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

So we really -- means we were not one of the pioneers, we were the pioneers that means we were the first to develop this drug, first in the clinic and are still years ahead of everyone else. So TREM2 is really part of our broad approach to really recruit the brain immune system to counteract node neurodegeneration. So broadly, what we do is very similar to immuno-oncology and what really revolutionized cancer in the recent years is that instead of killing cancer directly, we now recruit the immune system to counteract to cancer. And we do the exact same thing instead of going after individual pathologies, like Abeta or tau, we recruit the brain immune system to do the work for us. And TREM2 is basically an immune checkpoint for the brain immune system, a cell type called microglia. And there are very strong genetic reasons to target TREM2. TREM2 is an activating checkpoint for the microglia. So people that have genetic mutations that deprived them of TREM2 completely, develop dementia by the age of 40 at 100% penetrants. Basically, every individual that miss, that don't have the TREM2 gene, developed early onset dementia. Likewise, people that have one good and one bad copy of TREM2 have 3 to 4x higher risk of developing Alzheimer's disease. It's a similar risk of -- that you would have if you have one copy of ApoE4, which is the most famous risk gene for Alzheimer's disease. So loss of function of TREM2 invariably leads to dementia. And conversely, in animal models, people show that if you overexpress TREM2, you protect from dementia. So there are both gain and loss of function rationale, like the loss of function is human genetics, the gain of function is animal models. So we develop a drug that activate and enhance the functionality of TREM2. And we showed in multiple animal models that this drug is effective. In an Alzheimer's model, this drug protect nerve cells from damage caused by Abeta pathology, it improves behavioral deficits, it compact the Abeta plaques, it really counteracts the Abeta plaque pathology, and it's generally beneficial. And we also show that our drug is effective in a model for multiple sclerosis because in multiple sclerosis, what you need is to clear the myelin debris before you can regenerate the myelin. And if you activate TREM2, you enhance the microglia, the microglia are the garbage collector in the brain, you accelerate the myelin debris clearance and then you enable regeneration. So TREM2 activating drug really recruit the immune system in the brain to clear the brain for multiple misfolded protein and to exert multiple additional beneficial effects. So we took the drug, again, from the animal models to the clinic and in healthy volunteers, we show that we indeed are able to engage the target and unable to -- and able -- sorry, able to engage the target and able to recruit the immune system in the brain based on multiple biomarkers. And now we are in the end stages of our Phase II in Alzheimer's patients, which is double-blinded, placebo-controlled. And by the end of 2024, we will know if this drug works. If this general approach of recruiting the brain immune system to cure neurodegeneration is effective. And in our sort of hope and expectation is that this approach will be as transformative for neurodegeneration as immuno-oncology is for cancer.

Great. So from the time you started the TREM2 program, the landscape of AD immunotherapy has dramatically changed, as we know. So how do you see the development surrounding the anti-amyloids with respect to your TREM2 program? And how and where does TREM2 fit in the landscape?

Yes. So the field is changing in a way that they are probably going to be at least 3 accelerated approval or eventually full approval drugs that all target that beta-amyloid misfolded protein in Alzheimer's disease. All these drugs seem to have like a glass ceiling of efficacy of around 30% over 18 months. So it's really exciting for the field that there is a drug that show some efficacy in Alzheimer's disease, but the efficacy is still very modest and there is a lot of room for improvement. We think that our drug could have sort of better efficacy, where we have indications that our drug can also remove beta-amyloid based on ARIA events that we can talk about in a minute. But the mechanism of action of our drug is much broader than just removing beta-amyloid. The immune system in the brain which we are targeting was shown to regulate the connections between nerve cells and optimize them. It regulates all the other support cells in the brain that replace the myelin, the plastic wrapping on the cells, it regulates the cells that [indiscernible] the nerve cells, it regulates the vasculature in the brain. So we expect very broad beneficial effects of our drug way beyond removal of beta-amyloid. And as a result, we expect better efficacy with regard to magnitude. So we think that our drug will have a room as a stand-alone drug with at least as good likely better efficacy. And also very importantly, our drug will be able to work in combination with the approved anti-Abeta drugs. What the Abeta drugs are doing, they really tag the misfolded protein, they just bind the misfolded protein and then they call the immune system, the microglia that we are targeting to remove to dislodge the misfolded protein. So the immune system in the brain are really the excavator. These are the cells that remove the misfolded protein. Without them, the anti-Abeta antibodies don't work at all, they are just binding to the misfolded protein, but they don't prevent the toxicity, they don't cause removal. You need the immune system in the brain to remove the misfolded proteins. And if the immune system in the brain is aging, senescing, is not functional, this approach is not going to work well. So we have a drug that reprogram and hence, increase the number of the excavators, the immune system in the brain. It's a natural combination, natural partnership with anti-Abeta antibodies. So the combination, I think, has a lot of potential to really lead to a much more potent therapy for Alzheimer's disease.

Right. And you mentioned about ARIA, what's your thought about ARIA?

So as you know, all the anti-Abeta antibodies, there have been 3 of them now, at least 4 of them that were tested, and in every case where there is removal of beta-amyloid from the Alzheimer's brain, there is also an event called ARIA, which is amyloid-related imaging abnormality that can be observed with MRI. So in most of the cases, it's just an MRI observation. There is no clinical symptoms, but you see sort of changes on MRI in the brain parenchyma and sometimes around the vasculature. And so far, every drug that remove Abeta is also associated with this MRI abnormalities. And we, with our 002 TREM2 drug, we also see this MRI abnormalities, which are very -- in a very similar characteristics to the anti-Abeta antibodies like very similar in the time of appearance, in the fact that they are reversible, in the fact that they respond to the same drugs. And in the fact that they are more prevalent in ApoE4 carriers. So the ARIA events that we see with our drug in appearance are very similar to the ARIAs that all the anti-Abeta-antibodies show. So from this, we extrapolate that our drug may also remove beta-amyloid to a similar degree. So this is an exciting signal for us that in addition to engaging the immune system, we also are already having indications that we may remove beta-amyloid. And again, removal of beta-amyloid will be just the tip of the iceberg. We think that our drug is going to do many more beneficial things beyond removing of a single misfolded protein. So we are very excited to see the -- to unblind the data and see the cognitive efficacy, the removal of beta-amyloid, the effect on tau pathology, the effect on brain tissue loss. So we think that, again, we have multiple biomarkers and clinical evidence that the drug is active, and we are very excited to see the data at the end of 2024.

Very nice. So what is the data that might be most important for Alector, so that which might be the decision point where you decide that the drug is ready to move to the Phase III program?

Yes. So it will be the sort of the entire package. So we are looking at 4 different clinical endpoints like cognitive endpoints, the CDR and [indiscernible] and like basically, there are multiple different cognitive endpoints, and we'll see if there is any positive trend there. So this will be one very important thing. We are looking at multiple biomarkers. We are looking at Abeta 40 and 42 in the CSF and serum. We are looking at different forms of tau in the CSF and serum. We are looking at tau and Abeta by PET imaging in the brains. We are looking at MRI sort of brain tissue volume. So it's going to be sort of an extended package of liquid biomarkers, imaging and cognitive data that will tell us whether we have an active drug that justify go into Phase II. And as you know, this program is partnered with AbbVie, it's a 50-50 profit share. We received $205 million cash, $20 million in stocks when the partnership was formed, and AbbVie has an option to join the drug after the end of Phase II. So basically, in early 2025, they will have to decide whether they participate in the drug development. If they participate, they have to pay us $250 million opt-in fees and then they are going to do the Phase III and it's going to be a 50-50 profit share worldwide. So we more or less agreed on what package will be required for AbbVie to decide on their opt-in. And again, it's -- they don't expect even a full clinical data. They just want to see a trend in clinical benefit and a combination of all the biomarkers that we'll just confirm going into Phase III.

Got it. And let's talk briefly about your -- like the way -- it's still early, but still, I think it will help the community to understand. Like how different or similar might is 002 Phase III design be from other Abeta immunotherapies, especially in the context of -- with the current Abeta amyloid, it looks like that they have figured out a way to perfect the trial design.

Yes. So yes -- so yes, absolutely, means we are going to go after early stage of Alzheimer's disease, and we are improving the clinical trials based on what we see. For example, it's now -- sort of there are more and more evidence that blood biomarkers for tau could possibly substitute PET imaging. So we are doing many more sort of liquid biomarkers, which are much simpler and you can take them much more frequently. We are looking at all sort of different companies are using different cognitive tests, not sort of beyond the standard CDR, sum of boxes, and sort of we are looking at multiple cognitive readouts. We are looking at maybe stratify patients more precisely based on the level of tau. And we are still in discussions, but we are thinking of how to include people that are on Abeta therapy in our trials. So it's most likely that basically we will just include everyone that's on stable Abeta therapy in our trial, and we'll just stratify them to control and to our treated group. The same way that we now do for the symptomatic [indiscernible] for example. So basically, everyone that's on current Alzheimer therapy will be included in the trial. And we think that it's -- it will be interesting because, as you said, we see ARIA early on in the trial and the anti-Abeta therapeutics see ARIAs early on. And the ARIA usually appears once, and that means it's rarely repeats like with chronic trial. So once Abeta -- once patients are on stable Abeta treatment and thereafter the ARIA phase means we could treat with our drugs, and hopefully, there will be no additional ARIAs. So we think that the combination treatment is very doable. And again, it will be interesting to see if there is synergy and efficacy with the combination.

Sure.

And so again, we are talking -- we are still planning it. It's still early days and -- but we're absolutely going to learn a lot from the ongoing Phase III trials.

Got it. Let's delve a little bit on the ARIA, barring a few cases of ARIA in the ApoE4 homozygous patients, the trial has so far gone quite smoothly. So what has been your take on ARIA-E concerning the TREM2 program as you were thinking through Phase II, Phase III or beyond?

Yes, means, so -- yes, we saw higher incidence of ARIA in people that are homozygous for the ApoE4 variants. These are about, I don't know, 12% of the Alzheimer's population. In order to continue like the trial without changing the protocol, we decided to remove this patient population for now, but we are still including heterozygous, people have one copy of ApoE4, which is probably 70% of the Alzheimer's population. So our trial is now composed of ApoE4 heterozygotes and ApoE3 and ApoE2. We think that sort of the removal of ApoE4 is just for -- was primarily for operational convenience. We just wanted to get to the end of the Phase II as quickly as possible. We are thinking of ways of bringing the ApoE4 heterozygotes back to the trial and probably we'll have to do a slower dose drug -- dose escalation, just a longer drug dose escalation to mitigate the ARIA. And we are -- our plan is probably as part of the Phase III or as a small side study to bring the ApoE4 homozygous back to the study. We think that, again, that ApoE4 heterozygotes could still benefit from the drug that, again, the ARIA may represent aggressive removal of beta-amyloid from blood vessels that reduce -- that leads to some microhemorrhages and the ARIA events. So we are not giving up on the ApoE4 homozygous. We just delayed testing them, so we can really see if the drug works as fast as possible.

Correct. Very helpful. So that kind of brings us to the last question for this webinar. Where do you see Alector in the next 5 years?

Yes. Maybe I'll take a shot at that, Ananda. It's an exciting time for the company. And as Arnon was articulating both for progranulin elevation and TREM2 activation, we're by far the most advanced in clinical development already. And we want to continue to progress those programs through key derisking events over the next 5 years. And there's some exciting ones, including major data readouts, potential regulatory approvals, commercial launch. We've transformed this company from pioneering science and systematically exploring this microglial hypothesis into being now a late-stage clinical development company, and we look forward to continuing to progress the company into a commercial company and with major transformative therapies in the context of neurodegenerative disease. And it's a very exciting time, and we're doing it as Arnon had previously noted with very exciting science, very exciting assets and strong partners and major areas of unmet need that are desperate for additional therapies, and we think our approach is one that's going to be additive to the existing approaches that are out there.

Yes. So in the next 2 years, we will have positive -- sort of hopefully positive or like we will have data in sort of 2 major clinical trials if we see in 2024, if we see positive data or TREM2, it could transform the Alzheimer's disease field and could expand to other neurodegenerative disorders. In early 2025, we will have positive data, hopefully for the frontotemporal dementia. And again, it could expand the drug for many other nondegenerative diseases. So in 5 years, we will have -- if all goes according to our plan, we'll have 2 approved drugs, at least for major degenerative indications. We will be very advanced in -- we'll have -- again, we'll have clinical data with the progranulin elevating drug in Alzheimer's disease, possibly in Parkinson's disease, possibly in ALS. We'll have a slew of new drugs that we are developing that are now in sort of preclinical stages. So we think we will be in a very strong position to really treat multiple neurodegenerative diseases with multiple drugs and will be revenue-generating company. Again, that's sort of our vision. And I think if things go as planned, again, we will sell the progranulin for FTD in the U.S. We will be able to expand the progranulin elevating drugs for other types of frontotemporal dementia like sporadic frontotemporal dementia is 150,000 people. We think that the drug is also -- could be effective for ALS, which is another significant population. At the same time, AbbVie will develop the drug for AD and PD. And again, if we see positive data, it would be huge markets. And so GSK will develop the drug for AD and PD. And at the same time, AbbVie will be in the midst of Phase III for TREM2. So I think we'll be in a very good like position with multiple approved drugs and a very robust pipeline.

Very nice. I think with that, we kind of come to the end of the fireside chat, I think it was very helpful for the investment community in general and for ourselves also to get a broad insight on what to expect as -- in the next 2 years in the Alector. Thanks so much.

Great. Thank you, Ananda.

Thank you.