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

Yes. So I think for us, if we step back a little bit and look at the entire portfolio, our goal, which we've set now a while back was to commercialize our own medicines, specifically in the enzyme replacement therapies, right? And so we set out to figure out how would we do that as really leaving it ourselves. And the Royalty Pharma deal puts us in a very strong position. That with also an equity financing brings in another year of capital, really takes us to the end of 2028. But I think also is reflective of the deep diligence on the platform in order to say, okay, there's real promise here. And there's real promise in Hunter as a commercial opportunity, right? We wanted to be able to finance ourselves through our 3-year goals. And we've laid those out at the end of last year, which was to have 2 growing brands, one with tivi in Hunter syndrome, another with DNL126 in Sanfilippo, 5 clinical proof of concepts and bringing an additional 5 medicines into the clinic using the transport vehicle. At this point, we have 5 [ tivi-enabled ] programs. So the royalty financing with the equity financing at the end of last year lays that foundation for the next 3 years.

Yes. Interesting. So let's flip gears to Sanfilippo 126. So where are we with that program? And what do we have to show? Because there seems to be some derisking that's already occurred, I would think.

Yes. I'll start on where we are with the program and then Katie, you can add to that. So we just presented data at WORLD. This is the first data, the most robust data set, I think, yet presented in Sanfilippo. We have a robust reduction in CSF heparan sulfate, again, our familiar biomarker as well as GM2 and other lysosomal biomarkers. We also see reduction in urine heparan sulfate, normalization of liver volume. And basically, we're in a strong position. What's interesting about that data set is that it was essentially 2 cohorts that were dose finding, and we really need to figure out the dose frequency and the dose levels. And if you look closely at the data, you can see how that plays out in the biomarker over time as well, especially the urinary GAGs. You can really see that as we shifted to weekly dosing at the high dose, we drove a really robust effect. And we also improved tolerance going to weekly from every other week dosing. And part of that is in these enzyme replacement therapies, having drug on board allows you to build tolerance. So a lot of really important insight in that data set. We now have what we call the key efficacy cohorts, which are fully enrolled. We'll complete -- we'll have a data cut in September, and that will be the data that goes into our BLA filing for accelerated approval, again, using CSF heparan sulfate as a surrogate biomarker reasonably likely to predict clinical benefit. So a lot of similarities with Hunter, but also some significant differences. There's no standard of care in this disease. It is a very aggressive neurodegenerative disease. I'd say even more so than Hunter. Hunter is, of course, whole body and brain. Sanfilippo tends to really impact the central nervous system. Even the heparan sulfate is elevated about twofold above what you see in Hunter. And so I think timing of intervention is really going to matter with Sanfilippo and more so than some of these other diseases.

So in terms of the commercial opportunity, it is exciting because the infrastructure today that we're building for tivi is going to be the same infrastructure that we'll be launching DNL126 as well. So we will not have to add additional headcount. Same call point, same customers. And so you can imagine that with our ETB portfolio, we can get very, very high brand margins because our spend will be limited.

Interesting. And just lastly, before we move on, the number of patients in each one of these populations.?

Yes. So we're -- it's hard to because there's no treatment, getting the right epi is hard, but we're roughly estimating that it's about 75% of the MPS II market, so around 1,500 patients worldwide versus for MPS -- sorry, MPS II. MPS IIIA is 1,500, MPS II is 2,000 worldwide.

Yes. Okay. Terrific. I want to step back just for a second. One of the -- well, actually, before we do that, let's talk about any other lysosomal storage disorder pipeline products that we can talk about...

Yes. We just received clearance, and we'll soon begin dosing with our Pompe program using the transport vehicle technology. This is ETV:GAA. What we've shown there, which is a little unique from Hunter and Sanfilippo is the ability for transferrin receptor-enabled technology to improve muscle biodistribution. So that's well known. There are other companies that are using TFR platforms to deliver, for example, oligonucleotides to muscle. And what we've seen compared to the standard of care is more robust benefit in muscle endpoints in Pompe. So LOPD obviously, is the primary goal here. Now fortunately, there's also a rare population that has more severe mutations, IOPD, where we also believe ETV:GAA can be differentiated because we can deliver across the blood-brain barrier. So improve muscle delivery, improve brain delivery. That program will begin dosing and really expecting data for this next set of transport vehicles that includes GA MAPT for Alzheimer's, Abeta for Alzheimer's in 2027, but it all comes down to our ability to enroll and dose escalate in each of these studies. So a very exciting time expanding the portfolio at the same time that Katie and her team are preparing for our first commercial launch.

So 5, 6 years ago, I feel like you were the blood-based barrier buster, right? I mean you were the one. And now it feels like I don't know everybody seems to want to have one. How is yours different? Like as you hear about each one of these, I'm sure you get questions like what do you think of this? What do you think -- how do you differentiate?

I mean it's very good news that everyone else is wanting to do it. If you're in a field and you're the only one doing it, it probably means that what you're doing is not working. And I think in biotech, like once something starts to work, everyone jumps on board with a variation. And frankly, that's actually what's best for patients because then they'll have many options and people will use their deep expertise to invent in whatever part of this technology, if it's the protein engineering, if it's the cargo that you're delivering. And so obviously, you're right, we probably had a decade head start in this area. It's something that I've worked on now for 20 years and started working on blood-brain barrier in actually 2006. And I remember first working on this is prior to founding of Denali, we looked at everything that existed in the patent literature and everything that existed in the publication literature and just made them and said, is there something that already works and that's where we started to invent and really understand the dynamics of trafficking at the blood-brain barrier, first with transferrin receptor, then with CD98 and then we've now combined them. And what we learned when we founded Denali now over a decade ago is that we wanted really something that was modular that allowed us to make fusion proteins that allowed us to make antibodies. And then eventually, we were the first to show that you could actually get an oligonucleotide into the brain. That had never been shown. And frankly, I didn't think it was possible because think of what has to happen. You deliver this thing either subcu or IV. It has to cross the blood-brain barrier, get into a cell, release the oligonucleotide and then modulate gene expression in the neuron. I mean that's a journey. That's multiple cells that you're crossing to this -- to get to this spot. So when we saw that for the first time, and we actually published that in 2024, but saw it for the first time in 2021, we thought this is really like this can really change things. And I actually feel like that presentation of that data in '21 and [indiscernible] that's become one of the most competitive areas in blood-brain barrier is delivery of oligonucleotides because now you can regulate gene expression in the brain. And so of course, we want to win. We're competitive. That's great. But also, if it's working, you should expect a lot of people to do it, which was my original point. Now to answer the question, what is differentiated. And I think the fact that we built receptor binding into the Fc is unique. We haven't seen that with any other competitors. Part of that is we have a very strong IP landscape. The fab approach is what most people are taking. There's some variation of fab and they make fab fusions, fusions with oligos, fusions with antibodies. I think stability can be a challenge there. And we've done a lot of work on differentiation. In some cases, directly against the exact architecture of a competitor in other cases, like theoretical differences. Some of that has been published. Others we presented at the end of last year in an extensive R&D Day. So I think that those areas of differentiation are important. But all of them may work to some extent. The question is who will get there first and who will ultimately be better and let's see how -- I mean, I would love to look back 10 years from now and have like 20 or 30 approved transferrin receptor programs. Now great if a lot of them are ours, but also okay if the field is now really growing and can actually deliver medicines that way.

Yes. You mentioned the MAPT and the Abeta. Talk about those products a little bit. Obviously, there's 2 drugs for Alzheimer's on the market. Obviously, Roche is working very hard with tronti to kind of get there as well. Where do these fit in?

Yes. We're on the -- as we're on the eve of our first approval, I think it's important to step back and say a decade ago, we founded Denali because we wanted to defeat degeneration. Our goal was to make medicines for Alzheimer's and Parkinson's. But as almost always the case in biotech, you follow the science, and it was actually much more compelling for us to start with Hunter and Sanfilippo, where it's a monogenic disease. There's approved enzymes, they don't get in the brain. So there's a linearity, like you know there's a high probability of success. What's changed for us is that I didn't never imagine working on childhood diseases. It's profoundly impactful, like beyond measure as you engage with these families and you engage with the community, and that ended up being very foundational for Denali is working in the enzyme replacement therapies. But we never forgot that we wanted to solve, at least be part of solving Alzheimer's and Parkinson's and these other areas. And so it's very exciting that our first real oligonucleotide program, MAPT, is now entering the clinic it's going to silence the expression of the gene MAPT that codes for tau. And the idea is right now, there's intrathecal delivery, but can we replace that with IV delivery and subcu delivery and knockdown expression of tau. And in addition to that, there's now a class of molecules. I mean, let's all face it, everyone either believed in Abeta or tau, and now you can hopefully believe in both. I mean we're still waiting to see if tau knockdown will lead to clinical benefit. But there are now -- like now we need a best-in-class Abeta molecule, and that's where our ATV:Abeta program comes. And so that's -- I think it's an exciting time to go back to our origin and make neurodegeneration medicines using the transport vehicle technology to create this best-in-class, certainly in the Abeta field.

So just to be clear, the Abeta, this is your own Abeta...

Yes. So -- what we've done, and I think it's probably best described in a paper we published in science last year in August is we've engineered this antibody to be immune silent when bound to transferrin receptor. But when bound to amyloid plaque, we can remove amyloid plaque through the Fc gamma receptor interaction. It's called a cisLALA mutation. I think it's very clever. Our engineers proposed this idea and then determined it sort of empirically. And so the goal is to have the robustness of plaque removal that you have with any standard full effector function antibody, but have that molecule be silent when bound to transferrin receptor. Then in terms of the Abeta arms, we're selecting arms that bind aggregated Abeta preferentially, not monomeric, and that's essentially the approach we're taking with that program.

Interesting. And where is that program?

We'll be filing it very soon. So we'll be starting clinical studies this year. I think with both MAPT, Abeta and our GAA program for Pompe, we're just generally seeing data in 2027, but full speed ahead. The faster we can go, the better with any of those 3 programs. Obviously, the Pompe program expands the ETV franchise to a larger market, including muscle, but let's face it like tau and Abeta are really important targets, one of which has at least been clinically validated.

So we're all watching Biogen, I guess, is probably the next tau oligo, right? So we'll know what if it doesn't work? What if it does work? What does it mean?

So I think what we can say already and probably the most interesting thing we can say is that with the Biogen ASO program, they were able to reduce tau, but they're also able to reduce tau pathology by PET. And that actually is not intuitive. Now we think of amyloid plaque, you have these microglial cells. They're the -- since we're here in Miami Beach, they're the beach comers of the brain. So microglia goes around and cleans everything up. You have antibody tag the amyloid plaque and basically engulf the amyloid plaque. That's what the Abeta antibodies do. With tau, those neurofibrillary tangles are inside a cell. And it's uncertain that reducing tau protein alone would actually reverse tau pathology, but that's what the initial data has already taught us from Biogen. So now there's one really important question, which is, does reducing tau pathology lead to a clinical benefit. The distinction of the OTV, which is an oligo transport vehicle and the way that Biogen approach it, which is an intrathecal delivery of an ASO, so injecting the spinal cord is it's a very different biodistribution profile. Our medicine will cross capillaries and give you even distribution throughout the brain, where intrathecal delivered medicines don't penetrate deeper brain regions. We've shown this in nonhuman primates. And of course, humans are -- at least our brain or central nervous system is about 18x larger than a nonhuman primate. And there, you're just relying on browny and motion for these ASOs to diffuse. So I think there's a real chance for differentiation in biodistribution. Now does the traditional intrathecal approach, is it going to actually test the tau hypothesis? I guess it remains -- this is a type 2 experiment. In other words, if there's clinical data looks great, then we know and then we can replace that with either a subcu or an IV injection. If it doesn't look great, it could be around biodistribution, right? So there's really one outcome that's informative, which would be a clinical benefit. If not, there are multiple reasons why it may have failed.

Yes. Interesting, very interesting. Another data readout this year is LRRK2, right? So give us a quick update on LRRK2.

Yes. This is an exciting year, waiting for an approval. We just had our first data on Sanfilippo, we'll complete that. We have a LRRK2 readout midyear. That's being run by Biogen. LRRK2 is a kinase that when mutated is hyperactive and is one of the 2 major genetic risk factors in Parkinson's. GBA is the other. We're approaching that with a GCase enzyme replacement therapy. But in the case of LRRK2, it's really compelling genetics, and we've developed a LRRK2 inhibitor. This is one of few medicines that aren't using the transport vehicle in our portfolio. This is one of our very first programs way back 11 years ago that we started engineering small molecules that were blood-brain barrier penetrant. This will be a really big test of the LRRK2 hypothesis because it's 650 patients, UPDRS, real clinical endpoint. This is a registrational sized study being run by Biogen. But I think the reason to believe is that the genetics is very compelling. The question in neurodegeneration is always timing of intervention. right? You can have a genetic cause, but even Abeta, it took time for us to understand selecting the right patients, intervening at the right time to provide a clinical benefit. So we hope we've learned from that. And in the case of LRRK2, we're actually testing idiopathic, but we also have a separate study with just LRRK2 carriers where we're looking at biomarkers. So I think it's obviously an exciting target.

Were we able to find those patients? I know it was...

We -- actually, we are. And the difference between LIGHTHOUSE, which was a 400-patient study and BEACON, which is a 50-patient study, is that we actually focus more on the biomarker aspects of BEACON and therefore, changed the enrollment criteria to allow us to quickly find those patients. And that study, we're nearing completion and enrollment in that study, much faster than we had for LIGHTHOUSE.

Yes. And then just lastly, in the last few seconds, the other program that you were mentioning...

Yes. So progranulin, this is the -- so progranulin is PTV progranulin. And the idea here is a protein replacement therapy, enzyme replacement therapy for progranulin. And here, this year, we're looking at the proximal biomarkers, the biomarkers of lysosomal function in FTD granulin.

Excellent. There's a lot going on.

It's exciting time.

Hopefully, you'll be very busy.

Yes.

Thank you very much for joining us.

Thank you.

Thank you.