcsc have u looked into them yet?



  22. Ohad, what do you think about the whole sector in the next 1-2 years? What Kind of sentiment do you expect? Many Stocks got Really expensive so maybe Theres a new correction period coming?


  23. Hello Ohad…. You expressed an interest in DENALI THERAPEUTICS this past January. Denalis valuation has significantly declined ..Are you considering adding it to your portfolio???


  24. Ohad I asked u about $mgtx
    Forgot to ask if they are doing anything different/Superior to $agtc ….alot of overlap



  25. Emmanuel (AUTL) – I llke the bispecific approach, which, theoretically may be able to cope with antigen escape (a documented resistance mechaism with CD19 CARs). Data set is still very preliminary.

    andre (PTCT) – Agree PTCT is a different company with a diversified pipeline and in contrast to ataluren, the new programs (SMA, AADC) have encouraging clinical data. I like the Angelman syndrome program, still early and not sure they are using the best capsid though. Definitely worth tracking.

    Anna – Sorry, don’t know KMPH and SUPN well.
    ECYT – At the moment the PSMA program should be viewed as a single asset, but the company clearly has knowledge and capabilities from its small molecule drug conjugates (SMDC) days. This means they could develop small molecules for other targets, but this is relatively tricky. With respect to the PSMA program, the target might be expressed in subsets of other tumor types, see recent report on breast cancer so there may be room for expansion.

    DAn (TRVN) – I think you’re right. The migraine program is interesting indeed, very high risk of course without efficacy or long term safety data. Still need to be careful interpreting potential differentiated profile (seizures) given experience with their selective opioid.

    Manish (ADVM) – That’s a good question, maybe they are just being conservative…
    Regarding PARP companies – The market (BRCA+ tumors and HRD+ ovarian cancer) is simply not big enough to support these valuation. Amazing TSRO is traded at the same levels it did before the P3 data.
    Regarding valuations – I think that a multiple of 5-7 is what we have seen historically for highly innovative programs with good regulatory/patent protection. 3 sounds a little low, might apply to programs that are not competitive enough or have weak IP.

    DAn – Agree with all those potential advantages, still remain to be proven in humans. I would also add enhanced selectivity using a CAR+ endogenous gdTCR. Expansion is a major issue…
    I think it’s gonna be tough to compete in the CAR space without unique technologies, simply too much competition.

    Dave (ECYT) – Agree it isn’t cheap and plenty of risk ahead but clinical data at ASCO were too good to ignore. I think this drug can easily be a $1B franchise.

    Robert goulet (MGTX) – I am following them, I like their broad pipeline and the xerostomia program is very neat in my opinion.
    Yes the vectors they are using for their RPRG program utilizes AAV2 from what I recall, AGTC and NITE use modified/optimized vectors.

    Alex – Sorry, don’t know NTEC well. TRVN might be interesting at these levels, AUPH is a pass for me.

    Foresee – I think we are bound to have a correction (sector specific or broad), hard to predict timing but valuations on average are not sustainable imo, especially te recent pre-clinical IPOs…

    Bouschka (DNLI) – Still too expensive IMO…

    Robert goulet (AGTC/MGTX) – Agree, a lot of overlap. They are using different technologies (vectors, promoter, transgene codon optimization) for the same indications but hard to predict clinical outcome.



  26. Ohad
    do you have an opinion about GBT?
    It looks they have an approvable SCD drug – the recent data from Ph 3a looks good. BLUE has one time GT solution down the road, but it will be more expensive, compared to GBT drug, which is oral ones per day,
    Is the market is big enough for two companies?


  27. Hi Ohad,

    Have you done research into Aileron (ALRN) and their Stapled Peptide Tech?
    They have multiple readouts before the year end for ALRN-6924 in PTCL and AML.
    Has been crushed lately and thinking of taking a position as it’s near cash value now.



  28. Thanks, Ohad
    Yes, it seems that there are risks for TRVN250–hey are trying to position the drug for acute migraine–thus restricting the market and making the risk/reward propositions for patients more interesting. However, this will clearly reduce addressable market size. There is also a risk of execution, given their are preparing to launch their pain drug, and as an investor in SGYP I have seen how damaging the going alone strategy can be to share values. SGYP has not recovered and have struggled to get growth–but they are competing against a AGN.

    On the positive, TRVN has been managed to unlock value by signing some licensing deals (for the pain drug) in asian markets. Hopefully they can do the same for EU and other parts of the world, and mitigate liquidity issues and keep their cash burn under control.

    I just started a position yesterday at $1.43.

    What is your take on PFE CC with respect to their interest in Gene Therapy acquisitions or partnerships. They hinted that at the right valuation they are interested. ADVM and AGTC seem the best value for money right now. Would you agree? Only concern with DVM is that they keep changing CEO- and one has to wonder why.


  29. Ohad

    As Dan has mentioned, Pfizer’s C.E.O. stated they may be looking for smaller deals in the gene therapy space. Earlier this year you were underwhelmed with Sparks hemophilia A drug data, but had stated the stock had hung in well due to other programs in their pipeline. Can you talk about the program your most excited about and are you considering adding to your position in ONCE on this 20% correction over the last month


  30. AZEDRA has just been approved by FDA and ph3 PSMA-targeted SPECT Imaging Agent will be presented this q.
    Ohad, do have an opinion regarding Progenics (PGNX) ?


  31. Ohad
    SGMO will report Ph 1/2 data for MPSII on Sep 5. Oral presentation.
    “…ZFN-mediated in vivo human genome editing”
    RGNX is still enrolling for their Ph 1/2 MPSII trail:
    NAV AAV9, encoding I2S. 1.3 and 6.5×10^10 GC/g brain mass

    Two different approaches, hopefully both work against this devastating disease.
    What is your prediction about both companies odds to succeed?.


  32. andre (GBT/BLUE) – Don’t know the SCD space well but I am pretty sure it is big and diverse enough for the two approaches, not to mention the fact that we still haven’t seen “landslide” efficacy from BLUE.

    John (ALRN) – This is one of my biggest disappointments as their preclinical data and capabilities looked really good and it seemed that they have cracked the challenge of peptides against intracellular targets. Clinical data are underwhelming imo, P53 continues to be unbeatable especially in solid tumors.

    DAn – I don’t know what Pfizer’s appetite is for ophthalmic programs. From what I know they aren’t active in that space so I don’t see them buying AGTC. ADVM has other programs so hard to say.

    Dave (ONCE) – Actually there are indications the HemA program is back on track based on comments from management but need to see data, probably at ASH. I prefer to wait and see how the LUXTURNA launch goes.

    Rüdi (PGNX) – Not very familiar with this program but targeted radiotherapy is definitely starting to pick up.

    andre (SGMO/RGNX) – I put my money on RGNX, not a big believer of zinc fingers and canonical AAV expression is much more clinically validated. As you say, hope at least one of these approaches works…



  33. Hello Ohad,

    $RUBY and $ERYP have similar technologies concerning red cell therapeutics.

    But they have very different valuations. Can you take a look?



  34. Zyme

    Ohad, do you plan to increase your Position After the recent sell off? Maybe market punishes Zyme too due to the Clinical Hold for Mersana. How do you see zw25 in the competitive her2 – market? Is there a real Chance ? Zw49 will be interesting to See but the market seems to be careful about her2 adcs.

    EV about 250m still looks like a Nice RR


  35. Ohad
    ONCE, KURA, BOLD quite negative market reaction. What is your take on that?
    BOLD delayed the Pompe program but it is preclinical. Is it a serious issue to worry about?
    KURA starting registration trail by the end of the year. Is an earlier start expexted?
    ONCE is having problems with 2e12 and need steroids but BMRN doesn’t with 20x that level. Capcid issue?


  36. Hi Ohad,
    Amicus Therapeutics (FOLD) is going to acquire one or more gene therapy programs by the end of this year. I think, one of the programs should be in Pompe disease. Is it on your watch list?


  37. Ohad
    SRPT just acquired 3 CNS programs, incl one in Pompe.
    Altogether they now have 11 GT programs – by far the most diverst GT portfolio.

    Alex, 4 companies have Pompe programs, all in pre-clinic:
    ONCE, BOLD, AVRO and, as of today, SRPT
    I guess, if FOLD wants to buy such program, they might be able to afford only BOLD. The others are too expensive


  38. Toby (RUBY/ERYP) – Agree, valuation gap is very interesting. Don’t know the companies well but it looks like ERYP’s focus is on oncology (asparginase) whereas RUBY focuses more on ERT opportunities (PKU, homocystinuria, hyperoxaluria). Technologies should also be different to some extent and very importantly, RUBY is a US-based company backed by Flagship.

    Swoboo (ZYME) – I don’t plan on adding but definitely keeping my position. Still think they have efficacy signals in breast and gastric cancers, not as potent as Daiichi’s ‘8201 but safety looks very good and it can be combined with other treatments. I wouldn’t write off Zw49 yet, from what I recall the payload is an auristatin derivative (like SGEN) so different class than what MRSN has.

    don (XENE) – No, I didn’t.

    Xavi (OVID) – Still haven’t taken a closer look but agree it looks mixed at best.

    Karlo – I am actually working on one right now, it’s been hectic with the new fund so didn’t have a lot of time for public stocks…

    paul (ONCE) – Yep, reaction is justified in my opinion although the immunogenicity issues may be resolved, burden of proof of on ONCE. They still see good expression wit relatively low doses so they could make a comebac eventually.

    Scott (AFMD/PIRS) – Both have low valuations, esp AFMD and both focus on bispecifics. I prefer PIRS although they don’t provide a lot of info on their targets, not a great believer in AFMD’s CD16 approach.

    Christian (KURA) – From what I knoe they are enrolling patients in their pivotal trial H&N study at a reasonable rate, next data expected at ESMO.

    Les (GEMP) – I don’t know, never liked that stock….

    Andre (ONCE/KURA/BOLD) – Reaction in ONCE is justified in my opinion given their 2B+ market cap, BMRN used prophylactic steroids in all their patients so it’s hard to compare but agree it’s an issue ONCE need to resolve.
    not overly concerned with BOLD and KURA sound overall on track (data in Oct at ESMO).

    alex (FOLD) – Not following them closely.

    andre (SRPT) – Well done, great BD work. Agree it’s becoming a diversified GTx powerhouse.



  39. Morning,

    I think the time is now to get back in Aduro $ADRO with the upcoming release of STING data. EV of only $125M with $300M cash in the bank plus lots of milestones coming there way if the data hits from Novartis.


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