Avidity Biosciences, Inc. (RNA) Earnings Call Transcript & Summary

Good afternoon. Thank you for coming to the Morgan Stanley Healthcare Conference. My name is Rock [indiscernible]. I'm a Managing Director in the Investment Banking division at Morgan Stanley. I just have a brief disclosure to read. 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 representatives. So today, we have the pleasure of hosting the management team from Avidity. Thank you so much for coming. I know this is a busy conference, so I appreciate you coming. Perhaps before we get started, would you mind doing a quick round of introductions, please?

Sure. Hi, I'm Kath Gallagher. I'm the Chief Program Officer at Avidity.

And I'm Mike MacLean, I'm the Chief Financial Officer.

And I'm Kat Lange, Chief Business Officer.

Great. Before we jump into your various programs, could you remind us where your pipeline currently stands? And the most important catalysts you're looking forward to in the next 6 to 12 months?

Yes. First of all, thank you very much for having us here at the Morgan Stanley Conference. This is our inaugural Morgan Stanley conference, and we're very happy to be here. So as we sit here today, I kind of just remember back like 5 short years ago, we went public and we were a preclinical company. And now I'm about to walk you through what our next 12 months look like. And we actually sit here with 3 late-stage clinical trials. And we're looking forward to 3 BLA filings in a 12-month period starting this year. At the end of the year, we'll file a BLA for our first product, del-zota for patients with DMD44. And this will be eventually our first launch product. We expect to launch that product in 2026. And then we'll have 2 other BLAs for our del-desiran product and myotonic dystrophy and our FSHD product, which is del-brax. And those will both be filing BLAs in the second half of 2026. So it's really amazing to be sitting here 5 years later looking to 3 potential launches by the end of 2027. More near term, what we're looking for is what we're going to execute on is data readout from our del-zota trial this month. And this data readout will be for functional data, and our EXPLORE44 LLE, it will look at participants that have been on drug for 12 months, 6 months in the EXPLORE44 trial and another 6 months in the LLE. And that adds to really unprecedented dystrophin data that we showed earlier as well as bringing down CK to near normal levels and sustaining it there. Also in the fourth quarter, we'll be disclosing our data from our MARINA-OLE, and this will be for participants who have been on the drug for 24 or more months. And what we're looking to show there is consistency in terms of our ability to reverse disease progression and sustain it. Also in the first half of 2026, particularly Q2, we will be showing the 30-week cutoff data for the efficacy in our HARBOR trial. So our HARBOR trial is in for myotonic dystrophy, it's for our drug del-desiran. And it's a 54-week trial, but at 30 weeks, we will have completed all of the efficacy testing or measurements. And so we expect to disclose that we have met our primary endpoint and the p-value of that. Of course, the trial continues since it's -- there would only be week 30 and it continues till 54. So it will still be a blinded study, and we will be able to disclose more once that study is completed. And then also in Q2 of 2026, we'll have completed our FORTITUDE biomarker cohort. So this is for our FSHD program with the product del-brax and this is going to be a completed study for a biomarker accelerated approval program. So in Q2 of 2026, we will show all of the data from that study. And as we do all that, we continue to progress forward with other neuromuscular programs, precision cardiology franchise and bring forward our next-generation products.

Great. So over -- since long before going public 5 years ago, what have you learned across your muscle programs about their product design, long-term safety and dosing?

Kath, would you like to answer that?

Sure. I'm happy to. It's always fun. Thank you for the question on the AOC platform. We don't get it all that often. For people who are not as familiar with Avidity, AOC stands for antibody-oligonucleotide conjugate. And for all of our programs that are currently in the clinic today that Mike was just going through, they all utilize the same monoclonal antibody and the same linker and what changes for each is the actual therapeutic. So for 2 of those programs in FSHD and DM1, we're using an siRNA and for DMD, we're actually using a PMO for exon skipping. In terms of what we've learned, it's been a pretty incredible amount. And I guess we're both wax and philosophical today because I'm also looking back on being here 4.5 years. And almost like to the day, 4 years ago is when we started to dose our first patient in the del-desiran trial of MARINA, and we went into that with this incredible set of information, but we also went into it knowing nobody has ever done this before. We were the first AOC ever to enter the clinic. And so there were a lot of lessons that we did have to learn in order to kind of keep the platform going and also to learn from so that as we think about our next generation of technologies, we'll build upon that. Some of the key things that 4 years later, we are now dosing -- and this is a really important statistic. I don't think people fully appreciate this, but we are now dosing about 30 patients a week on average across our platform. So that is a tremendous amount. And we have also over 250 years of -- 250 patient years. And so we've learned a lot in terms of safety. I think one of the other big learnings that we have taken in is our understanding of how siRNAs work slightly differently when they're going with delivery to muscle. And so when we went into the clinic, we anticipated, for example, that we'd be doing every 3-month dosing. That was kind of based off of what we saw in nonhuman primates, what we knew about siRNA therapies beforehand. And what we learned through the MARINA program, but we've also now seen with the del-brax and del-zota programs is that we're dosing more frequently. And thanks to the safety profile that we have all this data on, we're able to do that. So for HARBOR, for example, in our DM1 program, we're dosing 4 mg per kg every 8 weeks; for del-brax 2 mg per kg every 6 weeks and for del-zota 5 mg per kg every 6 weeks. So we've really been able to learn a lot and kind of leverage that knowledge across the program. And just last year, we started talking about our next-gen as well. And the data we have collectively across the 3 programs is really helping us to figure out now that we've had this like kind of leading the field pace with our first 3 programs, what are the things we want to do and insert into our later-stage programs as well.

Got it. Maybe now starting to get into some of your programs. And I know we just touched on a lot of it. For -- maybe starting with DM1, vHOT is the primary in HARBOR and handgrip QMT and DM1 active as secondary. What is the right composite to capture the disease change and progression and what magnitude would you consider clinically meaningful based on your MARINA-OLE learnings?

So first, before we get into answering the question directly, I just want to kind of point out that this was our first program that we launched. Of course, I talked about del-zota and DMD being our first product, but DM1 and what we're going to talk about here in terms of influences where we've been blazing the trail into an area where although there's been some understanding of the biology of the disease, we've been part of figuring out that out and figuring the biology out and how to treat the disease and really dealing with the ambiguity of the biology, the regulatory pathway. And now we're starting to think about how to bring it to market. So with that, I'd ask Kath to answer the question.

Sure. So, we designed the HARBOR program so that we are really looking at the key aspects. I love that you call it a composite because not to be confused with the composite endpoint. But we really have always looked at this as a totality of data. Now the HARBOR trial is the first-ever global Phase III study in myotonic dystrophy. And so to some degree, there is a fair amount of responsibility in that, right? When you're leading the field, you want to make sure that you're really testing the right endpoints and that you're getting the right patients in that trial. And so we've spent a tremendous amount of time with the patient community, with the physician community -- the global physician community. And how we came to these end points was really an understanding from the DM1 community itself, that myotonia is, of course, important. And I think a key point in thinking about vHOT is that vHOT is not just measuring hand function, right? So myotonia is throughout the entire body. People have it in their tongue. It makes it difficult to swallow. They have it in their legs and makes it difficult to walk. They have an impact from sleeping. I mean it is a truly systemic challenge. The easiest way to really measure that is through video hand opening time. So vHOT while it is measuring the hand, is really giving you a lot more information because it's also helping us understand systemically, are we targeting the splicing changes required for to make an impact on myotonia. So that we put is our primary endpoint. We got a tremendous amount of input on it, and it's really a key hallmark of the disease. But in addition to that, and it being a really great functional endpoint, we also wanted to look at strength, which is another really important piece of this disease, and that's where we have our handgrip coming in as well as QMT, and of course, there's a big deal in all of this, which is how do the patients feel on drug. And so our other endpoint is the DM1 active which is a PRO that's in the study as well. And when you kind of look at these together, collectively, it's a total package for the DM1 community. And we believe and we designed it this way that it's not only going to help us with our regulatory path, but it's also a reimbursement path too. And key to all of this was getting regulatory input, and we have done that across the U.S., Europe and Japan. and have gotten full alignment around this design and vHOT as the primary.

Got it. And I guess from your perspective, what secondary endpoints are you most confident in hitting stat stig and least likely to hit stat stig?

I'm confident in hitting all of them. I really do feel strongly about that, was in full disclosure, I was the global program head for this program. So it is near and dear to my heart. But when you really look at the MARINA data, which is our Phase I/II data, we saw something that you just don't expect to see in the muscular dystrophy, which is reversal of disease progression. And we saw that across all of these endpoints. And so we do have -- we're pretty bullish going into our Phase III top line based on the data we've seen and also based on -- we have a tremendous amount of natural history data that we've been able to use to help us look at that and also to power it properly. So the study is really well powered for all of these endpoints.

Okay. With DM1 cardiac burden, how are you tracking all the cardiac endpoints or biomarkers as part of the HARBOR trial?

So somebody asked me earlier today if there's one thing I wish I could do differently. And my answer was, I would love to be able to track cardiac, but the HARBOR trial is not the place for us to do that. And we had a lot of discussion around this. The reason is that cardiac is a huge piece of the disease for these patients. And part of why I'd love to track it is because we know we deliver to the heart. So we know del-desiran actually can get there and can have an impact. But this is a rare disease. These patients have nothing today. And so as we designed this trial, it was about getting to the market as fast as possible. But I do look forward to actually studying some of those things in the post-marketing setting, for sure.

Got it. And can you talk a little bit around your decision to use an siRNA in this indication as well as your choice of dose and the dosing interval?

Yes. Actually, Kat, do you like to talk?

Yes. So this is something that we actually have a lot of experience that this team has a lot of experience from prior companies. siRNAs are just really good at knocking down genetic targets. And one of the things I was really missing from the field and one thing that Avidity has really been the leader in is taking the siRNA into tissues outside the liver. So we had a very strong hypothesis that if you get sufficient concentration into the muscle tissue, that these siRNAs would work incredibly well in these types of diseases. So in this case, DM1, it's all about the DMPK knockdown, which then leads to the freeing up of the muscle bind protein that has all of these downstream effects on splicing and really [indiscernible] a hallmark of the disease. So what we're seeing with the AOC deliveries is a very nice increase in the muscle concentrations of the siRNAs, and that was really the choice that we made. And then as Kath touched on in the preclinical models, we thought we could really get to a quarterly dosing schedule for every 13 weeks. And one thing that we noticed in the MARINA Phase I/II study is that, that was not quite frequent enough to really get the benefit to these patients on a consistent basis and really sustain that benefit. And it's something that we even heard anecdotally from patients that a couple of weeks before the next dose, they would feel a waning of effect. So it's really important for us that we took the anecdotal evidence together with some of the biomarkers that we've seen into account to really optimize the dosing and evolve. So that's how we've ended up at an every 8-week dosing interval here for the del-desiran program.

And I would just add that siRNAs are extremely safe. And they're also potent and durable. They are the right oligo to pick for this disease.

Got it. We've touched on some of the upcoming milestone events already. So maybe we can just talk a little bit around the disease prevalence. So you've framed the opportunity as 80,000 individuals across U.S. and Europe. Now -- but they are much higher estimates. Now -- at the same time, there's an argument that some of these individuals may not be motivated to seek treatment. So how will you segment the population while addressing awareness -- building -- addressing awareness, building awareness and also the diagnosis rates?

So I'll take that one. Look, this is a very large rare disease, right? 40,000 patients in the U.S. as rare diseases go is pretty significant. And what we're finding in terms of -- is that number appropriate? Is the size believable? And everything that we've seen is that, yes, this is approximately the size of things that we look to is the major medical centers where these people end up. There's an NDM1 study that has enrolled over 500 patients into a natural history study. And as we conduct our clinical trials, MARINA and HARBOR, the level of interest in the engagement in this patient community to be part of these trials is pretty healthy, like we are not finding apathy in terms of trying to come into the trial. You can see our HARBOR trial was enrolled on target and on time in a 12-month period. And so everything we've seen is that that's the right patient size. This is an engaged patient population. Is there a symptomatic apathy for the patient? Yes, we understand that's part of the disease, but it's really not part of their behavior towards treatment. And that may not be solely related to the patient. These patients are part of families that have this disease in their family. So that is -- it's a community that helps this patient deal with the disease through their lifetime. And when we talk to the patient advocacy group so passionate about getting treatment. And they deserve treatments, ours and others. And so as we kind of go forward on that basis, we see this as a patient population that's actively engaged. The uptake as we look at commercialization and the opportunity here, we're really pleased with the fact that we're going to be launching this drug globally, right? And by globally, initially, what I mean is the U.S., Europe and Japan. And all of those markets, we found great enthusiasm for the uptake. So this will be our first global launch. And so we're preparing for that. And del-zota is our first U.S. launch, but we'll be launching del-desiran in the EU and Japan first, right, as a company. And so we're setting up everything for that. The supply chain, the commercial organization, the patient services function. So we're really excited about not just the 40,000 patients in the U.S., 80,000 includes Europe, but I don't believe that anything brings in Japan. And these -- that's a market that we've started the clinical trials there a year ago. And the KOLs there are thrilled that we've launched our global first full approval clinical trial in Japan simultaneously.

Great. Most companies would be done with the presentation now, but we've got to get through the rest of your program. So maybe shifting to del-brax in FSHD. Can you talk about your biomarker approach?

Kath, do you want to talk about that?

Sure. Of course. So we -- just this past June, we announced that we have a circulating biomarker, which we refer to as cDUX. cDUX is targeting a gene -- gosh, KHDCL1 close. So we named it cDUX because it is quite challenging to remember the actual name of the gene. But it is a very well-known gene in the FSHD space. And it is something that people have been studying for quite some time. We had been looking at it in our muscle biopsies as well. The thing that Avidity really discovered is that you can also measure it in blood. And that really is a very exciting thing for the community. The real insight around cDUX is that when patients have high levels of cDUX, they actually have a more severe version of the disease. And so we're kind of looking for an inverse correlation here. We want to decrease cDUX so that we can see more improvement with del-brax. And so what we did last year is we kind of wanted to look at FSHD as a whole. And we got our first data set back in June of 2024 looked at that and said, we need to move this drug forward as quickly as we can. And so what we did, as we kind of call it at risk, as we initiated the FORTITUDE biomarkers trial, which is about 50 patients. And that one is our accelerated approval trial. That one we initiated in last November, and we fully enrolled it this past March. And that is what we are looking to have readout next year. A lot of the questions we've been getting around what functional data do you really need to show? The functional data is not necessary, right? This is an accelerated approval path. So it's not that we don't have to hit statistical significance on our functional measures here. What is important is that we're able to correlate cDUX with function. And so that is the work that our team is doing right now and kind of again paving the path for FSHD to really bring to this treatment to patients. At the same time, we have launched our global Phase III study called FORTITUDE3, and that has just opened and started enrolling this year, and that will be our functional trial that we would go for a global approval with.

Got it. While we're on the point about cDUX and function improvement, what -- can you elaborate on what additional work you still need to do to prove or show that correlation work by the time you go for a BLA submission?

Of course, sure. So we've already done a fair amount of work using the FORTITUDE data that we have, which is the dose escalation cohort that we presented earlier this year. And we've also utilized our natural history data, which we have a tremendous amount of -- I mean, in FSHD and DM1, the investigators have just been an incredible source of -- they were really strategic in setting up these natural history studies. So there is a tremendous amount of data we can utilize from RESOLVE, MOVE, MOVE PLUS. So now what we are really waiting for is the data from the actual biomarker cohort, which will allow us to really kind of fulfill the work that we're trying to do. The other things that we have to do between now and BLA are things like that you just need for an accelerated approval, like what CMC do we need to have, things like that to make sure that our submission is fulsome and ready to go.

Got it. in case you didn't bump into Commissioner Makary, what feedback did you receive from the FDA when you learned that the accelerated approval pathway was opened and announced that you had achieved significant -- you had achieved alignment with the agency around the regulatory strategy?

How about -- maybe I'll take that one and then -- so I think one thing that people haven't focused on is Kath just talked about how we were already doing the biomarker cohort. So the way that we set up our conversation with the FDA was we actually went and got approval of the confirmatory study design. And I guess one other thing that's important is that the part of the agency that we deal with, Neuro Division1 and CDER works with us across all of our programs. And so we had a conversation with the team at the FDA on confirmatory trial design. And then when that was approved, we went back, and we had a conversation with them on the biomarker accelerated approval design and process. And so a lot of the questions that you would typically have been answered as part of our confirmatory study. And -- so there, we were able to spend time on really the 2 pressing issues, which is how do you prove that the surrogate can be linked or correlated to benefit? And as Kath just said, how do you show that you're going to be ready to produce commercial level inventories in time. So most of our discussions were deep in those areas, which is really what we call alignment with the FDA.

Got it. What are the planned disclosures around the FORTITUDE biomarker cohort in the second quarter of '26?

Kat, can you talk to that?

Yes, absolutely. So in the second quarter of 2026, this trial would have been completed. So if you recall, we completed the enrollment in March of 2025. So by the time we get to the Q2 readout, all of those participants would have rolled over into the OLE if they so choose. So at that time point, we can actually disclose all of the primary and secondary end points, including the p-values and then, of course, also the safety profile. So that is really the totality of the data package that will go into the BLA submission in the second half of next year.

Yes. Maybe one more on FSHD. So you've provided a wide range for the prevalence in the U.S. and Europe. Now what sort of data support both the low end and the high end of the range? And can you speak to the interest in del-brax from the FSHD community, both here and abroad?

Absolutely. So this is, I think, out of the 3 indications that we're pursuing probably the least well elucidated prevalence figures, as you can imagine. The ICD code has been around for about 5 years. So it was launched right about the time of COVID, which is very unfortunate just in terms of gaining data from the ICD-10 databases. But we believe in the U.S., there are about 5000 patients that have already been identified and diagnosed with FSHD. So that is actually a pretty good number for the total size of the indication that we're looking at, which we believe to be at least similar to DM1, if not slightly larger. If you look at the genetic studies, there are a lot that would tell you at least 40,000 in the U.S., if not higher. And we're doing a lot of that work at the moment in order to prepare for the launch that we're anticipating here relatively soon. The interest has been just tremendous. We're getting multiple e-mails per day, not just for FSHD but also for the other programs, but I think FSHD really has been notable in just the motivation and the excitement from the patient community. And the big part of that is also the patient advocacy group, the FSHD society has been very active as well. So they're very good at getting the patients overnight, educated about potential clinical trials, treatments that will be available soon, but they're also driving a really big diagnosis effort that we think is going to really help us here. But overall, just as you would expect with a lot of rare diseases, as treatments become available, you will start finding even more patients.

Got it. Now shifting to del-zota and DMD. The EXPLORE44 showed an increase of 25% of normal in dystrophin at 4 months and almost near normalization of CK. How are you thinking about how to translate this into functional signals?

Interesting, you should ask. We have guided, as I said at the top of this meeting that we've guided that we're going to be giving functional data this month. And we think that that's really important for the community to really understand how this therapy could benefit them in their how they can live their lives. And so with the strong dystrophin, a 25% increase from 7% to 32% that we demonstrated and bringing down and sustaining to normal levels, we should see functional benefit. The original trial went 6 months, and we didn't think that we would see functional benefit that soon. So back last December, we said, why don't we look at it at 1 year. And so we guided to the fact we would be looking to functional and are presenting sharing functional data around this time for participants who have been on del-zota for 1 year. So here we sit at the eve of that disclosure. And we're really hopeful that we can actually connect the dots. That dystrophin leads to near -- like near normal CK levels and near normal CK levels so that you can see functional benefit at that point in time. Now importantly, we're applying to the FDA for accelerated approval based on a dystrophin biomarker as we're submitting the BLA at the end of this year. The functional benefit is not part of the requirement to submit that BLA. But we do think showing that functional benefit will be -- could be important to the patient community to understand the power that the therapy could have.

Thank you. Now shifting to your commercial strategy. When it comes to your prelaunch commercial preparations, what elements are del-zota or DMD specific? And what are anticipated to support all 3 programs? Now can you maybe discuss the top priorities between now and the del-zota approval?

Yes. So literally, Rock, we started building our commercial organization quite a while ago. We've actually built the patient services organization. We have MSLs in the field. We have payer reimbursement specialists who've been talking to those parties, and we're in the process of building the site of care team. And so that's all either built or underway. And then the next thing is the sales force in the field. And we have done the market research to understand that 75% of these patients are seen by 100 doctors, 100 specialists in the U.S. So we know where to go. We know what size team we need to get there. And so we are ready to go on del-zota. It's a bit of a gift to be able to launch your first drug in your smallest indication. And remember, del-zota will be U.S.-only right, because it's an accelerated approval here in the U.S. But what it allows us to do is build that center hub with things like patient services, build the field team, get them to develop the relationships and understanding of the patients, the doctors, where these people go for their treatments. And then when we're ready to hopefully in relatively short order, launch our next 2 drugs for FSHD and DM1, these sales reps and others have developed relationships with the caregivers. And so they're going to just be adding into the conversation these other diseases that they treat. Because these caregivers, these docs actually, there's pretty much 100% overlap between FSHD and DM1 in terms of their patients they treat and both DMD44 patients are treated by these docs, too. Some DMD44 patients are treated by pediatrics, right? So they're not necessarily an overlap there. So this is really powerful in terms of helping us build the infrastructure, helping us test the infrastructure, that it's sound, that people are doing the right things, developing the right relationships and then to leverage that for really incremental investment. Even though FSHD and DM1 are much larger populations, those potential drugs are going to be blockbuster in nature. the investment on top of the infrastructure is going to be relatively modest.

Okay. Maybe that's a good place to get to the last question. Now with $1.4 billion with the [indiscernible] of cash and a stated runway through mid-2027. Could you talk about some sensitivities in your assumptions. Just, I guess, conceptually, what is the shape of your financing trajectory once these products launch?

Kat, would you like to take that?

Yes. So Rock, you're correct. It's a very strong cash position to be sitting on today, runways to mid-2027. So that means we do not get all the way to profitability. However, once we launch these drugs with the market opportunities that we see we do believe we're going to reach profitability relatively quickly. So there's really a lot of things you can test in the sensitivity, but all of it means you get to profitability very quickly post those 2 big launches, and I'm talking about del-desiran and del-brax, specifically. So with that being said, we are in a very strong position today, but we do also emphasize all the time that we just want to maintain a strong balance sheet, be able to execute on all of these drugs in the clinical trials as well as the commercialization globally. So we will be continuing to assess additional pools of capital that we can tap into and we're very blessed in the sense that we are going towards 3 commercial launches and a lot of different pools of capital will be available to us.

Great. Well. Thank you so much for your time today. I hope you enjoy the rest of the conference. Thank you.

Thank you, Rock.