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

Good day, everybody. My name is Ash Verma. I cover SMID cap biotech and spec pharma here at UBS, and welcome to UBS virtual event, which is our CNS Day. Our next company here is Denali Therapeutics. I'm really excited to have with us Ryan Watts, who is the CEO at Denali. Hey, Ryan.

Great to be here, Ash.

Excellent. Yes, thanks for joining us. Really excited for the discussion. So maybe it will be helpful if you can give a little bit of a background about the business, just like you have an interesting platform just for the benefit of audience who are not very familiar and then we can go into the pipeline questions.

That would be great, Ash. So I enjoy CNS days, I trained as a neuroscientist. So these are my most exciting and relevant days. And just with that in mind, Denali. We founded Denali almost a decade ago with 2 primary goals. The goal -- the first was to engineer brain delivery, mainly of large molecules, biologics; and the second is to defeat degeneration. So we know that the second goal is going to be a lifelong goal. And what I'd like to just comment on in the last several years, and in particular, the most recent data set that we shared at WORLD on our most advanced program tividenofusp alfa. I think we have examples of accomplishing both goals. The ability to get a molecule across the blood-brain barrier, have robust reduction of substrate, but then also now seeing all patients normalized or near normalized on NfL, which is a marker of neurodegeneration. So the goal of engineering brain delivery as well as defeating degeneration. And now our main goal is to scale that across other enzyme other enzymes and other CNS diseases such as Alzheimer's and Parkinson's. And so I think just to set the stage, over the last decade, we have focused on the engineering brain delivery, inventing a technology that we call the transport vehicle technology, which basically engineering the Fc portion of an IgG, giving us a lot of flexibility to make Fc fusion proteins, antibodies and in fact, tag oligonucleotides. And what's emerged in the last year, there's 3 franchises, the enzyme transport vehicle franchise, the antibody transport vehicle franchise and the oligonucleotide transport vehicle franchise. I think we've obviously published a lot of this work in terms of the invention of the platform. And then what's happened in the last 2 years is now we see a huge amount of competition for brain delivery for these blood-brain barrier technologies. And not only are we leading the field with a number of the programs, but we feel like our technology is unique because of the Fc engineering rather than using a conventional fab approach, which has separate limitations. And so the last year, we focused entirely now on the transport vehicle and expanding that. I think, Ash, as we get into some of the programs, obviously, our lead program, I'm also excited to talk about the subsequent programs using this transport vehicle technology. But it's a very exciting time in the brain delivery space and happy to dive into details.

Yes, yes. That's great. Excellent start. So maybe for like Denali 310 for Hunter syndrome, if you can give a little bit of just quick overview of what are the data that we've seen so far? I know there's like good alignment between you and FDA that happened last year. Just maybe we start there and then I'll get into the more filing type questions.

Yes. So DNL310 is an enzyme replacement therapy. The idursulfase is the enzyme that turns over heparan sulfate and dermatan sulfate and keratan sulfate. The drug idursulfase has been approved for almost 20 years. And what it does is it basically reduces heparan sulfate in the periphery, specifically like peripheral organs like liver and spleen but does not readily cross the blood-brain barrier, and this has been the challenge. So if you look at basically 70% of patients have over pretty extreme neurological deficits. The other 30% actually do see neurological deficits over time, the vast majority. And so the standard of care does not treat those neurological deficits. So we set out now -- maybe 5 years ago, it's actually been much more rapid in retrospect, engineering brain delivery for IDS or idursulfase. And what we've seen is a maturing -- really mature data set, 47 patients. It's a very large data set in a rare disease. But the goal there was to fully validate the platform in addition to rapidly advancing medicine. And I think as you pointed out, a year ago, there was no alignment on an accelerated approval path. And I think as sort of been the history for the last 30 years in enzyme replacement therapy, there's been requirements for either placebo-controlled or active comparator-controlled studies, and that's essentially what we designed in our COMPASS study. But then leaders in the field, particularly physicians that have been treating this space for a long time, gathered with the FDA and showing data that measuring heparan sulfate in cerebrospinal fluid actually correlates with heparan sulfate in the brain and that correlates with ultimately clinical benefit. And so, now we have this mature data set. We've essentially completed the Phase I/II study, all patients reaching the 6-month endpoint, and that was the data that was presented at WORLD and that's also the data that is now being prepared for our BLA filing on the accelerated approval path. I think we'll get into some of the other questions, but that's a little bit of the history. And I think what you've seen is this stepwise heparan sulfate as like the primary biomarker, but then the subsequent downstream biomarkers and then what we're starting to see is really robust clinical data as well, including hearing data, behavioral and cognition. That was all presented recently at WORLD.

Yes. Yes. That's great. Excellent. So yes, I think you're past the bulk of the data generation phase. So now like the regulatory review process, kind of the next derisking event for the program. So maybe like if you can just kind of talk about like what is the status? I think earlier, you had outlined that early 2025 is when you are expecting the regulatory filing, and we are like sort of mid-March here, just if you can talk about like what are some of the remaining check boxes that you have to tick before you put the submission in?

I mean we've -- we're going all out to submit that BLA. And I refuse to take a very specific time, but every opportunity we have to accelerate that. And what has really been rate limiting for us historically is the CMC component. We mentioned this a year ago that we had to make a decision to either continue to invest on an accelerated approval path or not knowing that the FDA that wasn't an opportunity. And I think, fortunately, we did. But that's historically been the rate-limiting step is getting the CMC together and prepare for actual launch of the medicine. So at this point, the limiting were -- it's just all about writing and then it's all about submission. I think our goal is prepared -- being prepared for launch by the end of this year or early next year. And I think that's really the mindset. I will just make one other comment that we like to do things very thoroughly. I mean that's a Denali way, and so we will not compromise on any quality. And so anyway, I'm happy with how it's coming together. And as I think you mentioned, it's imminent filing as soon.

Yes. Yes. Okay. And like in terms of just the manufacturing module, like is there any -- I know you had started to work on this for a while back, but any sort of outstanding item there? Is there any like additional data that you need to generate? Or how should we think about that?

Yes. So at this point, both the manufacturing, clinical, preclinical, there's no additional data that we need to generate. It's literally like about putting together the various modules. What's interesting about the manufacturing of this molecule, and I think not well appreciated for the transport vehicle technology is that all of our medicines are essentially Fc, either fusion proteins or antibodies or antibodies with oligonucleotides. And so we have the fortunate benefit of using protein A columns for purification, which is very different than enzyme replacement therapies that is arduous, not -- you don't get great return on each of the expressions. And so we -- that Fc fusion makes it much easier and the COGS much frankly, lower using this technology. That being said, it's all about high quality. So we're not waiting for any particular data. It's about writing in submission.

Great. Yes, I think, look, this is happening just broadly in the biotech landscape right now that because of like certain disruption that is happening at the agency, I think investors are a little bit anxious on like -- especially for the companies that are going through a regulatory review cycle. So yes, I wanted to understand from your perspective, like how have those interactions being? Is there any change that you're seeing in either the tone or like acceptability? Are you working with the same reviewer that you've talked before, anything that has sort of shifted or been impacted at the other side of the table?

Yes. And this is not only a fair question. It's an expected question with the change in the administration and how we'll ultimately affect the FDA. The short answer is that we continue to have very effective communication with the FDA, very responsive. We -- I don't know if it's because of the actual division, which is the rare disease and Medical Genetics Division. The key was that, that Reagan-Udall Foundation meeting that was held a year ago included key decision-makers within that division, all of which we're still engaging with. And at the time, there was a sort of acting director, now that person is a full director. And so we see great and continued interaction. We, of course, are -- just like everyone else, the uncertainty is a little nerve racking. But for us -- and we've continued to communicate within the last weeks. I mean, it's definitely continuing. I'll add one other point which is important and a little bit -- I think actually a very important point, probably I should mention it earlier, at the beginning of this year, we received breakthrough therapy designation for tividenofusp alfa. And as far as we know, it's actually the first breakthrough therapy designation for an enzyme replacement therapy for MPS, definitely the first for a blood-brain barrier enabled technology. And what that -- what's required to receive that is basically not only evidence of biomarker improvement, but also that, that is correlating with clinical benefit that there is a clinical benefit or there's the possibility of clinical benefit. We think that's very important also from the time line from submission to approval. We think that will catalyze that time line. But I think that's just further evidence of the desire of the FDA to move these rare disease medicines forward. And I think what we're all -- I mean we're all listening to everything from new FDA commissioner that how important is rare disease, how important is that accelerated path? And it seems that, that still is very important and very logical. I mean I think it's not a very controversial issue.

Right. Has this -- I have like this type of situation play out with some of the other stocks like people start to look at like, okay, what has this division done most recently for other programs? Like have they recently approved any drug or anything that...

I think that's a great question for you. I think as you look at all the others, we've seen consistent progress within the rare disease and Medical Genetics Division. And I think, obviously, we're looking at a data set over a 4-year period. The fundamental question is between like February and today, and we definitely are seeing progress, but I won't comment on either our competitors or colleagues in the same division.

Got it. Okay. And then, is this a type of regulatory application that you would expect an advisory panel?

Yes. We don't know. We don't know. And I think one of the things we want to look at is when a drug gets breakthrough therapy designation, what's the probability that it has in Ad Comm. We are -- we will be prepared, and we are prepared if that's the case. And we look forward to obviously experts looking at our data, but we don't have that expectation necessarily.

Yes. Yes. Okay. Yes. I guess like first step filing and then the start to know from there. I think the one thing that -- another thing is just like the WORLDSymposium data that you had, right, like for these additional patients. So I believe you mentioned earlier that you made the decision to like include that data to make your registration page more robust. Like what is the incremental sort of like value add from that perspective that -- like what information do you want to have in the hands of the prescriber or the reviewer for that matter?

And that definitely is a proactive decision by us. At the time that we knew that the FDA was open to an accelerated approval file, we were just months off from essentially completing the Phase I/II, which I think is important and prespecified, all patients reaching 6 months. That was essentially the goal that you have this like basically excellent data package that includes these 47 patients. And so I think what it is, is -- if you follow the story for the last 4 years, it's more of the same robust data, but what starts to become very clear is the positive clinical endpoints as well because you had now a larger data set over a longer period of time, which is really important, especially for example, hearing. And I think that was the key. I'm actually -- I'll just share briefly, and I know that WORLD is always -- a fair number of investors follow WORLD, but not everyone. And I'm not sure anyone on this call has all the details. But I mean, I think the first thing is, this is highly differentiated biomarker data. We're the only MPS drug that's at least for MPS II, where you see normalization of heparan sulfate, now it's across a number of patients. But also normalization of serum NfL in most, if not all, patients. And so basically, these are the 2 primary biomarkers in our mind, really, the primary biomarker is CSF heparan sulfate. But this correlation with reduction in NfL, we think, is very important. But I think in addition to that, we haven't gone into these details, but we also focused quite a bit on the peripheral end points because our goal is that this medicine is approved for all patients, both neuronopathic and non-neuronopathic and it's actually kind of surprising. And I think a lot of this is driven by dose because this is an Fc fusion protein. We've been driving dose because we can build tolerance over time. And we think most patients are underdosed with standard of care. In fact, I think that's kind of well accepted. And so we see improvement in urine heparan sulfate. Obviously, liver volume is essential. That's -- this is one of the original endpoints for idursulfase. And so that's, I think, an important. And then the last kind of pieces of data, is improvement in behavior and cognition. And then ultimately, we're seeing in hearing up to the point where we're seeing patients that no longer need hearing aids. And so we think this data was actually really important for breakthrough therapy designation. But because before this, you have the biomarker data, but does it actually mean that patients are ultimately improving. So I think this data set is what we are looking for is the filing data set, ultimately.

Yes. All right. That's great. So yes, fingers crossed, hoping for that PR when we get the filing and then take it from there. On the COMPASS study, so you recently expanded the enrollment to include these neuronopathic patients, right? So how does that help you? And I guess the -- in the past that you've said that like 2 years from like last patient -- last visit was when you were expecting the data. So now that you've added these patients, does that take us to like -- sort of like first half '27 in terms of when we get the final readout from this. Any interim that can happen in this?

Yes. So I think your last point is correct. I mean the timing of COMPASS will be determined on the last patient in for the neuronopathic. Basically, what happened is we wanted to continue to give an opportunity for patients to be on tivi. And so there were a number of patients on the wait list for the COMPASS study. And so therefore, we decided to keep it open to add additional patients to that study. That was actually a very important for us as we rapidly file because -- and then essentially, when we get accelerated approval, then we have -- then patients have an opportunity to be on drug. And so I think that was -- the goal was to make sure that there was still that opportunity. And if you think about it, we have 47 patients on the Phase I/II. We're going to have 50 to 60 patients on the COMPASS study, right? In the U.S., there's 500 patients. And then worldwide, there's 2,000 patients. These are very robust data sets. And I think for us, the goal is to create that opportunity in the interim while we're preparing the AA filing.

Yes. All right. That's great. So just maybe a couple of questions on the other pipeline programs. So -- so 126 in Sanfilippo. So here, I know that you have been working with the FDA to get alignment on the regulatory path. How quickly can that happen? And does the 310 become like a playbook for the FDA to say, yes, based on the same biomarkers? Or are there certain like additional nuances to consider here in terms of that?

Yes. So I think a couple of points. So let me start with the last point you made that I'd say absolutely in the MPS disease is the precedent of heparan sulfate in CSF, that correlating with NfL correction with clinical benefit. And I think as you see that maturing data set in the Phase I/II is really important. What's unique about the Sanfilippo program is that it also received start designation that allows us to have more frequent interactions with the FDA, which has been the case. We've now been able to meet in person. We're able to discuss, I think, primarily the design of the confirmatory Phase III trial that has to be agreed upon, I think, in addition to what is the data set we need for an AA filing. We made the decision last year -- end of last year to expand this study. Before we had 8 patients and 2 cohorts. We've now added 3 more cohorts, which will be totaling 20 patients. We'd love to see a situation where Sanfilippo is like twice the -- or half the size of the Phase I/II of the Hunter program but twice as fast. And so I think that precedent is really important. So the next step with regulators and engagement with regulators is defining what the size of the AA data package needs to be. And we believe that we've now -- as we've expanded that enrollment, that will probably be sufficient. The other thing that's a little unique about Sanfilippo is that there is no standard of care. And so the debate becomes what's the right thing to do in terms of a placebo control. And this also is -- we're starting to see the FDA's thoughts evolve. I mean it's been 30 years where it's like always have placebo control in these rare disease, which is very difficult for patients, very difficult for families. And I think regulators both in Europe and in the U.S. are seeing that there's a pretty robust natural history data set. This is what we tried to argue, by the way, for Hunter. But now I think we're making inroads and arguing this for Sanfilippo. So these essentially confirmatory trials may have the possibility of not needing a placebo control. The other thing that's unique about Sanfilippo is it is a very rapidly degenerating disease, more so than Hunter and it's primarily CNS. That's why there's not really an approved central or peripherally acting enzyme because really, the main clinical manifestation is essentially neurological and rapid degeneration. So I think that -- so there's a lot of similarities, but there are some key differences that make this path unique. And I think that being said, Hunter paves the way and then the start program allows us to have regular interaction with the FDA.

Good stuff. So just in the last couple of minutes. So is there anything else like that you would call out in early pipeline? I know you recently started to talk about planning 1 or 2 programs, taking them to clinic per year from your tivi portfolio.

We have 6 programs in IND-enabling phase right now. And we'd love to be able to file 2 to 3 every year. But realistically, we're going to be filing 1 to 2 just in terms of resources. I think a very high priority for us is to bring our Abeta antibody forward to bring our MAPT ASO forward, GAA and Gaucher, Parkinson's. So that's GAA for Pompe and GCase for Gaucher, Parkinson's. These are all high priority. And then not to mention a few others that we have an IND-enabling phase. So it's a very exciting maturing portfolio, which will soon bring a number of clinical assets forward. And if you think about it, the goal is to have validation of the antibody transport vehicle and the oligo transport vehicle. We now know that the enzyme works, and we can build out that franchise. And there'll be, I think, a lot of value generation on the antibodies and oligos going forward. So that's an area that we remain really excited about as those programs are now in IND-enabling phase.

Yes. Yes. I think -- yes, I mean, you mentioned earlier that there's been like a fair bit of therapeutic development on the blood-brain barrier side, but like so far, like competition hasn't been able to catch up with you. Just wonder what is sort of the -- like the key differentiation that you have versus the rest of the field?

Yes. I think the simplest way to think of it is just 2 buckets. There are conventional fab approaches like fab fusions and conventional antibodies, which have been around for a long time. And then there's the Fc engineering, which is the way that we approached it. Now we -- to be fair, a lot of the work that was done in the fab space we did prior to founding Denali, so at Genentech and obviously, Roche has their own brain shuttle. And I think that those approaches, I think the limitation is manufacturing stability and immunogenicity where the Fc engineering allows us to have an integrated binding site. We're not making fusions and that integrated binding site also allows us to modulate the immune interaction, which is going to be very important. And so I think one program that we've all been watching closely is the Roche brain shuttle anti-amyloid program trontinemab and a very robust clinical proof of concept, but with some clear room for improvement. And I think that's something that we're focused on with the transport vehicle technology.

Good. Awesome. That's great. I mean, with that, we are out of time. So this went pretty fast, but thank you so much for taking the time and participating in our CNS Day.

Yes. That's great. And I'm looking forward to an exciting year for Denali. Thanks, Ash.

Yes. All right. Good luck with everything, Ryan. Take care. Bye.