Alector, Inc. (ALEC) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone. Welcome to this, let's say, late afternoon session. It's great to see many of you here. I'm part of the investment banking team of JPMorgan. And it is my pleasure this afternoon to welcome to our conference, Arnon Rosenthal, the CEO of Alector. He will be talking to you for about 30 minutes, 25, probably. And so you know the breakout room is going to be the Olympic Room. Welcome.

Thank you. Sorry. That really point us to a new direction, new therapeutic direction for degenerative brain disorders. So the surprising human genetic finding was that although no degenerative diseases, when you look at the human brain, you see myeloid cells degenerating and dying. The human genetic tells us that what causes the disease or what allows the disease to happen are actually dysfunctional immune cells in the brain. So dysfunctional immune system in the brain causes neurodegenerations based on the human genetic, particularly in Alzheimer's disease. So this is just one example of this discovery. This is a so-called Manhattan plot, looking at the entire 23,000 genes in the human genome and identifying genes that if you have the unfortunate bad variant, your risk of developing Alzheimer's disease is significantly higher. You see 28 genes that are listed here. And 22 out of these 28 genes are immune checkpoints for the brain microglia. This is the brain immune system. So the vast majority of the genes that cause risk for Alzheimer’s disease control the immune system in the brain specifically. In the brain -- the brain has only 1 type of immune system. It's cell type called microglia. They constitute about 15% of the entire brain cells. And in the last few years, there was a lot knowing of new information about the function of these cell types. So these cell types are the garbage collector in the brain. They clear up all the pathological proteins, beta amyloid and TAU in Alzheimer's disease, probably alpha-synuclein in Parkinson's disease, all the other cell debris, all the garbage that our highly functioning brain generates. But in addition, this cells control the survival and function of myeloid cells in the brain. They control the function of the oligodendrocytes. These are the cells that form myelin around their cells, and they control the blood flow to the brain as well as other supporters, including astrocytes. This is the cell that nourish the nerve cells. So what the human genetic tells us that if either through genetic mutations or through aging this immune cell stop functioning, a lot of bad things happens in the brain. Chaos ensues, and the outcome is degenerative brain disorders. So based on the human genetic and our understanding of the function of the brain immune system, what we set up to do is to recruit, harness, rejuvenate the brain immune system to cure the disease for us. So instead of going after single pathologies like beta amyloid or TAU individually, we're recruiting the brain immune system to do the work for us. So we think that this is a very broad approach to treat neurodegeneration in human. So based on this hypothesis and the human genetic, we developed a therapeutic approach we call immuno-neurology. Again, we recruit the brain immune system to cure the disease for us. So conceptually, it is similar to immuno-oncology. Immuno-oncology recruit the brain immune system to treat cancer. And here, we recruit the brain immune system to cure neurodegeneration. So with this approach which we have started 6.5 years ago when the brain immune system was not sort of very well understood and studied, we now were able to capture significant value from this approach. We have 4 programs in the clinic. Fifth program is going to the clinic this year. We capture significant intellectual property around this idea of recruiting brain immune checkpoints as therapeutics. We have more than 190 patent applications. We have a significant pipeline behind these 4 clinical programs. Our first program is going to be in Phase III this year for frontotemporal dementia. This is a fast-progressing form of dementia. We have 2 programs in Alzheimer's disease that are going to Phase II this year and 2 additional programs that 1 of them is in the clinic and 1 is going to the clinic this year. So the first program that -- so this is, again, our pipeline. We have 5 clinical programs and significant pipeline behind that of -- again, immune checkpoints for different brain disorders that are really tailored for different neurodegenerative disorders. So the first program that we took to the clinic is a program for frontotemporal dementia. As I mentioned, this is a fast progressing early onset form of dementia. It's the largest -- the second largest early onset form of dementia. It hits people under the age of 60. It's very little and fast progressing. People die within 7 to 10 years after diagnosis. And at this point, there is no either disease-modifying or symptomatic therapy for this disease. The disease has significant genetic underpinning. And one of the main genetic causes of the disease are mutations in a secreted immune regulatory protein called progranulin. So in human, progranulin comes in 3 variants. There are people that have no progranulin at all. Basically, both copies of their genes is dysfunctional. These people develop dementia by the age of 20. They are blind, and they die at a young age. And this is deterministic. Every individual that is missing both copies of progranulin develop dementia by the age of 20 to 30. There is another flavor of progranulin in human. These are people that have 1 good and 1 bad copy of the disease. And these people make 50% or less of the normal level. Since it is a secreted protein, you can measure it. You see here, this is the level of the protein in patients that have only 1 good copy. This is the normal level. And again, because they make insufficient amount of progranulin, they invariably developed frontotemporal dementia before the age of 60. There is a third class of mutations in human. These are mutations that decrease the level of progranulin by 10% to 20%. This is enough to increase the risk of developing lysosomal storage diseases, Parkinson's disease and Alzheimer's disease. So you see a textbook, dose-dependent effect of this immune regulatory protein. Complete loss leads to dementia by the age of 20, 50% loss dementia by the age of 60, 10% loss dementia by the age of 75. So our therapeutic goal was to increase this low level of progranulin back to normal level. And the way we did this by blocking reuptake receptor for this protein or degradation receptor for this protein. So conceptually, this is very similar to all the SSRI, where you block reuptake of the neurotransmitter and you increase the effective concentration of the protein of the neurotransmitter in the brain. So what happens in patients, although they make only half of the normal amount, this -- once you block the reuptake receptor, the amount that's produced stays in the brain 2x to 3x longer so you can compensate for decreased production by increased retention time. We tested this drug in rodents and in nonhuman primates. And in all cases, we saw a very effective blockade of the reuptake receptor. And the outcome is within 24 hours. You see tripling of the level of progranulin in the plasma and doubling of the level of progranulin in the brain. Animals that have 1 good and 1 bad copy of progranulin not only have insufficient level of this protein, they also show behavioral deficits. And our drug was able to reverse this behavioral deficits in rodents that mimic the genetic mutations. So again, this might show behavioral deficits. Our drug, within a month of treatment by peripheral injection, reverse this behavioral deficits. With this package of very strong human genetic and animal models, we took the drug to the clinic. We are now in the midst of Phase II. We are starting Phase III. And this year, and so far, both the Phase Ia and Phase Ib, we achieved all our primary, secondary and actually tertiary goals. So the drug was found to be safe, well tolerated, no adverse effects that are drug related, no infusion reaction. And in addition, we were able to show textbook level, target engagement and we were able to restore this missing protein back to normal level, and we actually see indication of downstream activities that I would show you. So we started, as I mentioned, in healthy volunteers. 50 subjects were injected in 8 different doses. Again, the drug was safe, well tolerated even at the highest dose that we tested. And you see here, we can measure target engagement. So our drug was able to block this reuptake of degradation receptor in a classical dose-dependent manner and there is almost complete blockade of these reuptake receptor. And at higher dose, you see increased duration of the effect. So even with a single injection, we can block this degradation receptor for over a month. As a mirror image of sort of blocking the reuptake receptor, we see increase in the immune regulatory protein. You see dose-dependent increase. We can triple the level of this protein in healthy volunteers' plasma. So this is the normal base level of the protein. This is doubling the level. And here, we can triple the level. And again, after a single injection, we tripled the level, and the duration of the effect is almost 2 months. We look to see what happened in the brain, and we see the same situation. We see a very clean dose-dependent effect and then the 2 highest dose, and we practically doubled the level of progranulin in the brain. And these doses are sufficient, as I'll show you, to completely restore this deficient protein in patients. And from the healthy volunteers, we went to mutation carriers. As I mentioned, these are people that have 1 good, 1 bad copy of progranulin. As a result, they have insufficiently low level of this protein, less than half of the normal level. And even after a single injection, we will immediately restore the protein back to normal level. So based on our measurements of healthy volunteers, the healthy level is this gray bar. And you see that mutation carriers now produce or retain normal level of progranulin in their brain for over a month. We then went to look what happened in the brain. And toward the right, we saw the same situation. So this is the normal level of progranulin in healthy brain. This is the low level of progranulin in mutation carriers before they develop symptoms. This is the low level of progranulin in patients after they develop symptoms. So people are born with these mutations. They have low level of progranulin throughout life. But they develop symptoms just before the age of 60. And you see that either a single injection or 3 injections, we can restore progranulin back to normal level and a little bit above. So we completely restored the insufficient progranulin to the healthy level and have about 30% to 40% of safety margin. Again, both in healthy volunteers and in patients, the drug was safe, no drug-related adverse effect, and we're able to achieve both safety and target engagement and pharmacodynamic sort of results in healthy patients. Once we were able to chronically restore progranulin, this effect lasts more than a month after each injection. We wanted to see what happened downstream of progranulin increase, whether we can lead to any therapeutic benefit or any biochemical outcome. And the first thing that we did was to look at 1,000 proteins in the CSF of these patients. And as a result of the disease, many proteins are abnormally up, over expressing in the patient's brain, and many proteins are abnormally suppressed in the patient's brain. And we wanted to see whether our drug can restore this abnormal pattern of expression. And this is indeed what we see. So we see multiple proteins that are abnormally up-regulated by the disease or down regulated by our drug. And conversely, many proteins that are suppressed by the drug are restored by -- suppressed by the disease are restored by our drug. And this is just exemplified here. One of the markers that is hyper-expressed in the disease are -- so the neuroinflammation marker. Frontotemporal dementia is a highly inflammatory disease. So you see that compared to healthy brain, this inflammatory marker is up-regulated, and our drug, even after 3 injections, sort of reverse this hyper expression, restored the normal level of this inflammatory marker by 52%. Likewise, the disease suppresses lysosomal proteins, among other things, very profoundly, and our drug restore this normal expression of lysosomal protein. So based on this very broad analysis of disease biomarkers, dozens of disease biomarkers are reversed by our drug. We then went to see what happened even downstream of the disease biomarkers. And as you know, one of the sort of hot biomarkers for neurodegeneration now is a protein called neurofilament. This is a protein that's produced by nerve cells inside the nerve cells, and it is released once nerve cells are dying. So now there's been 35 acute and chronic neurodegenerative disease that were increasing this neurofilament protein, was shown to correlate with disease severity, with disease progression and in several cases, decreasing neurofilament was shown to correlate with therapeutic benefit. So because frontotemporal dementia is a very rapidly progressing disease, neurofilament is very high in this disorder. It's five to sevenfold higher than normal. In frontotemporal dementia, nerve cells are dying at a very rapid rate. They release this intracellular protein to the CSF and to the serum. And you can measure the level of neurofilament. So neurofilament is, in a way, a speedometer of what is the rate of nerve cells damage in this. As I mentioned, in 3 diseases, including multiple sclerosis, spinal muscular atrophy and ALS, therapeutic benefit was shown to correlate with decreasing neurofilament. And this is exemplified here. This is a CD20 drug from Novartis that is a very effective drug for multiple sclerosis. And you see that after 3 months of treatment, you'll see 7% decrease in neurofilament, and a more profound decrease takes 1 to 2 years. So the limited experience suggests that it takes at least 6 months for neurofilament to start decreasing following treatment. We have samples from 3 months, so that after 3 months after treatment, so we did not really expect much, but we still tested neurofilament. And to our surprise, we saw sort of a trend to decrease. What happens in frontotemporal dementia with progranulin mutation and neurofilament actually continues to increase after symptom occurs. So over a year, longitudinal studies show that there is an increase of about 24% in symptomatic FTD patients. We did not see any increase in any of our treated patients, and in fact, actually saw a trend to decrease. So the combination of our ability to chronically restore progranulin back to normal level in patient's brain, our ability to reverse multiple disease biomarkers in the patient's brain and our ability to see a trend that this very early point in neurofilament really suggests to us that the drug is going in the right direction, that it really may halt a disease progression. So again, with this drug, we were able to achieve all our primary and secondary goals for the Phase Ia and b. We show target engagement, safety and downstream effect of the drug. And the drug is going to Phase III this year. It's a single pivotal study that sort of will allow approval. The second drug that's in the clinic is a hallmark immuno-neurology drug. It targets a receptor called TREM2. TREM2 specifically expressed on the brain immune system. It's activating immune checkpoint for the brain microglia. And if you activate this receptor, you induce microglia to proliferate, migrate to the site of injury and better deal with the emerging pathology. TREM2 is a very exciting target for Alzheimer's disease because it's a very strong genetic links to dementia. In human, TREM2 comes in 3 flavors. There are, again, unfortunate people that do not have TREM2 at all. These people invariably developed dementia by the age of 40 and they have short lifespan. There is a much larger population of patients that have 1 good and 1 partially bad copy of TREM2. This very mild loss-of-function mutation is sufficient to triple, and in some cases, quadruple the risk of developing Alzheimer's disease. And as an optimal human experiments, there are also where mutations where TREM2 is overexpressed. And these mutations actually lead to protection from Alzheimer's disease. So you'll see that loss of function leads to dementia in a dose -- allelic dose-dependent manner, 2 copies dementia by the age of 40, 1 copy dementia by the age of 70, and over expression shows some protection. Another interesting feature of the TREM2 receptor is that one of its ligands is ApoE. As you know, ApoE is the most famous risk gene for Alzheimer's disease. And it's really intriguing that the 2 most prominent risk genes for Alzheimer's disease, ApoE and TREM2, form a receptor-ligand complex. And this really starting to suggest that mechanistically, Alzheimer's disease may converge into a small number of signaling cascade. So what we did, because loss of function is detrimental and gain of function is protective, we developed a drug that increased TREM2 activity. We tested the drug in animal models. And we show in Alzheimer's disease models, very profound protection from Alzheimer's disease. So the drug increased the number of brain immune cells by fivefold, allowed the immune cells to migrate to the site of injury and really contain the disease. So pathologically, the disease is contained and also behaviorally, the drug is able to reverse cognitive deficits. Based on the human genetic and the animal model data, we took the drug to the clinic. We are now sort of in Phase II. And again, we achieved all our primary and secondary end points. The drug is well tolerated and safe in human, and we were able to show dose-dependent target engagement and downstream activation of microglia in response to the drug. So you see here, this is one of our target engagement biomarkers. You see a dose-dependent saturable effect of our drug. Again, the drug is delivered by IV injection, and we see saturable effect in the brain. So we know what dose to take to Phase II and eventually Phase III, and we see downstream pharmacodynamic biomarkers. This is biomarkers of microglia survival activity and function that really tells us that our drug is safe and gauge target and lead to the beneficial consequence that we were looking for. The third drug that we have that we took to the clinic is an inhibitory receptor for the brain immune system. Again, it's a typical immune checkpoint, it's very similar to PD-1. PD-1, as you know, is an inhibitor receptor on T cells and KEYTRUDA-like drugs release this inhibition, allowing T cells to act against cancer. Here, we are releasing inhibition on microglia, allowing microglia to act against neurodegeneration. So again, the drug is in the clinic. It's going to be in patients this year, and we'll have data from patients. Again, we achieved all our primary and secondary endpoints. We were able to show -- to identify maximum tolerated dose that we are taking to Phase II, and we show very profound target engagement. You see that even after a single injection, the drug completely block the inhibitory receptor, again, allowing the immune cells to act against Alzheimer's disease. We just announced the fourth drug that we are taking to Alzheimer's disease. Again, this is another prominent risk genes for Alzheimer's disease, and our drug mimics the protective variant of this gene. So we have a whole portfolio of dementia drugs that we can genetically stratify to different patient populations. So 2019 was a very exciting year for us. We took 3 drugs to the clinic. These are sort of disease-modifying drugs, first-in-class to different types of dementia. We have a Phase III-ready drug for frontotemporal dementia, Phase II -- 2 Phase II-ready drug for Alzheimer's disease, a fourth drug in the clinic in healthy volunteers for neurological disorder and a fifth drug that's going to Alzheimer's disease that's going to be in the clinic this year. And so next year is going to be even more exciting to us because we are going to have data in patients in 3 disease populations. We're going to have -- the 2 Alzheimer's drug in patients will have data, both safety and biomarker data. And we have safety, biomarker data for the frontotemporal dementia. So thank you, everyone. And again, we think, for the first time that we can achieve this goal of a brain neurodegenerative-free world.