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

Well, thank you guys all for joining us and for those joining us from the webcast. Really appreciate the time this afternoon with the CEO from Alector Therapeutics. And I really appreciate you joining us for this conversation.

Maybe just at a high level, could you talk about what Alector is and with respect to the particular competencies that you guys have to drive your business forward.

Yes, absolutely. So our mission is really to eradicate brain -- degenerative brain disorders and the approach and the competence that we have developed is to integrate human genetics, immunology and neuroscience to develop a new class of drugs. So whereas everyone else in the field is going after misfolded proteins to cure neurodegenerations. So in order there are dozens of drugs going after A-beta for Alzheimer's disease, after TAU for Alzheimer's disease, after alpha-synuclein for Parkinson's disease, we have taken a different approach, we are recruiting the brain owned immune systems to counteract multiple disease pathologies. So we are really following what happened in oncology. In oncology, what really revolutionized treatment was that instead of killing cancer directly with the radiation or chemotherapy or toxic conjugated antibodies. We are now recruiting the immune system to do the work for us. So all the checkpoint molecules, the CAR-T therapy are really recruiting the immune system to go after cancer. We are conceptually doing the same thing in neurodegeneration we are recruiting the brain owned immune system to go after multiple disease pathologies. And so as a result, again, we developed competence in immunology and sort of all our drugs are based on human genetics and we have insights in our science to really know how -- what target to go after for what disease.

Perfect. And we'll go into them in more depth, but if you could just provide us an overview of the pipeline that you guys have and with maybe a focus on what the kind of next updates are going to be.

Sure. So we now have 3 late-stage clinical programs. We have a TREM2 activating antibody, TREM2 is a major risk gene for Alzheimer's disease. And we have just completed recruitment in Phase II double-blinded placebo-controlled trial, and we expect data in the next 6 months. And if the data is positive, we think that this could transform the field because it will be a fundamentally different approach to treat Alzheimer's disease. We have a Phase III drug for frontotemporal dementia with this, which is the second largest from of dementia for people under the age 60. As I said, we just completed recruitment, and we expect data by the end of 2025, and this will be a pivotal study, which would follow is the data justified at BLA and subsequent approval, and we received breakthrough therapy for this drug recently, and we have a Phase II drug in Alzheimer's disease is, again, another progranulin elevating drug, which we just sort of started Phase II recruitment and hopefully, we'll complete somewhere around 2026 or 2027. So we have 3 clinical programs. We have a pipeline behind that, that's focused on the larger neurodegenerative diseases, different types of Parkinson's disease, genetically stratified types of Parkinson's disease, Lewy body dementia.

Perfect. Maybe let's dig into AL002, which you mentioned is a TREM2 agonist. Maybe first, just explain that mechanism and the relevance it has in Alzheimer's disease.

Sure. So for many years, people thought that Alzheimer's disease is a disease that's focused on damage of nerve cells. So in Alzheimer's disease, you see neuronal death, you see significant reductions in the complexity of connections between nerve cells. Normally, each nerve cell is connected with 10,000 other nerve cells. In Alzheimer's disease, this complexity can go down by up to 50%. So people thought that it's a pure neuronal disease. But the recent human genetics suggested that actually, even though the pathology, the neuronal pathology, what causes the disease is actually dysfunctional immune system. And so the majority of a large number of the 100 or so risk genes that have been identified in Alzheimer's disease were shown to be, in a way, immune checkpoints for the immune system in the brain cell that called microglia. And among this risk gene there the most prevalent gene that was identified is a single transmembrane receptor called TREM2. So TREM2 leads to neurodegeneration in a little copy number dependent manner. If you don't have TREM2 at all, both copies of TREM2 are dysfunctional, you develop dementia by the age of 40 at 100% penetrance. If you have 1 good and 1 bad copy partially bad copy of TREM2 that's one-off, I think, over 60-point mutations now being identified. You increased the risk of developing Alzheimer's disease by up to 3 to 4-fold. And conversely, people that express higher-than-normal level of TREM2 appear to be protected. They have reduced risk of Alzheimer's disease. And if they develop Alzheimer's disease the rate of cognitive decline is lower than in people that have lower level of TREM2, the age of onset is delayed, the buildup of A-beta and TAU is delayed, the brain tissue loss is delayed, the conversion from mild cognitive inhibitions to full Alzheimer's disease is delayed. So there's very strong human genetic that is single transmembrane receptor that's expressed only on microglia that plays a key role in Alzheimer's disease. And because the human genetic shows that loss of function is detrimental as general function is protective. We develop a drug that mimic the gain of function feature. So our drug is activating TREM2 and it does both as a stand-alone drug and it synergizes with the natural ligand of frontotemporal.

Okay. That's super helpful. As you think then about the preclinical and potentially early clinical data that you all have generated with your agonist talk to us about how that kind of genetic correlation has translated into seeing clinical changes in patients?

So in preclinical context, we've seen efficacy in multiple models for Alzheimer's disease. We've seen efficacy in multiple models of multiple sclerosis. And in human in Phase I, we saw that our drug is able to engage the target and recruit the microglia immune cells in the brain, means we saw a dose-dependent saturable effect on multiple microglia activation biomarkers. So based on the animal model data, the human genetics and the Phase I data, we went to Phase II, which, again, we'll have data by the end of the year. And in Phase II, we see that the drug is well tolerated and intriguing things is that we see incidences of ARIA, means ARIA like event, ARIA is MRI-based imaging abnormality that was reported with anti-A-beta drugs and so far, all the anti-A-beta drugs that show clinical benefits were associated with increase of this MRI imaging abnormality and the features of the MRI imaging abnormalities that we see are indistinguishable from the abnormalities that were seen with anti-A-beta antibody cell. The simplest explanation is that we are somehow removing A-beta although, the trial is still blinded, we have to see by the end of the year.

Perfect. That's a great segue to my next question, which is we obviously are expecting this clinical data from the Phase II later this year. Maybe first, just could you provide an overview of some of the key trial design parameters in that study?

Sure. So this is a placebo-controlled, double-blinded study with close to sort of 400 patients. It's a 4-arm dose, there is a placebo dose and 3 dosing arms low, middle and high. It's a common close design trial. So by the end of the year, we'll have patients that were treated for 12 months or 18 months and for 24 months and people who completed the trial duration will move voluntarily to a long-term extension field. And the trial measures 5 different cognitive and activity of daily living and read out, the final readout is the CDR Sum of Box, which is what we used for additional clinical measures in addition [Audio Gap] in TAU by PET imaging, A-beta 40, 42 multiple type of phospho-TAU by, in the serum and the CFS. We are measuring multiple biomarkers for neuronal damage for sort of astrocyte dysfunction again, periodically, and we're measuring very extensively changes in the protein configure before and after treatment. So by the end of the year, we expect that the totality of data, again, combinations of multiple clinical readouts, imaging and biomarkers we really tell us if we have an active drugs.

Okay. So maybe a couple of additional questions on the trial design. As you thought about patient selection and inclusion criteria, what's the patient population that you're going after with the study?

It's an early Alzheimer's disease, like CDR global score between 0.5 to 1. It's somewhere between [Audio Gap]. And so in donanemab, so it's mild cognitive impairment to early Alzheimer's disease. Even though we focused on early Alzheimer's disease, we think that because of the broad mechanism that drug would be able to be effective in both early and late-stage diseases and like anti-A-beta antibodies, but the trial design is, again, similar to what is seen with anti-A-beta antibodies with regard to patient baseline.

Perfect. It's obviously going to be a data-rich so you listed a number of endpoints. But as you think of which ones will be most informative as you think about progressing this program forward, are there a couple that you're most focused on? Or where you think you can see the greatest changes?

Yes, we think that the clinical readout will be really, really important to see the Alzheimer's books, we need to see at least positive trend in business measurements. We think that TAU reduction would be very important. So I'm looking forward to see these 2 things. And again, for TAU, we are looking both by PET imaging and multiples serum and CFS, phospho-TAU subtypes like phospho-181, it works, which means, which yet again represent what you see in the brain. So I think clinical [Audio Gap] involved TAU and A-beta, I think...

Perfect. And then from a safety perspective, you obviously referenced ARIA. Is there anything else you're monitoring from a safety point of view?

Yes, we are monitoring a lot of things. We have a safety committee that is unblinded to the data and meet every quarterly, and they are looking at all set which are including detrimental effect on cognitive decline. So yes, [Audio Gap] ARIA area by MRI, very frequently, we are looking at the fact on detrimental effect on cognition. We look at all the other safety features. We don't see any drug-related like meaningful adverse effects, safety committee so far, we did not see any adverse effects. And also like incidentally 90%, over 90% of the patients that completed the trial and could elect to move to the long-term extension -- elected to move to the long-term extension study. So this suggest again that there are no adverse effects that prevent people from being treated and that people may see that there may be...

That was going to be my next question. Very good. Perfect. So as you think about the Phase II results and what like a good outcome would be I guess, how are you and also your partner and AbbVie is thinking about what kind of results would allow for like a go decision versus a no-go decision?

So as you mentioned, this study of this program is partnered with AbbVie a 50-50 sort of profit share worldwide, and AbbVie will have a team decision to make by the end of like once they see the data by the end of the year. And I think that the consensus or the agreement between us and AbbVie is that we want to see positive -- at least positive trend in multiple aspects, we want to see a positive trend in the clinical readouts and we want to see positive drug -- positive trend in the imaging and soluble biomarker. So like consistent positive trend in multiple features of the disease would be exciting for us means.

How long after they need to come, does AbbVie have to kind of make a decision on this?

So AbbVie has 90 days after they get the opt-in package. So by the end of Q1, I think 2025, they will have to decide. And if they decide positively, it is associated with $250 million payment, opt-in payment, and then they are taking over the Phase III execution. And again, it's a 50-50 worldwide profit.

Okay. So pending the decision is to move forward with the program, how are you thinking about development strategy in Alzheimer's disease, particularly given it's something of an evolving landscape right now?

Yes. So I think the key issue will be whether we can develop a stand-alone drug or whether you have to start considering combination therapies. I mean the Phase II or the stand-alone treatment, we think that the Phase III also will likely be a stand-alone, but we most likely will have an arm with a combination therapy. Like there is a natural sort of possibility for combination with anti-A-beta drug. What the anti-A-beta drugs do they just mark size of A-beta plaques and then they recruit the immune system to excavate or remove the A-beta. So anti-A-beta drugs are completely dependent on the brain immune system for any efficacy, there was an anti-A-beta antibody that Roche developed with -- well, the antibody region that recruits microglia was mutated and was inert, and this drug was completely inactive. So there is no question that you need active recruitment of the microglia, the immune cells to be effective and basically anti-A-beta drug mark the site for excavation. And we and hence, the number and the potency of the excavator, the microglia. So there is really a natural combination, and I think a lot of companies are excited about this possible combination, including AbbVie. AbbVie is developing an anti-A-beta drug that I think is going to read by the end of the year. So again, there will be a positive [Audio Gap] combination is needed.

And then I guess, remind us, you talked a little bit about it, but the structure of the deal with AbbVie, if you could just kind of walk through the key parameters of that agreement. And then I think you mentioned already the next milestones, but certainly, there's quite a few of them.

So the deal was signed as actually a preclinical program. We actually didn't even have a drug lead, when we signed the deal. We received at the time, $220 million upfront payment and AbbVie during the trial execution participated also with additional funding to support the long-term extension to support recruitment of additional patients. So they gave us additional, I think, something like $30 million in a way, milestones during the trial. And now that the trial is about to be completed, we are agreeing together on the content of the opt-in package and we reach conservation base. And again, once they receive the package, either at the end of the year or very early next year, they will have 90 days to decide whether they are opt-in and if they are opting in, they will take over the Phase III, the manufacturing and there will still be a committee that like share the development and we are already planning that for the Phase III.

Okay. Maybe switching gears to the latozinemab program and the progranulin franchise, maybe more broadly. Let's start with frontotemporal dementia. What is it? How has it caused and how many patients are there?

So frontotemporal dementia is a very aggressive form of dementia. It progresses up to 3x faster than Alzheimer's disease. It hits people under the age of 60. And whereas in Alzheimer's disease, the main feature is cognitive and memory decline in frontotemporal dementia, the major features are behavioral disinhibition in a sort of speech abnormalities and less like cognitive that -- but again, it's a very little disease. People die within 7 to 10 years once they are diagnosed, and it unfortunately hit people sometimes as early as in their 30s and 40s and there are both sporadic forms and genetic forms of the disease. And 1 of the main genetic forms of the disease, about 10% -- 5% to 10% of all the frontotemporal dementia patients is caused by say loss of function mutations in a secreted immune regulatory protein called progranulin. So people that have 1 good and 1 bad copy of this progranulin gene show 50% or less of the normal level of this protein, and they practically invariably develop the disease. So in total, there are about 160,000 frontotemporal dementia patients worldwide and 5% to 10% of this have this progranulin mutation.

Okay. So you mentioned that latozinemab is designed to increase progranulin and that has relevance in the disease. So maybe you could walk us through the data that you've shown to date in terms of how latozinemab works in patients.

So because loss of function of progranulin is associated with frontotemporal dementia, it's also associated with actually practically every other neurodegenerative diseases. So modest loss of function of progranulin is associated with Alzheimer's disease, with Parkinson's disease with late, which is form of dementia called or associated with TDP-43 pathology. It's associated with the accelerated progression of ALS. So progranulin is an immune regulatory molecule secreted immune regulatory and lysosomal chaperone, that seems to be a universal risk gene for Alzheimer's disease. And since loss of function causes the disease, we developed a drug that elevate progranulin and we did this by blocking, we are doing this by blocking a degradation receptor for progranulin. So conceptually what we are doing in this system is similar to what SSRIs are doing. So SSRI like product, block the reuptake of neurotransmeter and by that increase the level of neurotransmeter that's available into neurons in the neuronal menu. We are doing the very same thing. We are blocking the reuptake and degradation of progranulin. And by this, we elevate the level of progranulin that's available for nerve cells by 2 to 3-fold. So when we block degradation of progranulin we showed in animal models and in human that we consistently elevate the level of progranulin in the brain by twofold and in a Phase II open-label study, we were able to show that this elevation is associated with normalization of multiple disease biomarkers with slowdown of brain tissue loss and possibly most importantly, a slowdown on cognitive decline of close to 50%. And again, this was a small open-label study that compare historical controlled patients to our treated patients. But this data were sufficient for the FDA to award as a breakthrough therapy. So the data was considered by the FDA sort of quite valued.

Great. So obviously, you referenced some of the data points, but maybe you could expand a little bit on what that Phase II study showed, particularly with respect to the differences versus natural history controls. And I'd be curious if you could also talk to with the fidelity across patient population such that you believe this natural history control is a good replication of a placebo group.

So first, we looked at biomarkers before and after treatment in the same patient, so that independent of historical control. So if you look at patients, you see elevation of multiple lysosomal biomarkers, progranulin is a lysosomal chaperone, it enhances lysosomal function. So if you don't have progranulin there is compensations in the lysosomes to elevate multiple lysosomal proteins like different types of cathepsin. You also see elevation of complement proteins microglia when they don't have progranulin their stressed because the lysosome is not functioning and part of the stress or inflammatory mediators that are secreted as a result of the stress are complement proteins that actually end up destroying synaptic connections. So they see elevation in disease patients, you see elevation of lysosomal protein, you see elevation of complement proteins. And we showed that risk treatment, we normalize amount of like 9 different lysosomal and inflammatory proteins. Again, this is in the same patients before and after treatment. So in addition to look at cognitive decline and a brain tissue loss. We looked at historical control, and we match patients based on the level of cognitive decline at baseline, and then based on the level of neurodegeneration biomarkers like neurofilament based on age, gender, the subtype of frontotemporal dementia that we had. And this was all done blindly and we identified control patients blindly. And then only after we identify the control patients, we looked at the rate of the cognitive decline. So this historical control patients show a decline of about 6.2 points over 12 months, whereas our treated patients show about half of this decline. And similarly, when you look -- we look by volumetric MRI, the rate of brain tissue loss, both in the ventricles, which is basically the open space in the brain that sums all the brain tissue loss and areas of interest, we saw sort of slowdown in brain tissue loss. So again, it's an open-label study. There's a lot of skepticism, but the FDA reviewed this data and so that they are strong enough to allow us break-through therapy.

Yes. And on the back of this data, you have a Phase III study that's ongoing. Talk to us about the key kind of parameters around that study and when we'll get the next data readout?

Yes. So we have completed recruitment for a pivotal Phase III study. It's, I think, 103 symptomatic patients and 16 presymptomatic patients that are mutation carriers. It's a 96-week long study the main clinical readout will be the CDR and STB, like I said, CDR that's tailored for STB the same as Alzheimer's disease, but with 2 additional measurements for behavioral and reach. So that's a clinical readout that was agreed by the FDA and by the European Regulatory Agency. We are measuring tissue brain volume over time. Again, the idea is if we have an effective drug, the rate of brain tissue loss will slow down. We are measuring multiple biomarkers, for example, in the Phase II, we were able to show normalization of GFAP, which is, again, inflammatory astrocyte biomarkers, it's elevated in STB and with treatment. We show normalization, we are measuring neurofilament. So we have multiple clinical readouts, imaging readouts and biosettlement, CSF biomarker readout and the FDA agreed that sort of the integration of this data could be sufficient for approval.

Okay. Very good. You also have AL101, which is similarly targeting progranulin. Maybe how is that drug designed to differ from latozinemab? And why does it matter in the context where it's being studied?

So AL101 is an antibody drug, again, that blocks degradation of progranulin, mechanistically AL101 and 001 are very similar. AL101 has a different pharmacokinetics. It's a longer-acting drug. So you can either change the dosing regimen for less frequent or you can reduce the dose and we decided for the Alzheimer's trial to reduce the dosing regiment and the scientific rationale for treating Alzheimer's disease with progranulin elevating drug is both human genetics and animal models. So human genetics shows that even a modest reduction in progranulin in genetic mutation that reduce the expression of progranulin by 15% increase the risk of Alzheimer's disease, progranulin is 1 of the official risk gene for Alzheimer's disease. And animal model study show that elevation of progranulin even beyond normal level is protected. So we are basically, again, testing this progranulin elevating hypothesis in Phase II. And again, the drug is blocking progranulin degradation and has a longer half-life than that...

Sure. Could you just remind us of that Phase II study? What are the endpoints and patients you're looking at? And when will we get a clinical update there?

So it's similar study to what we did with 002, TREM2 activating drug. It's a study with about 282 patients. It's a 3-dose arm study. It's 18 months long study. The readouts are going to be, again, CDR Sum of Box plus I think 4 other clinical measurements for activity of daily living PET imaging for A-beta and TAU multiple soluble biomarkers. So it's generally typical Alzheimer's disease.

Perfect. So I think you're planning to spend more time on this at an R&D Day next week, but could you just talk high level about the rest of your pipeline with a particular focus on how you think about the assets or targets you pursue and where you think Alector is best positioned to kind of solve these problems?

Yes. So next week, we are going to have a webinar on our blood brain barrier technology and you're all invited. We are now integrating blood brain barrier transfer technology to many of our drugs and blood brain barrier technologies enable like enzyme replacement therapy for brain disorders, protein replacement therapy for brain disorder, improvement in antibody access to the brain and even nonprotein therapeutics like ASR and other nucleic acid therapies with enhanced brain penetrants. So you'll hear again in the seminar a little bit about our next-generation drug or drug candidates. We are disclosing 2 programs on Parkinson's disease. One is a GKs enzyme replacement therapy. GKs is a lysosomal enzyme that is mutated in about 10% of Parkinson's patients and about 12% of Lewy body dementia patients. So we think that enzyme brain penetration -- enzyme replacement therapy could be beneficial for a large portion of Parkinson's and Lewy body dementia patients. We are working on another Parkinson drug targeting GPNMB. GPNMB is a risk gene for Parkinson's disease. And again, there is a protective and risk release, and we are mimicking with a drug, the protective and; all, this will be more likely for sporadic Parkinson's disease. So we have a pipeline of genetically validated -- human genetically validated drugs or both Parkinson's additional drugs, for Alzheimer's disease, Lewy body dementia is something that we work on. We are doing on multiple sclerosis sort of not from the immune suppression aspect, but for myelin replacement aspect, we work on ALS. So we have a pipeline of drugs that, again, everything is based on genetic, human genetics that sort of increase the probability of technical success. And in many cases, we'll integrate our blood brain barrier technology into this pipeline.

Okay. So then with that in mind, the robust discovery activities that you have going on, how should we think about the right cadence for new INDs in a given year from a...

Yes. Long term, we want to have at least 1 IND annually, maybe more than that.

Okay. Last question. It's biotech cash runway. Where are you? When do you funded and tell?

So we have funded through 2026. This is 2 years beyond our 002 TREM2 a full year beyond our 001 data and we are going to be very close to the Phase II with 101 Alzheimer's data. So hopefully, we can squeeze 3 clinical readouts with our runway plus sort of our pipeline drug. And this is excluding any milestones or payments from large pharma or any other conglomerate.

Perfect. Well, thank you so much for joining us. Great to have you all as well. Great. We'll wrap it up there. Thank you.

Thank you.