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

Good morning, and welcome to the morning session of Day 3 of the Bank of America Healthcare Conference. My name is Pavan Patel, and I'm one of the biotech analysts here at BofA. It's my pleasure today to introduce Arnon Rosenthal, Co-Founder, CEO and Director of Alector. Arnon, would you like to start off with some opening remarks? And then we could jump into Q&A.

Sure. Welcome, everyone. So as you know, the dominant therapeutic approach for dementia and neurodegeneration in the last 30 years was to target misfolded proteins. So every neurodegenerative disease is typified by its own misfolded protein. Alzheimer's is typified by A-beta and tau proteins. Parkinson's disease is typified by alpha-synuclein. ALS is typified by TDP-43. Huntington disease is typified by the huntingtin protein. And the idea was that these proteins, when they misfold and accumulate in the brain, damage neurons and cause the neurodegenerative disorders. And if you find a drug that prevent the synthesis, disaggregate or somehow inactivate this protein you develop, you'll have a therapeutics. And so far, this approach had not worked very well. And at Alector, about 8 years ago, we have embarked on an alternative therapeutic strategy. Instead of targeting misfolded proteins directly, we are recruiting the brain immune system, the microglia cell type which is part of the innate immune system, as a therapeutic strategy. And our approach of targeting the immune system is very analogous to immuno-oncology. What revolutionized cancer treatment in the last few years was that instead of trying to kill tumors directly with radiation or chemotherapy, we now recruit the immune system to do the work for us. And we are doing the exact same thing, but instead of targeting T cells in the periphery, we are targeting the microglia part of the innate immune system in the brain. And with this approach, we have now filed close to 400 patent applications. We identified dozens of targets that are all immune checkpoints for the microglia brain immune system, and we have multiple drugs in the clinic. We are targeting Alzheimer's disease, different types of frontotemporal dementia, ALS, and we are also planning on going after Parkinson's disease, and we have discovery efforts in multiple sclerosis. So we view it as a really broad strategic approach to treat degenerative brain disorders.

So let's start off with the progranulin franchise. Maybe could you give us an update on what's the current status of the INFRONT-3 trial? And what can we expect next from this program?

So one of our franchises is 2 drugs that elevate the level of progranulin. Progranulin is immune -- is a secreted immune regulatory protein that was shown by human genetics to be involved in practically every neurodegenerative diseases. So if you have heterozygous loss of function of progranulin, you have one good and one bad copy of progranulin, you invariably develop frontotemporal dementia before the age of 60. If you miss 2 copies of progranulin, you develop dementia sometimes in your teens and you die shortly after. And if you have a mild loss of function of progranulin, about 20% to -- 10% to 20%, you are at a higher risk of developing Alzheimer's disease, Parkinson's disease, different C9orf diseases, either lysosomal storage diseases or LATE, which is another type of dementia which is typified by TDP-43 pathology. So progranulin deficiency seem to be associated with every neurodegenerative disease. And because of the strong human genetics, we developed a drug that elevates progranulin by two- to threefold in the human brain, and we took this drug to the clinic initially in frontotemporal dementia, which is caused by progranulin deficiency. And in this case, it's just a classical enzyme replacement therapy. These people have 50% of the normal level of progranulin and as a result, they develop frontotemporal dementia and we were -- we found a way to restore progranulin back to normal level. And we started with an open-label Phase II. And in the Phase II, we were able to show that we can normalize multiple disease biomarkers, including multiple lysosomal proteins, which are abnormally elevated in the disease, including multiple inflammatory biomarkers such as the complement proteins, which are also elevated in this disease, including GFAP, which is astrocytes' neurodegeneration biomarkers, which is also elevated in this disease. So we are able to normalize multiple disease biomarkers with volumetric MRI imaging. We were able to show that we slowed down ventricle expansion, which is basically representing slowdown in brain, neurodegeneration by 50%. And most profoundly, compared to age match controls that were not treated with our drug, we were able to slow down cognitive decline by close to 50%. So with this human genetic data and the Phase II data, we went to Phase III, we are in the midst of a pivotal Phase III, which includes 180 patients. It's a double-blinded study, which will progress for 2 years. We are in the middle of recruitment. So far, I mean the drug is very well tolerated. There is really no meaningful adverse effects related to the drug. And yes, we are in the middle of recruitment, and we will announce when the last patient is in. And we will, yes, hopefully, then monitor the patients and unblind the data.

Great. And could you give us an idea of what level of engagement you have with regulators to bring AL001 into the commercial stage?

Yes. So we are very closely engaged with both the European regulatory agencies, with the EMA and with the FDA on every step of our drug development process. So for our Phase III, which we consider as a pivotal Phase III, we agreed with the regulatory agencies on the provable end points. We agreed on the patient population. And basically, we are in constant discussion for every pivotal milestone in the drug development process. So the FDA agreed with us that we can include 2 different populations in the trial. So the Phase III trial is a combination of patients which are early symptomatic patients as well as patients which are what we call at risk. They are presymptomatic, they have the genetic mutations, but they did not convert to symptomatic yet. So basically, our trial is testing both reversal paradigm of treatment and prevention paradigm in a single trial. And again, they have sort of -- we agreed with the FDA on the duration -- with both regulatory agencies, the European and the U.S., on the duration of the trial, on the end points, on the composition of the trial. And we think that, yes, that's going to be a well-designed trial that would be pivotal.

So if the data is positive from the INFRONT-3 trial and AL001 is approved, what would an initial launch possibly look like?

Yes. So we are, in a way, to have clinical trial, is -- are starting to prepare for launching. So we are spending a lot of effort on awareness of the disease. We are spending a lot of effort on providing and enhancing free genetic testing. What the situation with sort of frontotemporal dementia is that there are no drugs, either disease-modifying or even meaningfully symptomatic drugs. So people are not -- have no motivation to know that they carry the genetic mutation or basically people -- yes, people are just ignorant of the fact that they are about to develop the disease. So part of the launching will be increasing the awareness of the drug, increasing the awareness that a simple genetic testing is possible and that if the drug is approved, yes, then there is therapy. So we are again engaging with the patient community constantly, with the clinical -- with the consortia, with all the PI and KOLs in the field, with all the nonprofit organizations to really increase awareness of the disease. So we will start with the clinical centers that we are engaging in our clinical trials. We are engaging in close to 250 clinical trials worldwide. So this will be the initial center for launching, and we will expand from there.

Sounds great. And so what would you consider to be the main takeaways from the latest update of AL001 in FTD C9orf72 patients?

So when we started the program, the first program that we tested was frontotemporal dementia with progranulin mutations. And again, this is a simple enzyme replacement [ therapy ], like these people have 50% of the normal level of progranulin and you restore it back to normal. The human genetics told us that progranulin could be beneficial for other diseases even if patients have more or less normal level of progranulin. And we wanted to test that, and the test that we undertook was to treat patients that develop FTD because they have the C9orf72 mutation. These people have more or less normal level of progranulin. And in this case, we elevated progranulin to a super physiological level, 2 to 3x above normal. And what we saw in this clinical trial -- again, it was an open-label study, but what we saw was, again, that the drug was very well tolerated. There were no meaningful drug-related adverse effects. So elevating progranulin two- to threefold above normal level did not lead to any sort of adverse effects that we were able to discern. The drug was safe for over a year of treatment. We were able to show reduction in disease biomarkers like GFAP. And most importantly, we were able to show slowdown in cognitive decline of over 50% or 54% over 1 year of treatment. So the drug -- our drugs seem to be effective or show activity -- indication of activity in a patient population that really starts from a normal level of progranulin. And the learning is -- are twofold. First is that the drug is safe even in populations that have normal level of progranulin, that elevating progranulin two- to threefold above physiological level is safe. And the second learning is that if the drug -- if elevation of progranulin beyond normal level is active or has a therapeutic benefit in FTD with C9orf mutations, it is more likely to have therapeutic benefit in the other neurodegenerative diseases that start from normal level of progranulin, which includes Parkinson's disease and Alzheimer's disease, other types of ALS, even other neurodegenerative diseases like LATE, which are associated again with TDP-43 pathology. So this really -- first, it's validated that our drug is active because it was active in 2 different subsets of frontotemporal dementia patients. It validated safety of the drug even when you elevate progranulin. And it really, in our view, decreased the risk of going after other neurodegenerative diseases where we want to elevate progranulin beyond normal level.

So tying into that, could you maybe walk us through the strategy for your Alzheimer's programs? And what impact could Alector's products have in that space?

So human genetics data indicate that even modest reduction in the level of progranulin increases the risk of developing Alzheimer's disease. So progranulin was shown to be genetically linked to Alzheimer's disease. In addition, animal model studies show that elevating progranulin beyond normal level by severalfold is therapeutic, is protective in Alzheimer's disease models. So the human genetics data and the animal model data really provided, in our view, a strong scientific rationale to go with the progranulin-elevating drug to Alzheimer's disease. And again, this will be a novel approach to treat Alzheimer's disease. We are -- by elevating progranulin, we'll recruit the brain immune system to counteract the disease. We'll improve lysosomal function in both the immune system and in the nerve cells. And the lysosomal function are really critical to counteract multiple disease pathologies. And again, we think that this will be a novel therapeutic strategy for Alzheimer's disease that we are very hopeful about. So we are currently planning the clinical trial together with GSK, and we will announce when we start it.

Great. And maybe -- so what are you doing to address the concerns of the ARIA that was seen in the AL002 INVOKE-2 trial?

So one of our other clinical trials is a trial with a drug that activate TREM2. TREM2 is an immune checkpoint -- activating immune checkpoint on microglia, and it has very strong genetic link to neurodegeneration. So if you don't have TREM2 at all, you develop dementia at 100% penetrant before the age of 40 and associated with also severe neurodegeneration and myelin pathology. If you have one good and one partially bad copy of TREM2, you have one of about a dozen point mutations in the ligand binding of the TREM2 receptor which decrease its functionality, you triple the risk of developing Alzheimer's disease. And this is the same risk as you would have if you have one copy of APOE4. And conversely, there are indications that overexpression of TREM2 are protective in Alzheimer's disease. So based on the human genetics and our understanding of the biology of the brain immune system, we developed a drug that enhance the TREM2 activity in the human brain. And in healthy volunteers, we were able to show that we are engaging target in a dose-dependent manner and that we activate downstream biomarkers in microglia. So we were able to recruit the microglia in the brain. So our drug enter the brain, engage the target, the TREM2 receptor on microglia and was able to activate or to recruit microglia. We then -- from the healthy volunteers, we went to Phase II. In Alzheimer's patients, we are now in the midst of a Phase II. And we reported cases of ARIA. ARIA is an MRI imaging abnormality. In most cases, it's not associated with clinical with discernible clinical symptoms. All -- to the best of our knowledge, all the anti-A-beta drugs that remove A-beta amyloid plaques were associated with ARIA pathology at fairly high prevalence. So our sort of drug shows ARIA symptoms, which are similar to the A-beta drug. Again, the trial is blinded. We want to finish the Phase II as fast as possible. So we don't know the impact of our drug on A-beta pathology, but the analogy or the similarity to A-beta drugs may indicate that one of the many things that our microglia recruitment or microglia-enhancing drug may also impact A-beta. So we had again ARIA signals. And the only cases where we saw clinical symptoms in ARIA, we had 3 symptomatic ARIAs, and they all concentrated in APOE4 homozygous. And in order to -- not to delay the trial, we voluntarily decided to at least temporarily remove APOE4 homozygous from our clinical trial. APOE4 homozygous are constituting between 10% and 15% of the trial population. So we anticipate a fairly modest effect on the clinical trial recruitment or the meaning of the clinical trial. And again, this was done completely voluntarily. We just did not want to slow down our Phase II. We want to complete the Phase II and to basically know if the drug is effective in the -- 90% of the Alzheimer's population. And we will then figure out how to bring the APOE4 homozygous population back to the trial.

Can you talk a bit about how you're working with regulators to develop trials that align with data set requirements for an approval in Alzheimer's?

Yes. So the same way that we interact very closely with the regulatory agencies on our frontotemporal dementia program, we are also interacting with the regulatory agency very closely on our Alzheimer's programs. So we sort of -- we discussed with the regulatory agency what would be required for approval, what's the approvable end points, what the approvable patient population we are implying in our Phase II, all the primary and secondary biomarkers which are -- which would be acceptable on the FDA, that clinical trial duration would be acceptable on the FDA. So we are in constant discussion with the FDA on every step. It means we are reporting every ARIA case to the FDA. So we are in constant interactions with the FDA. So we don't expect any surprises when we go to later stage of the clinical trial.

And given the amended protocol, are there any changes to the timing for enrollment and management of the INVOKE-2 trial?

So as I mentioned, we decided to -- at least for the time being, remove APOE4 homozygous from our clinical trials. The APOE4 homozygous constitute 10% -- approximately 10% of the patient population. So we don't anticipate a significant impact on clinical trial recruitment, like we're still recruiting 90% of the Alzheimer's population. So we -- if anything, we anticipate sort of an incremental effect on recruitment, right?

Yes. So now moving to the oncology franchise. You're looking to bring multiple oncology products to the clinic this year with Phase I initiations expected in AL008 and AL009 programs. What are your expectations for entering the oncology space?

So first, I'd like to go over the scientific rationale of us getting into oncology. We are an immuno-neurology company. And basically, our therapeutic strategy was to recruit the innate immune system to counteract multiple neurodegenerative pathologies. So because of that, we have really deep understanding and strength in immune checkpoints for innate immune system. And we realized that many of our targets and drugs which we are using to modulate microglia in the brain also express and also modulate the peripheral innate immune system, including macrophages and dendritic cells. So we think that the same drugs and targets that we -- are used for neurodegeneration could also be leveraged and applied for cancer treatment. We think that many of our drugs are going to be very similar to CD20 drugs, the Rituxan that started as a non-Hodgkin's lymphoma drug and now is probably the best, most effective multiple sclerosis drug. We think that most of our drugs will be able to traverse between oncology and neurology. And because of that, we really are branching out to oncology basically to recruit the innate immune system as a therapeutic strategy for cancer. And as you mentioned, we are testing at least sort of -- we have 2 drugs that are ready to go to the clinic, and we'll test at least one of them in the clinic this year, and we'll see if this hypothesis pan out.

Great. And so how are you looking to position Alector and these early programs in the crowded oncology space?

Yes, the oncology space is indeed crowded, but it's primarily crowded with immune checkpoints for T cells, like the multiple anti-PD-1, anti-PD-L1 drug. We think that the innate immune system is still relatively open, means the only -- so the most famous drugs in the innate immune system is the CD47. I mean there are maybe several additional drugs that are in the clinic, but we think that the innate immune system is still an open field with very large potential for cancer. I think we're just starting to unearth the role of macrophages and dendritic cells and natural killer cells in cancer treatment. So we think that there is significant open there -- opening there. And although we are not expert in cancer per se, we are really expert in innate immunity, and that's where our strength is coming and that's where our unique angle to cancer comes to fruition.

Now shifting a little bit to management changes. With the anticipated appointment of a new chief medical officer at the end of May, what experience are you looking for them to leverage?

Yes. So we keep building our management team to anticipate the growth of Alector. Basically, we now have multiple drugs in the clinic, including a Phase II drug, multiple -- sorry, a Phase III drug, multiple Phase II drugs, multiple Phase I drug in a range of indications, again including Alzheimer's disease, frontotemporal dementia with progranulin mutations, frontotemporal dementia with C9orf mutation, ALS, and we are sort of planning on going into Parkinson's disease. So we have really -- we are going into oncology. So we have a really broad sort of breadth of clinical indications with multiple clinical stages. All our trials are international. So we're really building a broad, experienced leadership team to accommodate that. So we -- a few months ago, we recruited Sara Kenkare-Mitra from Genentech. She was the senior vice president of preclinical development at Genentech-Roche -- at the Genentech-Roche organization. She was leading or responsible and involved in all the marquee biologics that Genentech is known for, Rituxan, Herceptin, eculizumab, Avastin. And she has more than 15 approved drugs, more than 100 INDs filed. And basically, she is leading our R&D organization. In addition to Sara, we are looking forward to our new CMO, Gary Romano, joining at the end of the month. Gary again has extensive clinical experience in neurodegeneration. He was the head of the neurodegeneration clinical trials at Johnson & Johnson. He played a critical role in neurodegeneration at Merck. He was the CMO of Passage Bio. So we have a real -- so we are building a really deep clinical experience. We have Marc Grasso join us as our Chief Financial Officer after decades of experience in the banking industry. And we keep bringing really experienced managers and leaders to build a sustainable, large, complex organization.

So how do you expect these new management teams to help operationally position Alector to make clinical progress across the range of programs?

Yes. These are people that have tremendous experience in leading large organizations, in advancing complicated clinical trials at multiple stages. So basically, this is part of Alector maturation from basically starting as a discovery organization and now becoming a late-stage clinical organization. So basically, these people will facilitate this transition and our continued advancement and maturation as a company.

Great. Yes. So I just want to hit lastly on your preclinical progress because you also have a number of pipeline assets in the preclinical stage. So could you talk a little bit about that?

Yes. So we have a very -- sort of a broad pipeline of discovery programs. One of the programs that we are starting to talk about is a drug that targets a unique risk gene for Alzheimer's disease. The target is for transmembrane receptor called MS4A. It's a member of the CD20 protein family, and the human genetics told us that either directly or indirectly, this target control both the probability of developing Alzheimer's disease but also the multiple aspects of disease progression, including the age of onset, survival with Alzheimer's disease, the rate of brain tissue loss once you develop Alzheimer's disease, the rate of cognitive decline once you develop Alzheimer's disease, the rate of accumulation of beta amyloid and by the tau in the human brain. So we see, based on the human genetics, that this target is -- has a comprehensive role in neurodegeneration, and we were able to develop a drug that mimics and exceed the protective allele of this gene by multiple-fold, and we are very excited about taking the drug to the clinic this year.

Great. Thank you so much, Arnon. Thanks for joining us.

Thank you.

Thanks.