Denali Therapeutics Inc. (DNLI) Earnings Call Transcript & Summary

Okay. I think we're ready. So good morning, everybody. Thanks for joining us here at the Bank of America Conference in Las Vegas. I'm Tazeen Ahmad. I'm one of the senior SMid biotech analyst here. It's my pleasure to have our next presenting company with me, Denali Therapeutics. Presenting for Denali is CEO, Ryan Watts. So good morning, Ryan.

Yes. Great to be here. Thank you.

So for those who might not be as familiar with the company, maybe just give us a 2-minute overview. There's a lot going on, obviously, but maybe just the top level stuff, and we can go straight into Q&A after that.

Yes. Great. So definitely a lot going on, and we actually brought one slide, which is our development portfolio slide. But let me just start by telling you a little bit about the history of Denali for those that are new. So the company was founded 8 years ago with a focus on defeating degeneration. At the time, actually, most companies were exiting neuroscience and neurodegeneration. And I think a lot has changed in 8 years. You can see the recent success in Alzheimer's and in ALS and also in rare disease. And so we've built a broad portfolio focused on both the rare neurodegenerative components of disease as well as indications like Alzheimer's and Parkinson's disease. And I think importantly, we focused on 3 principles in the building and now execution of the company. First, what we call the degenogene pathway, so basically genes that cause neurodegeneration. Second, engineering brain delivery, so getting medicines across the blood-brain barrier. And then third, biomarker-driven development, so using biomarkers to identify the right dose and even the right patient population. And hopefully, in the future, biomarkers driving approval of medicines, which now we're seeing, for example, in ALS. And so we're very happy with where we have, 7, soon to be 8 programs in clinical development and 4 in late stage. And I think the last 1.5 years has been a big transition for the company, focused on late-stage clinical development and actually some launch readiness, so preparing to launch our first medicine, especially in rare and in ALS.

Okay. So there's a lot to talk about. Maybe let's start with your program 310 or 310 Hunter syndrome. Can you just give us a quick overview of that, where you are and when the next catalyst would be?

Right. So as shown here on the development portfolio slide that the top program, what we call ETV:IDS, which is enzyme transport vehicle, idursulfase or iduronate-2-sulfatase, basically Elaprase type molecule or idursulfase molecule that's engineered across the blood-brain barrier using what we call the transport vehicle technology. So it utilizes transferrin receptor to get across the blood-brain barrier. That clinical program kicked off in 2020, so about 2.5 years ago in August, almost 3 years ago. And we're able to show robust and rapid and now sustained reduction of heparan sulfate, which is the primary biomarker. In fact, it's the biomarker that causes disease in elevation in heparan sulfate, which is the substrate for idursulfase is causing organ damage, especially in the brain. So at this point, approved enzyme replacement therapies don't treat the brain. They don't readily cross the blood-brain barrier. So the goal of this program was to essentially get enzymes across the blood-brain barrier. We've now shown that successfully with the number of biomarkers, not only heparan sulfate, but the downstream biomarkers around lysosomal function, for example, GM3 and GM2. And we recently presented data at WORLD, which I think we'll probably get into some detail. But basically, this is a very exciting program. And it's also the flagship program for the transport vehicle technology. We'll soon have a second enzyme in clinical testing for Sanfilippo and a number of other transport vehicle-enabled programs.

Okay. So I think also a lot of people call this MPS II.

That's right.

So what is the competitive landscape right now? You mentioned ERT. What kind of penetration are they getting?

Yes. So it's very, very wide. So essentially, almost every patient that is diagnosed with Hunter syndrome or mucopolysaccharidosis 2 or MPS II has -- is on idursulfase. And that's IV once a week. The biggest sort of competitive landscape now is gene therapy and other enzymes that are engineered across the blood-brain barrier. So it's basically which technology will provide the most robust evidence of biomarker correction and ultimately, that translates to clinical benefit. Notably, actually, our program, not only we've seen a reduction in heparan sulfate in the cerebral spinal fluid to normal levels, we also are seeing a reduction in blood and urine as well in plasma and urine, meaning that likely the standard of care is under dosing with the enzyme replacement therapy. So our goal is to improve treatment, both in the periphery, but obviously capture the brain, which is about 70% of Hunter patients have neurological deficits. And those that are non-neurological, we can also improve peripheral efficacy. So I think in summary, the other, I think, big competitor, at least in the brain is basically gene therapy injected directly into the brain. And in some ways, they're trying to lead the way with regulators on some form of accelerated approval. And I know we're going to get into that I'm hoping.

Yes. So okay. So given the platform that you have, you could have gone in all different directions, right? So why did MPS II makes sense to be sort of your beachhead?

Yes. So when you look at what we wanted to accomplish, which is eventually effectively developing and delivering a medicine for Alzheimer's disease, the idea is that you need to first de-risk the technology and then you de-risk the biology. And so the goal of going after Hunter syndrome and Sanfilippo and these monogenic diseases is that the biology has been de-risked. There are approved enzyme replacement therapies. So we're trying to accomplish one goal here, which is to get that enzyme across the blood-brain barrier. And so we picked not just, again, Hunter syndrome, but now multiple MPSs and other lysosomal storage diseases because there's this big unmet need, the entire, what we call ETV or enzyme transport vehicle franchise is actually very large, but also the probability of success in those indications are much higher. I think we'll all agree than Parkinson's and Alzheimer's. But it's notable that now it's changing. I mean you're seeing progress, especially in Alzheimer's and in ALS. And so we took all of those paths in parallel as you can see here, but now are very dedicated to building an enzyme franchise where we basically replace the standard of care because we can treat both body and now brain. And so for us, it was -- it was about decreased risk in biology, improving the technology. And I think actually, just to comment, in 2020, when we showed the first data and share the first data on the enzyme replacement therapy using ETV:IDS, this normalization of heparan sulfate is not achieved by any of the competitors, either gene therapy or other enzymes engineered across blood-brain barrier. And even intrathecal Elaprase, if you look very closely, the recent publication of the Phase III is not coming close to normalizing heparan sulfate. And I think it's actually really important that everyone take a look at that and see that there's clearly an unmet need and be able to reduce heparan sulfate in brain. So I think that was the beachhead. We think we can now build this enzyme franchise, and that's actually where we're preparing for launch and actually have a lot of interaction with regulators and defining the path forward.

Yes. So on that topic, you did show biomarker data. How does the FDA feel about those particular biomarkers? Are they already validated? And can you talk to us about the pivotal part on the Phase II?

Yes. So there's really 2 different stories here, depending on which division of the FDA are working with, either CBER or CDER. And there's a very strong push. And of course, we will be part of that to use validated biomarkers as a way of receiving accelerated approval for these rare diseases where it's harder to run very large controlled studies, either active comparator controlled or placebo-controlled. Some may even argue that it's unethical to run those studies. And it's actually really interesting. The first study design for our Phase III was just going to use natural history because if you engage with patient population and these caregivers, there's 0 desire to be on active comparator. Every patient wants to be on the drug that's being tested. And it's obvious why that's the case, especially in a rare disease and especially because -- if you look at what data we've shown, which is normalization of heparan sulfate, so biochemical correction, normalization or near normalization of lysosomal biomarkers, so cellular correction. And then we're actually now showing improvement in hearing, cognition, behavioral endpoints. There's serious momentum around patients wanting to be on the active medicine. Now CDER has a long history working with like, for example, idursulfase. And so it's been a little bit more challenging to use these biomarkers as a correlation to clinical benefit. And I can explain why that might be the case. Number one, they actually don't see robust reduction in heparan sulfate with the newly published data. And number 2, they actually are giving it intrathecally, so it's a limited distribution throughout the brain. And so there's work to be done with regulators on using the primary biomarker, heparan sulfate as a basically approvable or an accelerated approval biomarker. But that's why we're focusing so much on the Hunter program to stack that up so that when we bring the next program, Sanfilippo and others forward, we can essentially use that as a [Technical Difficulty]

where you stand today, what's your confidence level in being able to tap into the accelerated path?

Yes. So I think the FDA on the CDER side has been clear that we need this active comparator study. Now CBER is a different story where there is some suggestion that an accelerated approval may be granted or at least reviewed for gene therapy. And so there has to be a unification across the FDA. And so we're just -- we're very engaged, very prepared. And when the time is right, we would go forward, if that ends up being the new precedent. In other words, if a biomarker is actually assumed to be a trigger for accelerated approval, we'll have that data package. In fact, we have it now. And if you look at our data package, it's about 2x of what maybe gene therapy will have in about 2 years from now.

Okay. So as it relates to your pivotal program, where are you on enrollment? Has it been easy to find these patients?

Yes. So we have now activated over 17 sites across 9 countries. It's going well. It is a rare disease. It's competitive. We're competing with other programs, but it's going well. And I think the best guidance I can give is just the clin trials sort of update on timing.

Okay. I guess what is the consensus view on when you would be commercial?

It depends on the regulatory path. That's actually the -- that's the biggest challenge is how to work with the FDA and use some of these biomarkers for accelerated approval versus full approval. And I think the math is pretty simple when you look at the time lines, based on the clin trials.

Okay. So maybe let's move on to FTD. You recently presented some data there. Can you just remind everybody about that and what next steps are?

Right. So our approach to frontal temporal dementia, specifically the granulin mutation carriers is similar to what we just described for IDS, which is basically progranulin replacement therapy. So getting progranulin across the blood-brain barrier. And so our initial data that we've shared, and we actually will present at AAIC, so the Alzheimer's Association International Conference coming up another data set, basically a full data set in healthy volunteer data. That is one of the key data updates. But basically, we showed a dose-dependent increase in progranulin in CSF. And so if you want to know our approach to treating FTD granulin, probably the best place to point you to is the publication we had in 2020 that describe progranulin replacement. I think what was most important about that publication is that -- it showed that granulin loss of function is essentially causing lysosomal deficits that again, the relationship to enzyme replacement therapy. And then that can be corrected with PTV progranulin. And we have a number of biomarkers that look again at correction of the cellular level and then more at the network level, looking at biomarkers of microglia or neuronal health. So basically, expect another set of data for the healthy volunteer. And now we're actively enrolling the program study. I will comment that it's about 5% to 10% of FTD is granulin, and it's extraordinarily difficult to enroll this study. And I think others are having challenges as well, in part because a lot of FTD patients are not granulin mutation carriers. And so we're not giving any guidance on timing, but we think this is an important program to further validate the approach to granulin and we're, of course, looking very heavily at biomarkers to validate the approach.

Yes. What are good biomarkers because a lot of companies have been trying to do FTD, and it's been slow, and that's not a surprise. But how validated are the biomarkers for FTD?

Yes. So I would point to -- again, to our publication in 2020 where we're sort of stacking proximal to distal biomarkers. And the most proximal or lysosomal biomarkers, the most distal would be glial like GFAP or neuronal biomarkers like neurofilament.

How do you think it's still early that you could be differentiated from other programs that are trying to be developed, even also targeting progranulin?

That's right. So I think the 2 probably biggest competitors in this space for us are gene therapy approaches, which has, I think, the challenge of just limited distribution throughout the brain. So you take a point to inject the gene therapy, doesn't necessarily broadly distribute. There can be some cross cellular correction, so a noncell autonomous correction. And then the other is blocking the natural receptor for progranulin-sortilin. And we're actually following those competitors closely, especially the approach to blocking sortilin and looking at that data, which I think, again, is part of the challenge of enrolling these studies is that there are multiple programs in a relatively small indication.

Okay. So do you think that your stock has value for FTD right now?

It's a good question. Probably not, but the path is also long, right, so.

Okay. So let's talk about the next program on the list here, which is Antibody TV. And I think in Alzheimer's, Biogen recently exercised an option for it. Can you talk about the importance of that particular program? And why you think Biogen is the best partner for it?

Yes. So there -- we have 2 antibodies that we're developing and we'll have -- we have more that we haven't disclosed yet for Alzheimer's disease using the transport vehicle technology. One is a trend to activating an antibody and the other one is an Abeta antibody. So I think it's probably never a better time to be working on Abeta antibodies. It was so hard for so long. I've actually been working on Abeta antibodies since 2006. So I've seen everything from the bapineuzumab, solanezumab era now to the lecanemab and aducanumab and other donanemab data recently, which was striking. And so our approach is basically to improve brain exposure of these antibodies. And so interestingly, in our hands, no matter how high we dosed enzymes, we couldn't correct in the brain the enzyme deficit. However, with antibodies that have a much better half-life, antibodies do cross the blood-brain barrier at a very minimal fraction the idea is the transport vehicle technology can enhance these antibodies. So in other words, you can use a much smaller dose or you can enhance activity. So for example, with our HER2 program for cancer or our TREM2 program, we massively enhance the activity by combining transferrin receptor with these transmembrane targets. So the Abeta antibody is unique in the sense that when we look at biodistribution of a transport vehicle antibody versus a standard antibody, so let's use like aducanumab or lecanemab as an example, antibodies that are just given as a standard antibody when they cross the blood-brain barrier, most of their localization is perivascular. So it gets across the CSF barrier, some may get across capillaries. And if you look at the biodistribution, it's very endothelial. And of course, this is a challenge because of I think the greatest risk around Abeta antibodies are ARIA, so amyloid-related imaging abnormalities, basically vasogenic demos, what it was originally described as with bapineuzumab. And the idea here is that rather than having to cross the perivascular space, you give lower doses and cross the capillary space. And so at least in our hands, we're seeing a differentiation in the biodistribution of vascular versus nonvascular. That, I think, will be important. Also important will be the dosing frequency and route. And so the only data so far, looking at different routes was actually the gantenerumab data, where data was shown using subcu. And there, they saw actually less plaque reduction, less Cmax. And if you actually look at the lecanemab data, you're giving 10 mg per kg every other week. So that's a very high dose given every other week, which has given you a better brain exposure. So the idea is that the transport vehicle technology will improve that by basically 10x, allowing you to probably give a lower dose and maybe even enabling subcu dosing.

Okay. I did want to touch upon 919 and where you are in discussions with FDA regarding clinical hold.