Xenon shares drop as depression trial pauses amid FDA review

Shares of Xenon Pharmaceuticals fell as the company announced a temporary pause in its Phase 3 trial for major depressive disorder. The decision follows the identification of neuropsychiatric adverse events in the study, which has raised investor concerns regarding the safety profile of azetukalner. These developments occurred while the US Food and Drug Administration is actively reviewing the same drug for the treatment of focal seizures, a condition affecting one side of the body.

Xenon stated that the unspecified adverse events were consistent with the known safety profile and mechanism of action of azetukalner. The company noted that these effects did not appear in the earlier Phase 2 depression study, suggesting that exposure to a larger patient population in the Phase 3 trial may have been the cause. On a call with analysts, executives described the events as mild to moderate in nature, short in duration, and reversible. William Blair analyst Myles Minter highlighted these comments in his analysis. The company emphasised that the pause is intended to be temporary and that it is evaluating potential dosing modifications to mitigate these adverse events.

The ongoing X-NOVA2 trial has enrolled 80 per cent of the necessary patients to detect a clinically meaningful benefit, according to Xenon. The news of the trial pause coincided with the announcement that the FDA had begun its review of azetukalner for focal seizures. Investors had previously been encouraged by pivotal data in this disorder, which exceeded expectations and contributed to a rise in the share price. Chris Kenney, Xenon’s chief medical officer, stated that executives remain confident in the product profile for epilepsy, citing strong efficacy and safety data from over 1,500 patient-years of experience.

Analysts argued that the safety findings in the depression trial should not impact the FDA review, noting that other approved epilepsy drugs carry risks of more serious side effects. Despite this, Xenon shares sank to levels last seen before the release of the epilepsy data. TD Cowen analyst Joseph Thome described the sell-off as overdone. RBC Capital Markets analyst Brian Abrahams concurred, estimating that azetukalner could achieve 1.7 billion dollars in annual sales in epilepsy. In a client note, Abrahams wrote that he would be a buyer on any weakness in the share price.