Last week, Xenon Pharmaceuticals (Nasdaq: XENE) announced compelling top-line results from the Phase 3 X-TOLE2 study with its lead asset, azetukalner, a Kv7 potassium channel opener, in patients with focal-onset seizures (FOS). Xenon reported that the study met its primary endpoint, with azetukalner reducing monthly seizure frequency by 53% compared to 10% for placebo. Azetukalner’s 53% seizure reduction from baseline matched the results from the company’s 2021 Phase 2b X-TOLE study. Impressively, the placebo-adjusted 43% seizure reduction seen with azetukalner in X-TOLE2 was significantly higher than the 35% delta reported in X-TOLE. Azetukalner also met the key secondary endpoint of the percentage of patients experiencing >50% reduction in seizure frequency from baseline. The data were an emphatic win for Xenon and should position azetukalner for an FDA approval next year.
Our regular readers will know that Xenon is a company we have followed and written about since 2019. However, over the past few years, as Xenon has grown from micro-cap to mid-cap, we have placed much less focus on it and instead concentrated on finding the next Xenon-like company.
Xenon-like: Enter Ovid
Xenon’s Phase 3 success seems like an ideal opportunity to re-emphasize the similarities between azetukalner and Ovid Therapeutics’ (Nasdaq: OVID) GABA-AT inhibitor, OV329. We first discussed the similar history and development paths of these two drugs in a November 2024 note, followed by a July 2025 note titled “Ovid and Xenon: Too Early to Draw Parallels?” Although they are entirely different drugs, both are second-generation products targeting proven anti-seizure mechanisms and designed to overcome the ocular safety liabilities of first-generation drugs. Both companies creatively employed transcranial magnetic stimulation (TMS) to produce early proof-of-concept data from Phase 1 studies in healthy volunteers. Clearly, Xenon, having completed the first of two Phase 3 studies with azetukalner in FOS, is well ahead of Ovid, which is about to begin Phase 2 studies with OV329 in FOS shortly. This is reflected in the substantial valuation gap, $5.2 billion versus $450 million, between the two companies.
Pushing Higher
Earlier this week, in conjunction with its FY2025 press release, Ovid provided a thorough update on its pipeline, including healthy volunteer results for the 7mg dose of OV329. Remember that in Phase 1, Ovid tested OV329 up to 5mg. The 5mg dose showed an excellent safety profile and, based on a cross-study comparison, outperformed the first-generation GABA-AT inhibitor, vigabatrin (branded as Sabril), across several pharmacodynamic TMS metrics. Given the excellent tolerability at 5mg, the decision was made to test the safety of an even higher dose, 7mg, to optimize OV329’s potential anti-seizure efficacy.
The safety and PK data for the 7mg dose shared this week were very encouraging, and the company plans to move both the 7mg and 5mg doses into Phase 2. We believe advancing the 7mg is a key development for Ovid. Xenon has raised the efficacy benchmark for FOS with azetukalner. To our knowledge, the 43% placebo-adjusted reduction in monthly seizure frequency is the best seen in a pivotal study. We’re not suggesting that OV329 needs to match or beat the azetukalner data to succeed. Novel mechanisms, such as GABA-AT inhibition, will undoubtedly play a role in managing treatment-resistant FOS. However, once clinicians have stepped through older generic anti-seizure medicines (ASMs) and are considering branded novel-mechanism ASMs for a treatment-resistant FOS patient, their prescribing choices will be strongly influenced by the efficacy and safety of those drugs. Ovid believes they may have “best-in-category tolerability” with OV329, but they also didn’t want to leave any potential efficacy “on the table” by not pushing the dose. Hence, we are enthusiastic that the 7mg dose has passed its Phase 1 safety and PK tests and will be advanced to Phase 2.
Interestingly, on the day Xenon released its Phase 3 X-TOLE2 data, Ovid’s CEO, Meg Alexander, was presenting at the Leerink conference and stated, “…This is a field where we’ve got peers that are doing well. We had a peer do well today. It’s great. So it’s a field where you need to be competitive from a seizure-reduction perspective… we think we can do that. But that’s why we want to be pretty assertive in terms of a seven milligram dose.” We appreciate CEO Alexander’s recognition that Ovid’s peers are achieving impressive seizure reduction results and believe the company’s assertive strategy with the 7mg dose gives it the best chance to demonstrate competitive efficacy with OV329.
Opening Up About Phase 2
During its FY2025 call, the company provided more details about its Phase 2 plans for OV329. As mentioned earlier, the company plans to start an RCT with 60 FOS patients in Q2, with results expected around mid-2027. Since the Phase 2 RCT will test two doses of OV329, 5 mg and 7 mg, it wouldn’t be surprising if Ovid slightly increased the sample size. This is just speculation on our part, but with a strengthened treasury, we might see the company adding more power to the study.
Ovid also plans to conduct an open-label Phase 2a study of photoparoxysmal response (PPR) with OV329. The PPR study will evaluate OV329 in 12-20 patients with photosensitive epilepsy. Although this study will not be in Ovid’s target FOS population, it should provide proof of concept for OV329’s anticonvulsant activity in patients with epilepsy. The company has stated that data from the PPR study are expected to be available later this year.
Imitation Is The Sincerest Form Of Flattery
Ovid successfully borrowed from the Xenon playbook when it showed early proof of concept with OV329 in a TMS model with healthy volunteers. Now, the company plans to generate more robust proof-of-concept data, this time in patients with epilepsy, using the PPR model. It could be argued that Ovid is now borrowing from the playbook of another peer, Praxis Precision Medicines (Nasdaq: PRAX), which in March 2024 completed a successful Phase 2a PPR study for its sodium-channel drug, vormatrigine (PRAX-628).
This small, eight-patient PPR study by Praxis provided compelling proof of concept for vormatrigine, causing the company’s stock to rise 30% and adding approximately $325 million to its market cap on the day the study results were announced. Praxis then moved vormatrigine into another Phase 2 study, this time involving 50 patients with FOS. Those results were reported in August 2025, showing a strong 56% reduction in seizure frequency from baseline. Although these were uncontrolled data, they offer solid evidence that success in the PPR model can translate into actual anti-seizure efficacy in an FOS population. The real proof will be next quarter, when Praxis is expected to release top-line data from the first of its two Phase 3 FOS studies.
New Playbook?
Xenon had positive Phase 1 TMS data with azetukalner, which translated to Phase 2 success in the FOS population (X-TOLE) and eventually to Phase 3 success (X-TOLE2), likely paving the way for FDA approval. Praxis had positive Phase 2a PPR data with vormatrigine, which translated into Phase 2 success in FOS, and next quarter, we will see whether that translates into Phase 3 success. Ovid had positive Phase 1 TMS data with OV329 and plans to initiate a Phase 2a PPR study imminently, with results expected before year-end. If the PPR study yields positive results for OV329, investor confidence in OV329’s success in the Phase 2 FOS RCT and beyond should be high. Ovid may have taken a page from the playbooks of Xenon and Praxis, but by employing both TMS and PPR as proof of concept, they might have created an entirely new playbook for ASM development.
Better, Safer, and Bigger
Ovid also announced this week that it plans to pursue two rare pediatric indications with OV329: infantile spasms (IS) and tuberous sclerosis complex (TSC) seizures. Vigabatrin is FDA-approved for IS, where it is generally used as a second-line treatment, and it is used off-label for TSC. The drug is highly effective for both indications, but its use is limited to short durations due to ophthalmic safety concerns. Despite the serious ophthalmic risks associated with vigabatrin, peak U.S. sales reached $320 million in 2018, mostly from IS. Ovid believes OV329, a cleaner second-generation GABA-AT inhibitor, could become a first-line treatment for IS and TSC, pushing peak sales well beyond those of vigabatrin.
***Ovid Therapeutics March 18, 2026 Corporate Presentation
Ovid plans to start an open-label, signal-finding Phase 2 study of OV329 in 30 TSC patients later this year. In this study, OV329 will first be given to older TSC patients and then gradually to younger pediatric patients. This will help determine the appropriate pediatric dosage of OV329 for future TSC and IS studies. Because it is an open-label study, CEO Alexander confirmed on the call that information will be periodically shared as the study advances.
Ovid is developing a unique liquid formulation of OV329 for the TSC and IS populations. OV329 will also use weight-based dosing for these indications. We highlight this mainly to emphasize that it will be a very different product from the oral capsule being developed for FOS.
New Funding
To fund its OV329 expansion into TSC and IS, Ovid announced it has raised an additional $60 million in a PIPE (29.8 million shares at $2.01 per share) led by Point 72 and several other smart-money funds. The company also announced that it received regulatory clearance in Australia to start a Phase 1 study with its oral KCC2 activator, OV4071, triggering a 30-day exercise period for 38.5 million $1.40 Series A warrants issued as part of the October 2025 financing. Once all those warrants are exercised, Ovid will have approximately 200 million shares outstanding and $200 million in cash.
Prediction
Investors should also be aware that there was a second and final tranche of Series B warrants in the October financing mentioned above. The 28.8 million Series B warrants are also struck at $1.40 and include a forced conversion mechanism, triggered when Ovid’s stock trades at 300% of the $1.40 strike price (i.e. $4.20) for 20 out of any 30 consecutive trading days. We emphasize this because, in a January note earlier this year titled “Pipelines, Partnerships, and Predictions For 2026,” we predicted that Ovid would trigger the forced exercise mechanism for the Series B warrants this year.
Based on its updated shares outstanding (O/S), Ovid, trading at $4.20, would have a market cap of around $850 million. We still believe this is an achievable prediction for 2026, but the additional 30 million shares from this week’s PIPE might be our downfall. As we noted earlier, Praxis increased its valuation by $325 million after its Phase 2a PPR results. Assuming Ovid has positive results from its Phase 2a PPR study and its stock reacts similarly, its stock would have met the $4.20 target based on the pre-PIPE O/S. However, to reach $4.20 based on today’s post-PIPE O/S, Ovid would need to outperform what Praxis achieved from its successful PPR study, or perhaps get a lift from positive news from its KCC2 pipeline…
Big Idea
Since we first started writing about Ovid in December 2024, our main focus has been on OV329. As legacy Xenon shareholders, we tend to view Ovid through the lens of OV329 and azetukalner. However, another significant aspect of Ovid’s appeal is the “big idea” potential of its KCC2 platform, something we discussed in a December 2025 note. In that note we wrote, “Ovid describes KCC2 as a master switch for neurological disorders where hyperexcitability is central to the pathophysiology. While fully recognizing that biotech companies, especially small ones, are prone to hyperbole when describing their assets, KCC2 has all the appearance of a big idea in CNS drug development.”
As mentioned earlier, Ovid announced this week that it has received regulatory clearance to begin Phase 1 with its oral KCC2 activator, OV4071. This will be the first time an oral KCC2 direct activator is tested in humans. Ovid will soon begin the Phase 1 study with healthy volunteers and expects to have results later this year. Additionally, it will evaluate OV4071 in a ketamine challenge study, which could provide early proof of mechanism and proof of concept, similar to TMS for OV329. If these studies confirm OV4071’s safety and show early signs of drug activity, investors may increasingly view Ovid through a KCC2 lens. Success in these studies could also be very helpful for us in achieving our prediction.
Final Thoughts
As Ovid shareholders, we are optimistic about replicating the Xenon azetukalner story with OV329. A second-generation compound targeting a proven anti-seizure mechanism, supported by a successful Phase 1b pharmacodynamic study that suggests success in a Phase 2 RCT, leading to a significant re-rating of the stock. Alternatively, Ovid could follow the Praxis story, where Phase 2a open-label PPR data excite investors and drive the stock higher. Or perhaps Ovid’s success will combine elements of both scenarios. Regardless of the path, there’s evidence that success in Phase 2 should lead to considerable upside from here. At least, that’s our prediction.