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

Welcome, everyone, to the 4:40 session on day 3 of the 42nd Annual Goldman Sachs Global Health Care Conference. My name is Graig Suvannavejh. I cover U.S. and European biopharma names here at the firm. And with that, it's my great pleasure to be hosting Alector today in a fireside chat. And joining us is Shehnaaz Suliman, who is COO, currently, still? Or have there been...

Yes, that's it, President and COO.

And with the company for almost -- was it almost 2 years?

2 years. Yes.

Yes. Very Good. Well, thanks for joining us. And I suspect there might be some investors who are joining us who know the story. But perhaps some of that are new to the story. So maybe with that, maybe we can start at a high level and have you walk us through who Alector it is, how you got started, what you're focused on? And why you think Alector presents such a unique investment opportunity.

Terrific. Thank you, Graig. It's always a pleasure to see you. We are an immuno-neurology company that was pioneered and founded by Arnon Rosenthal, our founding CEO, and really look at the intersection of human genetics, immunology and neurology to activate the brain's immune system to treat significant areas of neurodegenerative diseases. This immuno-neurology approach has been a hallmark of the company since founding. And the concept is really that we're targeting immune dysfunction as a root cause of neurodegeneration rather than focusing on some other approaches that include protein misfolding, although we're extremely jazzed about the approval this week and the regulatory tailwinds in the sector. That said, this approach is deeply rooted in the emergence of human genetic data, strongly suggesting that neurodegeneration can be thought of much in the way immuno-oncology was thought of as fundamentally an immune disregulation caused by a senescent immune system. And so from GWAS, and we know that the vast majority of risk genes for Alzheimer's are immune checkpoints associated with microglia, the brains primary innate immune cell. And so our entire approach is really cornerstoned in that philosophy of looking at the brand's resident innate immune cell or microglia as the key actor to generate therapeutic targets around.

Thank you for that very nice summary of Alector. You did mention some industry news in the neurodegenerative space. I would love to get perhaps your perspective, if you were willing to offer one such with regards to how do you think that shapes the Alector view of the opportunity that it is before them, what do you think it means for patients? I won't ask you to comment on whether the outcome was something you would have predicted or not, but how does Alector [indiscernible] news?

Yes, absolutely. I'd say we're quite encouraged by the agency's willingness to look at the totality of the data available, in addition to adjust clinical endpoints. We've always struggled with these clinical endpoints in FTD, in AD, certainly because of the heterogeneity in the patient population and the subjective nature of a composite endpoint. So I think, first and foremost, the approval after 20 years is just incredibly meaningful for patients and caregivers, and for clinicians and the industry, and it's really a testament to the urgent need for novel treatments. As it relates to us, I mean, we have always taken a very strong biomarker-focused approach in our discovery and development. And with our lead compound, FTD progranulin. As you'll hear from us tomorrow in our FTD panel that we have planned, we will outline our approach to developing a composite array of biomarkers that we think reflect the underlying pathophysiology in FTD, in addition to neurofilament, also talking about other categorical biomarkers that reflect inflammation and complement activation and neuronal health, more generally speaking, in addition to clinical outcome data and BMRI. And so back to the specific question you asked, which was just, what does this mean? It just means that I think FDA is going to be a lot more open to looking at the totality of the data. And so we will continue to collect that data as well as clinical endpoints and look forward to engaging with the agency more proactively, much as we have been in order to look for avenues of approval that are different from traditional modes.

Very helpful perspective. As some of you or many of you know who have joined us, Alector does have its own Alzheimer's disease-focused efforts. We'll revisit your AD efforts later on in this fireside chat. But since you did mention your FTD day tomorrow, why don't we talk about your efforts there, and you've got AL001, which has got a very unique mechanism of action and perhaps we can revisit the AL001 mechanism of action. And perhaps if you could describe for us why you think this makes sense in terms of treating FTD.

Certainly. So our lead program, AL001, is currently in a Phase III FTD progranulin trial, which is enrolling well. And the data we will show at AAIC in July is the data from the Phase II open-label symptomatic FTD progranulin patient cohort. Of the scientific rationale for targeting it -- so the AL001 is sortilin inhibitor, which is a degradation receptor responsible for targeting progranulin. The reason we think this is a valid hypothesis is that progranulin is a secreted protein that we know has a critical role in the genesis of FTD. Patients that are [indiscernible] insufficient and have one good and bad copy of progranulin go on to develop FTD with the progranulin mutation with an extremely high penetrant. And so because of that, what we're really trying to do is to restore the underlying deficiency in progranulin by stimulating the body's own endogenous supply. So that, that's up regulated. And we now know from patient data in both FTD patients as well as in healthy volunteers that we are able to upregulate progranulin to physiologically normal levels and, in fact, to sustain that upregulation for a long period of time. And so this is what's making it exciting for us. We know that we have target engagement, and we're now doing the Phase III to really look at the clinical outcome assessment, and we'll see some data from the Phase II as well. Basically, to validate the hypothesis that the target engagement we're seeing with progranulin does, in fact, carry over into other biomarkers of relevance as well as clinical data.

So you have generated data. You've presented clinical data on your AL001 program. You're in a unique situation where you have Phase II data that people are very interested in seeing an update on. You've got your Phase III study that's already started as well. So can you help remind us how to put the Phase II data in the context of the fact that you already have a Phase III that's ongoing?

Exactly. So I think the way to think about this, Graig, is that the Phase II data is really validating data. As we dive into FTD and related biomarkers, again, what we're trying to do is develop a composite picture of how these biomarkers track with the underlying pathophysiology of FTD. And so in Phase II, what we should be looking for is directional evidence of target engagement certainly on progranulin, but also proximal and distal biomarkers that are related to progranulin that you would expect to track with the natural history of the disease, in addition to clinical outcome assessment data, the CDR-NACC-FTLD and volumetric MRI. And so I would say, if we see those trends, we -- what it does, in fact, do is validate the design of the Phase III, which is placebo-controlled, in which we look at, at-risk as well as symptomatic patients, and provide confidence that, in fact, the sort of downstream effects we're hoping to have that could ultimately lead to a treatment impact are, in fact, trending as we would expect.

Now we should take a moment at least to remind our audience of the preliminary Phase II data that you shared about a year ago. And that did create some market interest, let's say, in terms of the [indiscernible]

Yes.

And with that said, as we now reflect back on that data set, first of all, if you can share what that data suggested, and how you think the next update, which you're hoping to share in that data set that may put the first set of data into context.

Sure. And so we've shown data, I think, in our R&D day a few years ago as well as last year at AAIC. That was primarily focused on neurofilament. We believe that neurofilament continues to be an important marker of neuronal health. But what we've come to understand in relation to neurofilament is that there is a fair amount of variability as well as the durability of response with neurofilament, particularly in a disease like FTD, is yet to be understood. And so and we also know that recent data suggests that clinical efficacy doesn't always track with neurofilament reduction. So our plan is really to move to this -- again, as I said, composite view of what are the biomarkers that are relevant in the disease? And yes, I would categorize these as 5 categories of biomarkers. It's kind of progranulin upregulation and immediate downstream progranulin pathways, then there's lysosomal function, because we know that progranulin is a secreted protein that does, in fact, traffic through the lysosome. And so the lysosomal function will be an important marker of, in a way, progranulin function. Thirdly, there is inflammation. And here, there are a number of biomarkers that are disease-relevant and important for determining whether we're jumping down the inflammatory, neuronal inflammatory effect. The fourth would be complement activation, as complement is known to be downregulated in the disease statement. We would look for activators of complement as part of a treatment effect. And then the fifth would be neuronal health, of which neurofilament is one, but there are others. And this is in addition to volumetric MRI and clinical outcome assessment data. And so I would say that the difference is that instead of relying solely on neurofilament as the primary marker of disease pathobiology, if you like, now we're really moving towards a model where we're trying to define a temporal relationship between these biomarkers at different stages of the disease and in relation to progranulin upregulation.

In terms of these 5 criteria that you lay out, do you anticipate that you'll need to necessarily see direction and improvement in every single one of these criteria or domains? Or is it more important, from your perspective that just -- again, it seems like you're trying to paint a picture that's more holistic?

Yes. It's a good question. I think it's really more about defining the MAPT. It's -- and we will have 6 months -- at least 6-month data to define that. And tomorrow, you will hear about more of the specifics around exactly which data will be available. But I think the goal again is to paint a composite picture of the biomarker data. And then frankly, to contextualize that with durability of effect in these patients and in addition to the clinical and the MRI data.

Maybe another, just a question on the Phase II. So relative to the numbers of patients that you shared last year at AAIC, what should be the expectation in terms of the numbers of patients and perhaps for how long those patients have been treated?

Yes. Good question. So anywhere between 10 to 12 patients. And again, the reason why it's not a specific number is some patients completed their full clinical assessments and CSF follow-up and others have not. So again, Robert will provide more information on exactly what can be expected, but that's the ballpark.

Okay. Great. With that, maybe if you could describe what the Phase III trial for AL001 is like.

Certainly. So this is a randomized placebo-controlled trial in frontotemporal dementia patients with a progranulin mutation. And there are 2 categories of patients. The first is an at-risk category of patients. So these are essentially asymptomatic patients that have been stratified through a raised neurofilament level, because we know that an increase in neurofilament at baseline actually is predictive of patients that are going to pheno convert sooner rather than later. The vast majority of patients, though, are symptomatic FTD patients with kind of early disease CDR-SOB in the 0.5 to 1 range. And these are the patients that, I think, largely, we know from GENFI and other longitudinal cohorts are likely to show a rapid decline in their clinical status over a period of 2 years. And so this trial is really combining both of those patient populations, but with most of the powering assumption really predicated on the decline we would expect to see in the symptomatic cohort and following them for 96 weeks in order to see and track a change in their CDR-NACC-FTLD, which is the endpoint that's been accepted by FDA for registrational purposes. So in addition to that, we will, of course, be measuring all the biomarkers we -- I described as well as volumetric MRI. And so that's the design. And again, we -- later this year, likely at CTAD, we'll have a poster outlining some more details on the Phase III design.

In terms of the biomarkers that you'll be collecting, will these be CSF biomarkers related, the serum biomarkers, would be collecting both? How should we think about, in a disease like FTD and where we are at the current state-of-the-art, how to think about the biomarkers?

Both. So absolutely, in some cases, plasma and CSF correlating track quite well, as in the case of neurofilament. In other cases, it's better to just look at CSF levels. So again, if we think about the 5 categories of progranulin, lysosomal function, inflammation, complement activation and neuronal health. It will be a combination.

There are a number of approaches being employed in terms of tackling FTD. You have one such approach, is a monoclonal antibody approach. I think using a monoclonal antibody for a CNS disease has -- interesting proposition in terms of being able to penetrate the blood-brain barrier and kind of how much drug you need to get into the CNS. But with that set, can remind us how you think about AL001 in terms of being able to get to the target?

Yes. So I think what's interesting about -- again, we all know the PKPD sort of assessment around extra serum levels and how it relates to actual target engagement and CNS penetration. But I would say, with our program, we've got the SOD1 inhibitor, which actually -- and progranulin which bind extracellularly. And so what's interesting about it is even though we're giving it extracellularly, what makes it interesting is that we really believe that only functional wild-type progranulin will in fact be elevated by an antibody targeting SOD1 and not sort of the mutated progranulin, which is present in progranulin FTD patients. We know that SOD1 has an extracellular receptor with a well-defined function, making it an ideal target for antibody therapeutics. And we also know that we've got target engagement as evidenced by raised CSF levels of progranulin. So of course, there are a number of approaches. You can restore progranulin directly. You can think about different ways to elevate endogenous supply, but we feel like this approach is quite valid. And we also know from how progranulin traffics through the lysosome, that there are a number of chaperone proteins that are associated with enabling function to occur in the lysosome and that we don't inhibit any of those and neither is the knockout for SOD1 [indiscernible] . So we feel like this is a robust scientific approach.

Other approaches for FTD are some that are gene editing-based, gene therapy based. And would love to get your perspective on the pluses and minuses of those, vis-à-vis the approach that you're taking with the monoclonal antibody.

Certainly. I think -- so a direct administration of progranulin certainly has merit. I think the issue there is around dose titration and also exposure. So are you actually penetrating the cells that you need to that are responsible for downstream functions of -- that will ultimately lead to new renal restoration. That's one issue. The other is dose titration, which is obviously difficult to do with a gene therapy approach. The third not insignificant factor is safety. We've seen a number of gene therapy programs, not just in CNS monogenic diseases but all over, been stymied by significant safety liabilities around the capsid, around the protein itself. So I would say that the verdict is out in terms of whether you have a true therapeutic window, within which to see an effect that you think is actually beneficial. We have moved very fast with our programs, going from IND to Phase III in less than 2 years and are very far along in terms of the development program. And so we feel that even if other approaches should pan out, they are significantly behind.

Maybe we can use this as an opportunity to switch to your Alzheimer's disease efforts, which I'm sure, again, given the recent news for Aduhelm. Perhaps investor interest in this program might now necessarily increase. And so it is a program that's partnered with AbbVie and with that, with AL001 seemingly being the primary area of interest for investors. Perhaps it's now time to give AL002 and AL003 some air time. So with that in mind, maybe you can tell us about the 2 different compounds, how are they different and where they are right now.

Certainly. So we've got AL002 and AL003. And the goal of the AL002, which is our TREM2 antibody is really to activate microglia, kind of irrespective of genotype risk allele. There are a number of really great publications out there that support the idea that TREM2 activation is actually beneficial in all stages of disease and in all genotypes. And that, in fact, in the -- if you look at the loss of TREM2 in a transgenic -- triple transgenic model, it sort of greatly exacerbates tau pathology and synaptic loss. So we feel -- we are very excited about the target. And increasingly, there's strong biologic validation that TREM2 dependent activation of microglia is -- has a critical role to play in delaying a beta induced sort of tau pathology. And so for that reason, we are conducting a Phase II study with the TREM2 program. This is a randomized placebo-controlled study, the INVOKE-2 study, that will look at early AD, about 265 patients. And what we're doing with the study is it's an all-comers study, but we will be able to retrospectively look at the genotype TREM2 versus non-TREM2 carrier population. And the goal there would be to look for differences in these patient populations to help inform the stratification of the Phase III. So that's the AL002 TREM2 program. You're right in that it's partnered with AbbVie, but we actually control all of the execution up to the end of Phase II, at which point AbbVie has an opportunity to opt in. So that's the TREM2 program. We also have good biomarkers like soluble TREM2 that can be used to measure evidence of target engagement, and we have shown some TREM2 -- soluble TREM2 data in the Phase I before, which served as the catalyst to actually initiate the Phase II. So that's TREM2. And then AL003, again, this is an immune checkpoint, which is also associated with increased AD risk. And here, with the SIGLEC 3 program, we have a Phase Ib study ongoing, which we shared, I think, early last year, and we've completed enrollment, and our goal is to again, show biomarker data from this Phase Ib in AD patients at CTAD later this year. And again, here, we can look at CD33, among others, and other markers of microglial activation as evidence of target engagement. So those are the 2 AD programs that we're very excited about, continuing to propagate.

I think that as we think about, again, the aducanumab approval, they seem to have gotten a very broad label.

Indeed.

I think there are going to be some very interesting investor debates around whether the drug will actually end up being used. I'm sure there'll be a debate in the medical community as well. As we think about what you saw with Aduhelm and as you think about the positioning of AL002 and AL003, given that their targets are genetically defined, how are you thinking about the utility of each of those drugs, if it meets your expectations? I guess the correct sort of question is, is this going to be a drug that you think is more appropriate for a subpopulation of patients that are genetically defined? Or is there truly the potential for them to be used across a broader patient population?

Yes. Absolutely. I think that our view is that these will be good for all-comer patient populations. I think, with respect to the approval, I mean the efficacy at around 20% or so, there's plenty of opportunity to improve. And when we speak to thought leaders about what's considered clinically meaningful in Alzheimer's, the range that we typically hear is sort of 30% to 40%, is considered clinically meaningful. And so I think, independent of where Aduhelm nets out, whether it becomes a standard of care or not, there's plenty of opportunity. And in fact, therapeutic synergy, given our mechanistic differentiation, to add on in terms of overall therapeutic effect and also to synergize with an NDA beta or in fact, an anti-TAU. So from our perspective, we don't view that as impacting what we would have done differently other than adding on a therapy on top of standard care. I'd say, conceptually, most people have always thought that the holy grail of Alzheimer's disease was really more around combination therapy and combining different therapeutic strategies and therapeutics to enable, again, to kind of stack on efficacy in these patients over time. And so maybe we're getting to that drug development paradigm sooner than we thought we might with the approval. But from our perspective as an immuno-neurology company, we are, in a way, kind of agnostic to whether it's an anti A-beta or an anti-TAU approach or another protein degradation? Approach because we're somewhat upstream of that, and we think microglial activation will effectively add therapeutic efficacy and synergy to any other approach.

I'm curious if the company has thoughts around how to think about hitting the AL002 mechanism TREM2 or the AL003 mechanism and what the translate ability to efficacy from a -- whether it's a cognition endpoint or whether it's a functional endpoint? Or I think now we're in a place in Alzheimer's, where there are very novel ways of thinking about how drugs can get approved, at least that's the perspective that I have and cover a couple of Alzheimer's disease companies. It seems like the FDA is quite open to -- or quite receptive to perhaps novel ways of thinking. So with that in mind, I'm just curious if -- as you think about the clinical development plan as far as it has been teased out with a full realization that AbbVie will probably pick it up or not. But how we think about the biomarkers and the translate ability to efficacy for an Alzheimer's drug and how is Alector thinking about it?

Yes. So I think we're in an early stage of doing that because I, again I think ideally, you would like to see a correlation of these biomarkers with clinical outcomes. When -- in our talk tomorrow, you'll see us starting to define, okay, what does the map of biomarkers look like? For example, in FTD, and how, when we look at the clinical data, we can make certain associations or inferences, at the very least, between these biomarkers tracking with clinical outcomes. And I think in AD, it's the same. So in the TREM2 program, again, I think the goal would be to look at TREM2 carriers versus noncarriers, to look at soluble TREM2 and other biomarkers, to look at clinical outcome measures and determine whether or not you can show these associations or correlations in Phase II. And then to look prospectively at Phase III and how you can stratify or enrich patient populations or potentially look for ways to think about an accelerated approval paradigm, based on the data that you've already generated. But truthfully, it is a little bit early to say that we have that data in hand, we'll have to actually complete the Phase II and then kind of look back to determine whether the hypothesis around biomarkers, linking closely with clinical outcomes is feasible. But I think, again, what's encouraging is the precedent that FDA now is open to that kind of approach.

Thank you very much for that. I would be remiss if I didn't mention that beyond your interests in FTD and Alzheimer's disease, you have interests outside of that. And maybe going back to AL001, I forgot to mention and bring up that you've got an ALS study that you recently...

Indeed.

And with that said, how do you see that opportunity there?

Oh, yes. So the way we think about AL001 and AL101, which is actually the follow-on program, which we haven't spoken about much, Graig, but for which we will have some data later this year as well, because it is ostensibly a different formulation that allows for expansion indication into broader indications. But the way we think about all of this is that it's really a progranulin franchise. So a franchise strategy with a faster market approach in orphan indications such as FTD and ALS and a fast follower approach in, again, genetically stratified PD and AD population. So PDGBA1, for example, could be an opportunity to do an early signal seeking study that then may have read-through into broader PD population. So that's the way we're thinking about the franchise and the ALS study, which will enroll pretty shortly here in Q3, will be the start of our exploration into further indication expansion.

And within ALS, for those who may not know, it's broken up into familial or genetic ALS -- more sporadic ALS. The familial is a smaller segment of the ALS market. And I believe with AL001, the initial efforts are in C9orf72-mediated ALS. And so while it is still early days and you're going into the clinic, is there a view that with progranulin, it's really just that slice? Or are there other mini slices of the ALS population that perhaps, whether it's AL001 or 101 that you could penetrate into the ALS market?

Yes. So we really are starting with that repeat expansion, C9orf72 gene population, which we know to be a frequent cause of ALS, and in fact, FTD, and we also have an FTD C9orf cohort in the Phase II. So that's where we're starting to look for signal-seeking activity. And once we have that, our goal would be to then expand into a broader ALS population and to have the discussion with FD around broader approval. But again, our approach historically has always been about looking for signal-seeking in smaller Phase II studies and then using that to really dictate the development strategy for Phase III.

Okay. I think we've got a much broader pipeline that goes even beyond the compounds that we just mentioned, they probably don't get done that much attention currently by the investment community and maybe because they are earlier stage. Maybe I'll throw it, to you, Shehnaaz, in terms of are there certain programs that you think that are underappreciated right now or programs that you think are ones that we should be paying attention to?

Well, certainly, we have sort of a small immuno-oncology effort with targeting SIGLEC -- the SIGLEC pathway, AL008 and 009. One is partnered with Innovent in China and we -- and then 009 is one we are moving forward on our own. And there, our goal is to actually initiate first-in-human studies sometime late next year. So we are continuing to move that. On the neurodegenerative side, the next program likely to emerge from our pipeline is the MS4A4A targeting program. Again, this is kind of a master regulator of microglia which is in the TREM2 pathway, but at a different place, more upstream. And we think that this is an extremely important risk gene for Alzheimer's as well, which is distinct. And our first-in-human studies for that program will also initiate toward the latter part of next year. So that's just kind of a small snapshot of more to come behind that, of course, as an expanse of research pipeline. And as is our operating mode, we're trying to move those programs through the -- through early clinical studies as soon as possible.

We've got probably a couple of minutes left. I do want to touch upon where you are from a financial perspective, just to remind us what your cash balance is as of the first quarter and how you think about that cash runway? And then maybe thinking about the fact that you are very much an R&D-focused company, but you've got some really interesting opportunities that you can perhaps commercialize on your own, you already got the partnership with AbbVie. Is the vision with FTD to commercialize that on your own? And with that said, as with your other assets, how do you think about where you spend that incremental dollar on R&D, whether it's the big programs, how do you capital allocate to the smaller programs? Just your thoughts there?

Sure. So we have about $360 million in cash at the end of the first quarter, and that we'll fund the operations into the second half of 2022. And our burn rate's around $50 million a quarter. So in terms of the sort of the question about R&D spend and our ability to commercialize. I think we -- what we feel would be helpful is to maintain rights or an opportunity to commercialize in the U.S. certainly, particularly around the orphan indications like FTD, in which we already have amassed a fair amount of expertise. We know the KOLs. We already have a medical affairs effort ongoing in relation to the trial and expansive patient recruitment and physician interaction. So I think strategically, it makes sense for us to maintain a vision around commercializing at least our orphan indications. With respect to Alzheimer's and Parkinson's, there is the open question whether or not we would think about building out commercial infrastructure outside the U.S. Or, in fact, commercialize those on our own, I think, remains to be seen. For now, we're keeping all of our options open and intending to take these programs as far as we can on our own, doing what we do best, which is really finding great targets, and very quickly moving them into the clinic.

Maybe I'll leave you, Shehnaaz, with one last bigger picture question that I've been asking my companies, which is, if we were doing this fireside chat 5 years from now and hopefully closer to California, and in 2026, where would you think -- where would you hope Alector to be in 2026?

I think there would be no doubt that we were the premier immuno-neurology company in the world, that we will have gotten one, if not more than one, several therapies to market for really horrible neurodegenerative diseases like FTD, but potentially others such as Alzheimer's as well. That this immuno-neurology approach would have been validated clinically and commercially and that we would be seen to be generating an extremely expansive pipeline of immuno-neurology targets that continue to make a difference in the lives of patients.

Okay. Well, thank you very much for that vision, one that I think I look forward to you making progress on. And with that, I think we'll conclude our fireside chat. Thank you very much, Shehnaaz, for joining us, and I want to thank the audience for joining us as well. Wishing you a great rest of your day. There is one last session here at the Goldman Sachs Healthcare conference, so please find a reason to stay for -- and I'm hosting one as well. But with that, thanks again, Shehnaaz.

My pleasure. Thank you for having us, Graig.

Bye-bye.