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

Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analysts. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have Alector with Co-Founder and CEO, Arnon Rosenthal. Welcome, Arnon.

Thank you.

So for those who may not be familiar with Alector, can you provide a brief introduction?

Sure. So Alector was created about 10 years ago with the purpose of developing a novel therapeutic strategy for [dimentia] for older generation. So instead of going after misfolded proteins, which is what is the prevalent approach, we are recruiting the brain-specific immune system to counteract multiple disease pathologies. The scientific rationale for this approach is human genetics in the last 10 years or so multiple novel genes that increased the risk for, for example, Alzheimer's disease have been identified. And the surprising finding of this human genetics was that the majority of these genes are genes that are specifically expressed in the brain immune system. They regulate survival, proliferation, migration and function of this cell type. So even though in all the generation and specifically Alzheimer's disease are diseases where nerve cells are dying and connections between nerve cells are destroyed, the genetic cells or what causes this disease or what facilitate the diseases is dysfunctional immune system. So what we do, we really use genetic risk genes as levers to recruit, rejuvenate, repolarize, reeducate the brain immune system to counteract multiple disease pathologies. We view the immune system as the health care, the National Guard, the police force of the brain. And what genetics tell us is that either because of aging or because of genetic mutations, the police force in the brain stopped functioning and then a lot of things go wrong. Imagine what happened if you remove the police from New York City, there's going to be a lot of crimes happening, but the common denominator is that there is no law enforcement. And this is what we think happens in the brain. In the absence of the immune system, a lot of random things occur, like misfolded proteins accumulate and myelin is not replaced, synaptic connections between nerve cells are not replaced, the supporters are not functioning, the vasculature start to leak, a lot of bad things happen. And we think that by recruiting the immune system, we can repair most, if not all of these pathologies.

Great. But before we dive into the pipeline programs, can you talk about the blood-brain barrier technology and how it's different from what others are doing?

Sure. So as you know, the brain has a barrier that prevents large molecules from entering from the blood or from the serum. So all our drugs are antibodies. They are large protein molecules. Their ability to penetrate the brain is pretty limited. But so far, we have 3 drugs in late-stage clinical phases and all of them appear to enter the brain in sufficient quantities. But despite that, we and others are developing technologies to improve the transport of proteins to the blood-brain barrier. Everyone is easy, most people are using either the transferrin receptor, which is expressed on the endothelial cells in the blood-brain barrier, a Trojan horse basically to take a ride to each hike on the transferring receptor that brings iron to the brain, to transport large molecules or other carriers that transport essential minerals or proteins to the brain. And we fundamentally are doing the same thing, but we have 3 different carriers that we are using. We have very large flexibility in how we can optimize the brain carrier technology to the specific targets with regard to affinity, with regard to how we link the carrier to the specific drug. So our technology is main feature is that it has very high level of degree of flexibility, optimize the affinity, optimize the valency and optimize the configuration of the interaction between the drug and the blood and barrier technology.

Great. Let's start with latozenimab. Can you talk about the biologic and genetic rationale for targeting progranulin in different degenerative diseases?

Sure. So latozenimab is a drug that elevates a secreted protein called progranulin. Progranulin is an immune regulatory molecule as well as a survival factor for nerve cells. And in addition, it's also an enhancer of the lysosomal organ. The lysosomes are really the organ that process and degrade misfolded proteins, for example. And progranulin has very strong genetic links to neurodegeneration. In human, there are 3 types of mutations in the progranulin. There are people that have no functional progranulin at all. These people develop dementia in all the generation, blindness, seizure. They're teenagers and they have a very short life span. There is another group of individuals that have one good and one bad copy of progranulin. These people make 50% of the normal level of progranulin or sometimes even less. And they invariably develop another disease called frontotemporal dementia. Frontotemporal dementia is an early onset type of dementia. It hits people under the age of 60, and it's up to threefold faster and more aggressive than Alzheimer's disease. And there is a third class of mutations, these are regulatory mutations in the progranulin gene that reduces progranulin by 10% to 15%. And this modest reduction is enough to increase the risk of developing Alzheimer's disease, Parkinson's disease, ALS or another prevalent neurodegenerative disease called LATE which is a dementia that is associated with TDP-43 pathology instead of A-Beta [indiscernible]. So lots of function of progranulin invariably lead to neurodegeneration. So we developed two drugs that elevate progranulin. The way they do it is by blocking the gradation or reuptake of progranulin. Conceptually, our drugs are very similar to the SSRI neurotransmitter uptake inhibitors, like Prozac that prevents the reuptake of neurotransmitters and by that, increase the level of neurotransmitters in the brain by two to threefold and basically lead to therapeutic benefit. Our drug is doing the exact same thing. It's prevented reuptake and the gradation of progranulin. And by that, it increases the level of progranulin by two to threefold in the brain and serum. And we think that this elevation of progranulin could be therapeutically beneficial for multiple diseases because of the human genetics. So we started with frontotemporal dementia, which, as I said, subsets of this disease have -- people have genetic mutations, which lead to one good and one bad copy of progranulin. We are in Phase III in this patient population. We are sort of about to complete recruitment this year. And sort of recruited between 90 and 100 patients, and we think that, that will be plenty to see therapeutic benefit. As you said, we are developing progranulin-elevating drug for other disorders because both human genetic shows that even modest loss of function of progranulin leads to increased risk and conversely, animal models for Alzheimer's disease, Parkinson's disease, ALS show that overexpression of progranulin is therapeutically beneficial. So we are now, together with GSK, which partnered with us on this progranulin franchise, we'll be starting a Phase II trial in Alzheimer's disease. Again, the human genetic for Alzheimer's has the showed that even 10% to 15% reduction in progranulin is constituting [increased] risk. And animal model studies show that overexpression of progranulin is therapeutically beneficial. So there are both animal model studies and human genetic studies supporting elevation of progranulun in Alzheimer's disease. And the same story is also for Parkinson's disease. Progranulin loss of function is a risk for Parkinson disease and elevation of progranulin showed to be beneficial in models for Parkinson's disease. So we think that progranulin could be, in a way, universal therapeutic agents for multiple types of neurodegeneration, and we are pursuing this together with GSK.

Can you talk about the INFRONT-2 study that you conducted in FTD and what you saw?

So as I mentioned, we are now in Phase III pivotal study in FTD that is caused by progranulin mutations. Before conducting the Phase III, we conducted an open-label Phase II study in FTD with progranulin mutation. And since it was an open label, we compared the data to age and disease matched historical control or what we call digital twin. What we saw based on this comparison with historical control is that: first, we were able to elevate progranulin back to normal level after one injection. So we were able to elevate progranulin from 50% of normal level to 100% of normal level. And this normalization was sustainable for as long as we provide the drug. So once you provide the drug, you cannot distinguish based on the level of progranulin, whether these patients have mutant progranulin or whether they have 2 normal copies of progranulin. So the first thing that we are able to show you that we can restore progranulin best to normal level, and there is sort of no adverse effect associated with this restoration. So it's a complete enzyme replacement, we replace the missing protein back to normal level. We then looked at multiple biomarkers that are known to be elevated in the disease. And these include lysosomal proteins, this includes complement-mediated proteins and also multiple neurodegeneration proteins like GFAP. And we saw that we were able to normalize all these proteins. For example, GFAP is elevated up to threefold in frontotemporal dementia, and we were able to normalize it both in the serum and in the brain. And GFAP is one of the biomarkers that, for example, lacunumab, the anti-a-beta antibody used to show efficacy. In addition to normalization of multiple biomarkers, we looked at the rate of brain tissue loss using volumetric MRI and again, compare to age-match controls, we were able to show that we slow down brain tissue loss. It was most profound in the ventricles in the open space in the brain where we were able to show a slowdown of ventricle expansion by 50% compared to age-match controls. Finally, we looked at the rate of cognitive decline. And again, compared to age-match controls that started from the very -- from the same cognitive deficits at baseline, we saw after 12 months, a slowdown of cognitive decline of 48%. So overall, the integrated data suggests that our drug is able to really normalize multiple disease biomarkers, slow down brain tissue loss and slowdown cognitive benefit. And again, this was a very small open-label study compared to age-match control. But if this repeat in our pivotal Phase III, we will have a very profound drug for frontotemporal dementia with progranulin mutations.

You've talked about how you're in Phase III right now. Can you talk a little bit about that study? And what kind of difference do you need to see in the primary endpoint to be clinically meaningful?

So our current updated study involved symptomatic -- early symptomatic FTD patients. We had discussions with both the FDA and with the European regulatory agencies. And we agreed on the clinical endpoint, which is CDR sum of boxes, which is tailored for FTD. It has 2 additional domains compared to Alzheimer's disease. And in addition, again, we are going to look at for volumetric MRI. We are looking at multiple end biomarkers. And we agreed on the number of patients that we would need, and it's going to be between 90 and 100 patients. We already have this number of patients. So we are practically finished recruitment. And we are looking for ideally 40% effect size, but we can detect 25% effect size, and we think that 25% effect is clinically meaningful. There is no complete consensus of what would clinically meaningful be because there are no approved drugs for this disease. But sort of from what we understand from KOLs, even 25% slowdown in cognitive decline would be clinically meaningful. So that's the lower level that we would detect and expect to be meaningful.

Now you're also developing latozenimab for FTD C9ORF72. Can you just remind us what you saw in this cohort from it? And then I guess, given the small sample size and variability in the disease progression, was it difficult to interpret with it on the treatment effect? Like what are the next steps for this program?

Yes. So we are -- we currently sort of are focusing on FTD with progranulin mutation. So there is another subset of FTD, which is caused by mutations or by repeat in another gene C9ORF72. In both progranulin FTD mutations and C9 of FTD mutations, the [indiscernible] misfolded protein is TDP-43. So I think that there is a lot of mechanistic similarity between the 2 diseases. And because of that, in our open-label Phase II, we run one arm with progranulin mutation FTD, it was a very small study. We always see elevation of progranulin by 2 to 3 fold when we treat patients. And yes, we saw some normalization initially of GFAP and some cognitive decline -- slowdown in cognitive decline. But this is, again, a very small study. And we don't think that, that sort of the data should sort of -- are informative at this point. We are very interested in the indication. Again, because of the mechanistic similarity with relation to TDP-43, but we want to see more efficacy data with the progranulin mutation carriers before we advance a larger clinical trials with the C9orf mutation carriers.

Great. Well, let's move to AL002. Can you talk about the rationale for targeting TREM2 in Alzheimer's disease?

Yes, absolutely. So TREM2 is a single transmembrane receptor that's expressed only on the microglia immune cells in the brain. It's an activating checkpoint receptor for the microglia. It sense damage, so the ligand for TREM2 are lipids an A-beta and APOE as different signals that really tells the microglia that there is a damage occurring somewhere in the brain and what the thromtoreceptors does, it first -- it brings microglia to the site of injury. It's a chemoattractant to the site of injury, and then it activates or change microglia to better respond to the injury. It's changed the gene expression profile of microglia. It induces proliferation of microglia. So there are more immune cells that can respond to the injury. It increases the ability of microglia to [indiscernible] or to remove damaged proteins and misfolded proteins. It's overall what's called repolarize or change the microglia to better respond to the threat. And there is a lot of -- there is very strong human genetic data linking TREM2 is now the generation. So if you don't have TREM2 at all, you develop dementia at the age of 40, 100% penetrant. If you don't have TREM2, you're destined to develop neurodegeneration. If you have one good and one partially bad TREM2, you increase your likelihood of developing Alzheimer's disease by 3 to 4 fold, which is the same risk you would have if you have one copy of APOE4, the most famous risk gene for Alzheimer's disease. And in addition to the genetics, there are measurements of the level of TREM2 or soluble TREM2, which is a cleaved fragment of the TREM2 receptor and the relations between the level of soluble TREM2 and multiple aspects of Alzheimer's disease progression. And invariably, what you see is that high level of soluble TREM2, which in our view, and in the field's view represent high level of TREM2 in the microglia membrane. So high level of soluble TREM2 are inversely associated with cognitive decline, so high level of TREM2 leads to slowdown in cognitive decline, to slow down in the rate of brain tissue loss in Alzheimer's disease, to slow down in the rate of conversion between mild cognitive inhibition to Alzheimer's disease, to a later age of onset of Alzheimer's disease, to better survival with Alzheimer's disease. So basically, every measurable aspect of Alzheimer's disease is beneficially impacted by high level of TREM2. So we developed a drug that basically mimic the human genetics and a high level of TREM2 activity. We developed a drug that agonize, activates TREM2. And again, mimics the human genetics and mimics the high level of TREM2 that you see in sporadic AD. And with this drug, we showed initially in animal models that we can elicit benefit. And this was bought in 2 different models of Alzheimer's disease and in a model of multiple sclerosis with a drug to the clinic and in healthy volunteers, we showed that we can engage the immune system in the brain. And we can elicit multiple biological responses based on biomarkers that are -- we think are beneficial for brain health. And then we took the drug to Phase II clinical trial, in Alzheimer's disease. So this was placebo-controlled, double-blinded study in early sort of in mild to moderate Alzheimer's disease. We initially planned to recruit 264 patients, but there was incredible interest in the drug and in the program. So we ended up recruiting 100 patients more than originally planned like we recruited over 380 patients. It's a 3 dose arms, placebo -- placebo-controlled and low, medium and high arm. And again, we completed recruitment. We just announced that we finished recruitment last week, and we expect data by the end of 2024. And this drug is partnered with AbbVie. They have an option deal. And once they see the Phase II data, they have 3 months to opt-in. And if they opt-in, they have to pay $250 million opt-in fees. And then it's a 50-50 worldwide profit share. So just to go back to your original question, TREM2, we think that after APOE4, it's the strongest sort of -- has the strongest genetic link to Alzheimer's disease, both the genetic form and the sporadic form of Alzheimer's disease. The mechanism of action is very clear. It's an activating checkpoint molecule for the brain immune system. And we have a drug that really mimic the beneficial effect of TREM2. And we will see within a year, whether this immune therapy for Alzheimer's disease is working.

So one follow-up question on the Phase II that you talked about. Can you just talk about what you need to see to. consider that study a success?

Yes. We are targeting, again, 40% effect size. In the Alzheimer's disease field, the anti-beta antibodies sort of got approved based on somewhere between 25% and 30% slowdown in cognitive decline over 18 months. So we think that, that's the range that you'd have to see. And again, because of the very broad mechanism of action of TREM2 that we think that, again, recruiting microglia will lead to removal of multiple misfolded proteins, not just A-beta, will lead to enhancement of neuronal function, of repair of connections between nerve cells, enhancement of support cells in the brain. So we expect broad activity, which will lead in our view to better clinical readouts. But even if we see similar clinical readouts to anti-a-beta, it's still a completely different mechanism that could be combined with anti-a-beta drugs. So any positive signal, we think, would really change the Alzheimer's field. And again, there is a natural combination between anti-a-beta drugs and our drug. What anti-a-beta antibodies do. They just mark A-beta plaques, and they recruit the microglia in the immune system in the brain to dislodge the A-beta plaques. The microglia are really the excavators. These are the entities that remove the A-beta. The anti-a-beta antibodies just marked the side that needs to be removed. And if the microglia is not functioning because of aging or genetic mutations, this combination is not going to work well. So the antibody against A-beta market side, and we have drugs that enhance the excavator. So there is really a natural combinations between these 2 classes of drugs.

Okay. And maybe one last question on TREM2. Recently, one of your competitors decided to discontinue its TREM2 candidate, and this was attributed to both the candidate and TREM2 biology. So can you just talk about how this impacts your confidence in the TREM2 as target? And then what gives you confidence that AL002 has sufficiently wide therapeutic window?

Yes, this does not change our confidence at all means we think that the side effects that led to the termination of this trial is completely due to the drug designs, not to the target sort of -- because of the drug designs. This company have seen cases of anemia in human. And the anemia is directly linked to the blood and barrier technology that they use, they use -- that sort of transfer receptor to transport the antibody to the brain. And this transferring receptor technology has been known for 20 years to cause dementia -- to cause anemia. We have not seen any anemia case that's drug-related in our drugs. We treated almost 300 patients for up to and over 2 years. We have not seen a single case of drug-related anemia, means the only the positively adverse effect that we saw was ARIA, which is within mechanism based, and we can talk about it. So basically, we have very strong confidence in this drug. We don't -- didn't see -- in nonhuman primate, we went up to 250 mg per kg, which is 4x -- more than 4x higher than our -- highest in human. We didn't see any adverse effect -- so we didn't really identify dose-limiting adverse effect with this drug. So we completely are confident that the adverse effect that we reported are due to the drug design, not to the target and not to our drug.

Okay. Great. Maybe one last question. Can you just remind us how much cash you have and runway does that get to?

Yes, we have over $600 million in cash. It's going to run us through 2025 and through the 2 main milestones like the completion and data of the Phase II in Alzheimer's disease with 002 TREM2 antibody and the completion of the Phase III with 001 in FTD with frontotemporal dementia. So we'll have at least 2 major clinical readouts in major types of neurodegeneration with this cash.

Great. It looks like we'll leave it there. Thank you so much for your time.

Thank you.