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

I'm Laura Hansen, Vice President of Investor Relations, and I'd like to thank you for joining us today. Please note that the press release we issued earlier today and the slide deck for this webinar are available in the Investors section of our website, denalitherapeutics.com. Before we get started, I'd like to note that the presentation is given today and the responses to questions will contain forward-looking statements regarding Denali's future plans, business strategy, product candidates, planned preclinical studies and clinical trials, among other things. Such statements are subject to numerous important risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. These risks, uncertainties and assumptions are more fully described in our filings with the SEC, including our latest quarterly report on Form 10-Q and our latest annual report on Form 10-K. Any forward-looking statements are based on information available to us as of today, and we disclaim any obligations to update any forward-looking statements, except as required by law. On the webcast today, I am joined by members of Denali's management team; Ryan Watts, Chief Executive Officer; Carole Ho, Chief Medical Officer; and Alex Schuth, Chief Operating and Financial Officer. I'd like to take a moment to review the agenda and Q&A logistics for today. We have scheduled 30 minutes for the webinar, including presentations and a Q&A session at the end. If you would like to ask a question, you may do so by typing it into the Q&A box. We'll do our best to answer as many questions as possible during the Q&A session. And now I'd like to turn the program over to our Chief Executive Officer, Ryan Watts.

Thank you, Laura. We're very much looking forward to sharing data today and discussing our DNL310 program for Hunter syndrome. Just a reminder that Denali has a broad portfolio of therapeutic candidates. And our focus today will be on our rare neurodegenerative diseases, and in particular, our enzyme transport vehicles or ETV enabled programs, specifically in Hunter syndrome. If you look at our portfolio, the portfolio split into 2. One part of our portfolio is enabled by our transport vehicle technology, which I'll introduce briefly. And the second is our small molecule programs. As you see here, the program that will be the focus of today's webinar will be our Iduronate-2-sulfatase or ETV:IDS program. This program is numbered DNL310. So what is the technology that we use to get large molecules across the blood-brain barrier? The technology we use is called the transport vehicle technology, and it's basically the engineering of the Fc portion of an IgG to bind to the transferrin receptor, which is an iron transporter at the blood-brain barrier. Using this technology, we've shown that we can get antibodies, enzymes antisense oligos across the blood-brain barrier. But today, again, we'll focus on our flagship program, DNL310 or ETV:IDS. When this molecule binds to the transferrin receptor, it blinds in a nonblocking way and is transported across the blood-brain barrier. And I think importantly, we've shown robust reduction of substrate and subsequent correction of neuronal and cellular dysfunction. This highlights the other technologies that are enabled by the transport vehicle platform. Our focus will be on the ETV today. However, we've shown that we can get antibodies as well as proteins and antisense oligos across the blood-brain barrier. So now let's focus on what we are doing -- why we're here on this webinar. Today, we're going to show interim results demonstrating a robust reduction in serum NfL as well as CSF NfL. The FDA has recommended assessment of NfL as an exploratory biomarker of neuro-axonal damage in MPS II. We plan to share additional interim data of the DNL310 program at SSIEM in August. So with that, I'm now going to hand it over to Carole to get into the data.

Good morning, and thank you, Ryan. Let's go to the next slide. So DNL310 is an IV therapy that is dosed once weekly. And as Ryan noted, utilizes Denali's transport vehicle technology to deliver the IDS enzyme missing or defective in MPS II to the brain and body. DNL310 is currently being evaluated in an ongoing open-label Phase 1/2 study and a randomized double-blind Phase 2/3 pivotal trial, the COMPASS study. For patients receiving DNL310, DNL310 is administered once weekly IV, which is the same dosing frequency as standard of care Elaprase. DNL310 is in clinical development to replace current standard of care by delivering treatment to the brain, a current unmet medical need while also treating the body. We have taken a methodical approach to systematically mapping the downstream impact of glycosaminoglycan accumulation and MPS II on pathway biomarkers of disease. We have characterized these biomarkers in natural history patient samples and in the ongoing open-label Phase I/II study. We previously hypothesized that successful treatment of MPS II would require biochemical correction of the elevated GAGs in the brain and CSF. Cellular correction of lysosomal function in all cells of the brain, including astrocytes, microglia and neurons and subsequent neuronal correction that may translate to patient impact. In our Phase I/II, we have evaluated the ability of ETV:IDS to directionally normalize these biomarkers. We previously demonstrated a sustained ability to normalize elevated CSF GAGs and the ability to reduce and normalize gangliosides and lysosomal lipids. Today, we will present data on the effect of DNL310 treatment on neurofilament in MPS II. In the ongoing Phase I/II study, we also continue to evaluate clinical endpoints with positive trends observed across a number of clinical end points. Together, these data support the current DNL310 development strategy. Today's presentation will review data previously presented at World 2023 for context and share the new data for the patient population highlighted below in the demographics of the neurofilament analysis. The new data set consists of 23 patients that have reached 1 year of dosing. This is 4 more than previously presented at World and 13 patients that have reached 2 years of dosing or 104 weeks. This is approximately 9 since World. The clinical cutoff date was early March of 2023 and notably, the DMC reviewed safety data from this data cut on May 31 of this year. The DNL310 Phase I/II study is an open-label 6-month study, followed by an open-label extension plan for approximately 45 MPS II patients aged 2 through 18. There are 5 cohorts A through E in the study designed to enable dose selection for the ongoing Phase II/III COMPASS study and also evaluate the safety profile of DNL310 in a broad range of MPS patients in age, neuropathic status as well as previous treatment. Importantly, all patients that are on standard of care are switched to DNL310 at the start of the study without a defined washout period. The key primary, secondary and exploratory endpoints have previously been presented and are summarized on the right side of the slide. The key primary endpoints are safety, adverse events, infusion-related reactions and total urine glycosaminoglycans. The key secondary and exploratory endpoints include CSF and urine heparan sulfate and biomarkers of lysosomal function, biomarkers of neuronal function, including NfL and clinical outcomes. Cohort A is a within patient dose escalation cohort and includes neuronopathic patients age 5 through 10. And Cohort B, it was a dose-finding cohort to enable dose selection for the Phase II/III. Cohort C,D and E evaluate additional younger patients, siblings treatment-naive patients and patients who have completed our biomarker natural history study. The next slide shows the importance of heparan sulfate as a glycosaminoglycan that accumulates in this disease. MPS diseases are all characterized by the accumulation of different species of glycosaminoglycans. Depending on the deficient enzymes, certain GAG species accumulating key organs causing clinical disease. Across the MPS diseases, it's notable that the CSF, glycosaminoglycan appears to be necessary and sufficient for brain dysfunction and impairment. In the family of MPS disorders, all of those that have CNS manifestations have increases in CSF HS. Higher levels of CSF heparan sulfate and MPS II are also associated with the neuronopathic phenotype, carry a poor prognosis and are effectively normalized with DNL310 therapy as we can see on the next slide. After switching from IDS or Elaprase to DNL310, a rapid and sustained reduction in normalization of CSF HS is achieved. The DNL310 safety profile enables achievement of these normal levels of CSF HS sustained over time, including those in orange that have high levels of preexisting ADAs, which are seen in this disease, given that the patients with deficient enzyme, the enzyme replacement is a foreign protein. These data demonstrate that rapid normalization of CSF HS is observed across all of the dose ranges tested in the Phase I/II study in the cohorts that I outlined in the study schema. These data suggest robust and efficient crossing of the blood-brain barrier with reduction of CSF HS to normal levels. We also looked at lysosomal biomarkers on the next slide. Reduction of GAGs is hypothesized to improve lysosomal function and shown here across biomarkers of lysosomal function that are associated with other CNS diseases and accumulate indirectly due to the deficiency in iduronate 2-sulfatase. We see here that after switching from IDS to DNL310, near or complete normalization of lysosomal biomarkers are observed in most participants and is sustained. Denali is the first to characterize these lysosomal biomarkers and the effective treatment on MPS. The biomarkers shown here are important as each of these accumulates in rare genetic diseases that are missing or defective in an enzyme that prevents appropriate processing. For example, GM1 gangliosidosis cause severe neurologic disorders. GM2 accumulation is associated with Tay-Sachs and Sandhoff and glucosylsphingosine accumulates in Gaucher's disease and is associated with neurocognitive dysfunction. In addition to these lysosomal biomarkers to our knowledge, Denali is the first to characterize neurofilament in MPS II. I'll now present the new interim data from the Phase I/II study for serum neurofilament. With longer-term treatment and data from 23 patients that have reached approximately 1 year of dosing and 13 that have reached approximately 2 years of dosing or 104 weeks. A robust reduction of 64% in serum neurofilament is observed at 104 weeks. Notably, the statistical significant [indiscernible] is observed starting at 61 weeks. The serum neurofilament is run using a fully validated Quanterix method. Reduction of serum neurofilament in the 13 patients evaluated was similar and well correlated to the reduction of CSF neurofilament in the 11 patients evaluated where a 53.5% reduction was observed. The correlation coefficient of 0.76 for the change from baseline at week 104 was observed between serum neurofilament and CSF neurofilament, where 11 samples were available for CSF. These data demonstrate that DNL310 can correct biomarkers of biochemical function, cellular function and neuronal injury. Neurofilament has emerged as an important biomarker of neuroaxonal damage across multiple neurodegenerative and lysosomal storage disorders. Neurofilament has the demonstrated ability in its utility as a biomarker of therapeutic response in other neurodegenerative diseases, including CLN2, MS, spinal muscular atrophy and ALS. And all of these diseases summarized an elevation of neurofilament in disease versus control individuals is responsive to therapies where reduction in neurofilament has been associated with clinical impact and consequent FDA approval. For the first time, the FDA recently granted accelerated approval of a rare form of ALS based on plasma neurofilament as a biomarker predicted of clinical efficacy. This is for SOD1 ALS, which was treated with a SOD1 ASO. In 2020, we were the first to characterize a roughly fivefold increase in serum neurofilament in MPS II. With this level of increase, a reduction of 64% is impactful in patients moving in the direction of neurofilament normalization, and we continue to evaluate clinical data in our ongoing Phase I/II to further understand the relationship of this neuro-axonal biomarker to clinical endpoints. As presented at World, open-label data suggests improvement or stabilization of clinical symptoms, including behavior on the VABS across all domains evaluated, improvement in cognitive BSID or Bayley scores, stabilization or improvement in global impression and improvement in auditory brainstem-evoked responses, a test of hearing function. This open-label data continues to support the design and objective of the Phase II/III COMPASS study, a randomized double-blind study comparing the effects of DNL310 after switching from standard of care Elaprase. The Phase II/III COMPASS study has been actively recruiting since summer of 2022, and along with the Phase I/II study is designed to support approval for DNL310. I will now turn it back over to Ryan to summarize and conclude this webinar.

Thank you, Carole. So in summary, what we've shown today and in the past is biochemical correction, cellular correction and today neuronal correction with robust reduction in neurofilament. In addition to this, we see positive changes across multiple measures of exploratory clinical outcomes, including adaptive behavior, cognition and auditory brainstem response. We also observed improved peripheral activity. And importantly, the safety and tolerability profile up to 2 years of treatment is consistent with current standard of care. We are now enrolling a global Phase II/III study known as the COMPASS study. So what does this all mean? I think importantly for us, it's further validation of the TV platform and specifically the enzyme transport vehicle technology. Also, this shows for the first time the potential utility of NfL and MPS II and in particular, our regulatory strategy. And then importantly, we're now building out the broader ETV franchise, including bringing another ETV into the clinic for Sanfilippo. So with that, I just want to thank everyone, especially all of our families and patients and everyone at Denali who's been working on this data. This interim data is very important and I think it highlights the impact of the transport vehicle and specifically in Hunter syndrome. And with that, we'll enter the Q&A session. I can bring Carole and Alex on. Okay.

So let's dive right in here. So the FDA input suggests NfL could be a biomarker for clinical benefit. Could this enable accelerated BLA for review, Carole?

Yes. So we have been an ongoing discussions with the FDA. And as noted, as part of these ongoing discussions, they have asked us to evaluate neurofilament as a potential exploratory biomarker. We certainly are looking forward to these discussions and together with our understanding now multiple biomarkers, including CSF HS, which is an important biomarker directly linked to the disease. -- and neurofilament, we certainly will proceed if the path opens up for accelerated approval for this disease.

Okay. So a number of questions around both the FDA, but also around neurofilament as a biomarker. So can you speak to the consistency and meaningfulness of NfL results. There's been prior commentary about NfL not being a biomarker of interest in the FDA for MPS II. How do you now think about the potential to use NfL as a registrational endpoint?

Yes. So I think neurofilament, while we have seen its utility across a number of other therapeutic areas, in the lysosomal storage disease pediatric space. This is not a biomarker that is very familiar to many that have been studying this disease. As noted, we are the first to characterize neurofilament and MPS II, but we are not the first to start to explore neurofilament in lysosomal storage diseases. So for example, for CLN2, many have seen the publication of a reduction in neurofilament over 3 years with treatment of CLN2 with Brineura. And that data is also data that suggests that this biomarker may be important in these lysosomal storage diseases that have CNS impact.

Yes. I think I'll just answer, I think, specifically this question where there's been prior commentary about NfL not being a biomarker of interest to the FDA. The interesting thing is there's been no conversation actually with the update about neurofilament until recently and then the FDA proactively suggested neurofilament as a potential biomarker. I think part of that is just, as you highlighted, Carole, how the field is very much focused, especially with the recent Tofersen data on neurofilament as a marker of neuronal axonal damage. And so we see, obviously, that the FDA is now quite keen on this. Now another one related to FDA is the alignment with the FDA on accelerated approval filing using NfL as a surrogate biomarker.

Yes. So I think as we've discussed before, the CDER and CBER divisions that had a different approach, at least in what they've publicly shared around accelerated approval. While Peter Marks with CBER has indicated potential interest in accelerated approval using biomarkers. CDER has been very clear in this division of medical genetics and rare disease that clinical endpoint would be necessary for approval. Now that being said, I think the understanding of biomarkers is rapidly expanding. I think as Ryan noted, the recent approval for the Tofersen drug for accelerated approval for ALS in a rare population of ALS, suggests the importance that now the agency is seeing for these rare diseases of accelerating approval using biomarkers. We think it's very encouraging that the FDA is now asking us to look at these biomarkers. And so potentially, in the future, these could be applied to an accelerated approval strategy.

So now a couple of questions on the COMPASS study on the Phase II/III. So can you -- can we provide an update on the study enrollment. And then more broadly, I think how is that study going? Carole?

So I think the study is going quite well. I think there's a lot of tremendous interest globally in that study given the data that we've shared today from the Phase I/II study. We haven't provided specifics on enrollment, but it is rolling globally across a number of sites and countries.

Great. again, many, many questions around the FDA. I think we've answered most of them. Maybe just the next steps on the interactions with the FDA.

So we have not discussed this data yet with the FDA, but plan to in an upcoming meeting and as part of our continuing dialogue with the FDA, both on our Phase I/II study as well as our pivotal COMPASS study.

I guess, would you feel comfortable speculating on the different scenarios here? For example, could you do an interim of the Phase III? What do you imagine are the scenarios?

Yes. So I think it may be challenging to speculate for the FDA what the scenarios are. I think we're very focused on advancing the field in terms of the understanding of these biomarkers. I think as we've seen in the past across other disease areas, the interest in the FDA for accelerated approval generally requires a community understanding both the academic as well as the industry community and understanding of these biomarkers. I'll just say that we're very encouraged with this neurofilament data also because there is a standardized validated assay using Quanterix that is used for this field in measuring neurofilament. And I think this addresses some of the challenges perhaps and some of the other biomarkers like CSF HS, where companies have proprietary assays and there isn't a standardized assay. And so I think as we think about our interactions with the FDA and our understanding of this disease across multiple treatment paradigms, we are very hopeful that others will begin to measure this as well. So we can gather additional natural history data for neurofilament and better understand treatment response. I think it's anyone tuned into the Tofersen Advisory Committee, the wealth of data in the ALS community that was generated around natural history data for neurofilament was very helpful in support for the accelerated approval.

We had any discussions with the EMA? Is there any inclination on where they might or might not stand as it relates to an accelerated path to market?

Yes. So we've absolutely had multiple interactions with the EMA and global regulators given our Phase II/III studies enrolling across a number of countries. You can see it on clinicaltrials.gov, all of the active sites. In general, the EMA has taken a very similar approach to the FDA at the CDER division in terms of requesting clinical data to support approval and the design of our randomized Phase II/III study. But I think as noted, the field is really evolving and advancing in terms of understanding of surrogate biomarkers and biomarkers that may be correlated with clinical response. And I think particularly in the neuro division for years, there were no accelerated approval biomarkers that we've seen just in the past 2 to 3 years. Openness to, for example, amyloid and then now neurofilament to support approval. And so I think we feel this is a very dynamic time, and we feel it's important to continue these discussions and hope that we can start to shift the approach to thinking about approval for these therapies.

Okay. So the 2 questions related, and I'll bucket them into one. Are there any -- is there any correlation between neurofilament reduction and clinical benefit?

Yes. So we have shared top line data for our neurofilament today. We do plan to do multiple additional analyses, and we'll present these at a scientific conference at a future date.

How long is the lag time between heparan sulfate normalization and neurofilament reduction? Maybe I'll take this one, Carole, to give you a break. So what's really interesting is that we start to see by 6 months, sort of at that point, a decrease in neurofilament over a year and then 2 years. And the advantage of measuring serum neurofilament is that we can measure more frequent time points. And so if you look at sort of the steps in correction of biochemical deficits, cellular deficits, and then neuronal axonal deficits, there each one has a bit of a lag time. So we see a very rapid normalization of heparan sulfate and then some delay for correction of lysosomal biomarkers, such as GM2 and GM3 and then by 6 months, we now start as the beginning of the reduction out to a year and 2 years with neurofilament. We, of course, are very excited to see this data and especially the robustness of the data including, as Carole highlighted, the nearing normalization with neurofilament. So I think it's a sort of expected biological sequence of events from starting with correcting the enzyme to ultimately halting or slowing neurodegeneration. Now some questions around the ETV franchise. I think I'll start here, and then Carole, you can add related to this. So given the observation of heparan sulfate being necessary and sufficient for neuropathic disease across MPS cohorts. Could there be a strategy beyond Hunter. I'll answer this and Carole, you'll add to that. And I think importantly for us is that heparin sulfate is at that top of the cascade and is now predicting a benefit across multiple cellular and in clinical endpoints. And so this is exactly our hope. Our hope is that with this hunter program we can establish basically heparin sulfate is the primary biomarker. Therefore, when we go in Sanfilippo and other MPSs, we can essentially draw that line between heparan sulfate and ultimately clinical benefit and really having a robust biomarker package. I think, illustrates that. Carole, do you want to comment because I know we've had a lot of discussions about heparan sulfate is really the primary biomarker.

No, I think you covered it. And certainly, we believe that looking at the primary substrate if we can reduce that and demonstrate that we can replace enzyme, we believe that over time, this should have an impact on this monogenetic disease. That's very clear. We do really believe, though, that these additional biomarkers, particularly the lysosomal biomarkers that are elevated in other diseases, and are known to cause neurocognitive function issues are very important because there, we're showing not only are we reducing that primary substrate that can cause CNS symptoms, but we're also reducing the accumulation of these others, which on their own can cause neurocognitive symptoms. So we think it's very important to demonstrate that. And I think all of that data, again, really supports the importance of CSF HS as a biomarker in this disease.

So continuing on the ETV franchise, does the latest NfL data from Hunter change your thinking or design of other MPS programs you're running such as the Sanfilippo program. What do you think, Carole?

Yes. Well, I think this really comes down to how regulators will look at this data to potentially accelerate development plans. I think just in terms of measuring serum neurofilament, we will certainly measure it. It's actually easy to measure given that we don't have to collect CSF for this, and the serum neurofilament enables more data points. So that I think over time, we can get better understanding of the trajectory over time as we showed today with multiple time points. So I think absolutely, this will impact our future development programs as well as, I believe, to the field.

Alex, this is a question for you. So again, related to ETV franchise, but more around portfolio strategy. So we've started to expand, obviously, in Sanfilippo, could we speak to a higher level on the overall strategies towards targeting MPS diseases? And would there be an interest in further building out this area as a focal point.

Yes. Thanks, Ryan. So the ETV platform does drive a broad franchise opportunity in lysosomal storage diseases. But 2/3 of all lysosomal storage diseases have CNS involvement, which is currently not addressed by standard enzyme replacement therapy. So based on encouraging early data with DNL310, we did start to build out a broad portfolio. So as we mentioned, in addition to the DNL310 program the ETV:SGSH, or DNL126 program is on track to start clinical trials in the second half of the year. And we've built a broad portfolio of 5 preclinical stage enzyme replacement therapies, which are all enabled by the ETV platform. In addition, we're currently working to accelerate launch readiness to be ready and to launch these programs in key markets when possible.

So actually, along those lines, and Alex, you and I can answer this, would we be ready to launch 310 in 18 to 24 months if an upside opportunity to file soon did emerge what would we do, what we need to do on the CMC and SG&A build-out side? So maybe I'll begin that, and Alex, you can add to that. So in fact, we've -- we're actually very aggressive preparing for launch because of sort of this unique circumstances with CDER and CBER. And so we have actually started to build out I mean, for a long time, the CMC side. So they're, I think, very strong, but also on the commercial side, preparing for launch and specifically globally. Alex, do you want to add anything to that?

Short answer is yes, we will be ready.

Okay. Great. So now a more technical question. Any differences in measuring NfL in the CSF versus the serum? And maybe I'll hand this to Carole.

Yes. So as we noted, our serum assay is a fully validated assay. And also our serum assay allows us to collect more data points over time. However, what we have observed is that we see a very similar reduction in neurofilament in the CSF and serum. As noted, we had a 53% reduction in the CSF, and this was highly correlated at week 104.

Okay. So I actually am not familiar with this as JCR has shown encouraging recent data at a higher dose. How do you think about differentiating versus that program now? And maybe I'll answer it and then Carole, you can add to it. So we actually compared the JCR architecture and head-to-head in a publication and happy to share that publication where we did dose ranging. Interestingly, at least in our experience, JCR is sort of dose limited at 2 mg per kg doesn't hit that 4 mg per kg. And there, they see sort of a plateau effect on CSF heparan sulfate. Do you want to add anything to that, Carole?

No, I think the only thing that I would add is, as a field, there has been recognition that there has been consistent underdosing of therapy in these patients. So standard of care Elaprase which is given peripherally and addresses the peripheral manifestations of the disease. That is likely underdosed. Physicians feel like that there is certainly room to improve on that. And we've noted with our urine HS and DS that we can reduce levels even further after switching from standard of care therapy. So our approach to this was really to not underdose and evaluate DNL310 and its safety profile fully so that we could dose to a level that would treat all patients, including those that have these high levels of antidrug antibodies. So we think dose is very important. But as you noted in the data that we presented on CSF HS, even those individuals that were in Cohort B that had a lower dose regimen, they were able to normalize their CSF HS as well.

I think with that, we've hit the majority of questions. We thank everyone for showing up early this morning fantastic turn out and great questions. And so we're very excited about the data today and look forward to further advancing our TV platform and specifically our enzyme transport vehicle franchise. That, we thank everyone. Take care.

Bye-bye.