Design Therapeutics, Inc. (DSGN) Earnings Call Transcript & Summary

All right. We're ready to get started. Welcome, everyone. I'm Josh Schimmer from the Cantor Biotech Equity Research team. I'm pleased to introduce from Design Therapeutics, we have Pratik Shah, Chief Executive Officer.

We're going back to some GeneTAC. So Pratik, thanks so much for joining. Why don't you frame Design Therapeutics and give us a quick overview of how the GeneTAC platform works?

What makes design unique and interesting is that we've developed a new class of small molecules that do something remarkable, which is that they dial up or dial down the expression of a single gene in the genome. And the way the molecules do that is they recognize DNA sequences through the minor groove interactions, much like a transcription factor would. And they then recruit the appropriate transcriptional machinery to the locus to either dial up or down expression. And so as you think about the role of individual genes in disease, there are many monogenic disorders where the single gene root cause is known, and we're working on several such monogenic conditions. One is Friedreich ataxia. The other is Fuchs endothelial corneal dystrophy. The third is myotonic dystrophy and then Huntington's disease as our front-runner examples of monogenic diseases. In Friedreich ataxia, the problem is that the level of expression from the frataxin gene is low. and that's what causes the disease. And so what we've done with the GeneTAC platform is developed a molecule that can dial up the expression of normal endogenous frataxin despite the presence of the mutation that causes this disease, which is a very exciting prospect and goes after sort of the root cause of the condition. So if we can dial up frataxin expression in patients with FA, that could provide significant clinical benefit and value to patients and a value creation opportunity for investors. In the case of the other 3 diseases, they are all caused by a toxic gene product derived from the mutant allele. And so the GeneTAC, in those cases, dial down the expression of the toxic RNA and/or protein, and that's how the GeneTAC is intended to create benefit. And so having an opportunity to do that in Fuchs corneal dystrophy, myotonic dystrophy and Huntington's disease is what we're looking to demonstrate hopefully with our clinical results. And we're now into -- 2 of these programs are in clinical investigation currently, and we're looking forward to the results of those.

How do you get gene selectivity with this mechanism?

So one primary driver of selectivity is the ability to recognize the particular DNA sequence in the mutation. So in the case of Friedreich ataxia, the molecules look for long GAA, GAA, GAA sequences, and there's generally a selective pressure against long repeat expansions in the genome because they drive genomic instability. But in the case of Friedreich ataxia, you have this GAA repeat expansion, where in a normal allele, you have a handful of repeats. But in a mutant allele, you have hundreds of repeats, sometimes over 1,000. And so that's an added layer or driver of the selectivity is when there are more binding sites all next to each other, that facilitates the localization of the molecule to the locus of interest. And we've seen selectivity between the wild-type and mutant allele. In Friedreich ataxia, we've seen this similar selectivity in the case of Fuchs corneal dystrophy where the wild-type allele is left untouched and in myotonic dystrophy as well as Huntington's.

What do we know about the frataxin expression in Friedreich ataxia. I guess it's autosomal recessive, and so many patients have very minimal. There are actually some interesting clues because we talked to Alexion yesterday about what they're showing in the heart and actually how minimal enzyme activity might be required to start to normalize patients.

Yes. So when one looks at the literature of the level of frataxin expression, there are widespread reports that indicate that a carrier has approximately half the level of frataxin expression as a non-effect -- as a non-carrier wild-type condition. And carriers are actually quite common, about 1 in 100 individuals are carriers of the Friedreich ataxia mutation, but they're clinically unaffected. And so we know that there is some reserve capacity where you can go down to half normal expression and there have no clinical manifestation whatsoever. Patients on average in the literature are reported to have about 20% to 25% of wild-type levels of frataxin. And it's a systemically expressed protein, and it's certainly encouraging to hear that any sort of increase in endogenous frataxin level could provide benefit. But that's really never been demonstrated. No one's ever really increased endogenous frataxin expression. And so we have an opportunity to potentially do that and see what level of increase might provide therapeutic benefit.

As a small molecule, are you able to address all aspects of Friedreich ataxia? There's a neuro component, cardiac component. I'm not sure if there are any other components.

Yes. The small molecule naturally gets into cells and gets into the nucleus and binds to its target without any facilitation. These are not charged molecules. And so unlike other genomic medicine modalities, whether it's gene therapy, proteins, oligonucleotides, those all have to be either transfected in or somehow get into the cell. So these small molecules, because they naturally get in, they distribute widely into a variety of organs, including all of the target organs you mentioned. And so there's simply an opportunity, more than one target organ in which we might look for or potentially observe therapeutic benefit.

We're able to measure CSF concentrations with the first product iteration, and that will be a good segue into DT-216 and then ultimately 216P2.

Yes. We don't measure the drug level in CSF. In fact, it doesn't -- it really compartmentalizes more to the tissue. So it's not really -- readily observable. But in all of our nonclinical studies, we've looked at CNS levels of drug, and we believe we get adequate exposure in the CNS with a systemic administration to drive pharmacology. And your next question was about 216?

216, yes.

Yes. So we had the opportunity to take our FA molecule, DT-216, into the clinic in 2022 and 2023. And in those studies, on one hand, we saw a nice demonstration that 216 actually can and does upregulate frataxin expression in patient studies. And that was seen in both peripheral blood mononuclear cells as well as in muscle as measured by a biopsy after treatment. The issue that we ran into is that the previous formulation was not well-behaved, and there were 2 limitations that prevented that from continuing development. One was that we saw injection site thrombophlebitis that prevented us from considering increased dose frequency or dose levels because there were concerns around worsening of those reactions. And the other is that the duration of exposure was very short. And so what was supposed to be a multiple-dose study with an increased expectation of steady-state levels, in hindsight, turned out to be a series of single-dose studies 1 week apart because the drug exposure was seen only for about 2 days. But despite that very short exposure at that day 2 time point, both in peripheral blood and in muscle, we saw an unmistakable increase in frataxin RNA expression. And that occurred at exposures of about 8 to 10 nanomolar, which match nicely with our preclinical cellular exposure experiments that suggested that 10-nanomolar exposure was sufficient to drive full pharmacology as long as the duration of exposure was sufficient. And so on one hand, we had validation that the mechanism works in humans. On the other hand, we realized at the time, we needed to figure out how to address both of these limitations. And I'm really pleased to see that here we are 2 years later and that we were able to create a new formulation of the same molecule that showed activity in humans and address both of these limitations. So we've recently showed data from our single-dose studies in humans with the new formulation that we call DT-216P2. And that data shows that the exposure is -- the profile is more favorable. We like the PK, and we've published that. And we also have now sufficient evidence to support the view that this injection site thrombophlebitis that issue we had run into has now been resolved.

How did you solve it with formulation?

Originally, we had used sort of off-the-shelf excipients. And we took those forward into the clinic with the expectation that it would be fine. But after having the clinical experience that we did where we were surprised to see the short duration of exposure in the tissue, we went back and looked more broadly at novel-excipient space. And because this is a new chemistry and a new modality, we now have developed a different set of formulations that actually are much better behaved and allow us to progress into the clinic.

We know what the half-life of frataxin protein is as a guide to, like, ultimately accumulating protein with successive dosing?

It's a pretty longer protein. So the literature reports generally guide to a multi-day, potentially 2-week half-life. And once the protein is made, it is thought to be stably incorporated into the mitochondrial matrix, and that might explain why it has a long half-life. And the consequence of having a long half-life protein is that like any long-lived analyte, it takes, as a rule of thumb, several half-lives for an analyte to clear. And by corollary, it takes, say, 5 half-lives to also get to steady state. And so if we think about the time course in which a protein might get to steady state, that takes you into the sort of several week time frame, as a rule of thumb. And you layer on top of that, that DT-216 has a half-life that supports, we think, about a once-weekly administration. And that will take a few weeks to get to steady-state exposure. And so I think those factors have led us to target about a 12-week treatment duration for our final analysis for frataxin impact of 216.

So what are the next steps for the program now?

Well, we're in Phase II studies. It's the RESTORE-FA trial, where we're doing multiple ascending doses in patients with FA. And we're excited to be in that phase of the program, and we look forward to analyzing the totality of 12-week data sometime next year.

What doses are you exploring? And how do this compare to the exposure you achieved with the original formulation?

So we published some early PK recently with approximately 40-milligram dose that showed a very nice exposure relative to what was a comparable dose of P1. And so that data gives us comfort that we have in DT-216P2 a formulation that gives us the kind of PK profile we like. Now we are in a dose-escalation study. And so we haven't yet determined all of the dose-escalation levels. We have a lot of flexibility in terms of both frequency and duration. So we're exploring various routes. We're doing an IV route as well as now we have subcu route of administration available. So we're exploring that in some cohorts. And so we're working through that whole dose-escalation schema, and we'll have more clarity on the timing of our readouts as we finish up planning our operational study execution.

And what do you expect you need to bring to the FDA to contemplate a registration trial and design?

Our focus right now is on generating data to see if we can restore endogenous frataxin, and that's our current objective. In terms of registration, we're just looking -- we're following, with interest, the conversation, reports from other sponsors in the FA space, and we find the reports from those sponsors to be encouraging, both in terms of the FDA's appreciation for the level of unmet need in this population as well as potentially what looks like there might be an openness to considering surrogate endpoints for potential registration. But until we have endogenous frataxin data, we won't really have an opportunity to engage with the agency on those conversations.

On the clinical side of the development path, are you thinking more cardiac symptomatology or neuro symptomatology to kind of guide that registration strategy?

We have an opportunity to look at a variety of potential impacts. So right now, our focus is on seeing what sort of a frataxin registration we're able to get. And then either of those avenues could be fruitful.

Would the mechanism, in theory, be complementary to gene therapy by getting even further expression of frataxin, whether it's in the heart or -- I think there are program -- gene therapy programs targeting the CNS as well?

Yes. I mean I think the goal of the GeneTAC approach is to increase endogenous frataxin. And so until we know what the impact is of exogenously delivered frataxin on patients clinically, it's hard to say. But our hope is that by addressing endogenous frataxin production for the patient's own cells under natural regulatory control that, that we hope would be sufficient to address the need. But sure, there are certainly scenarios in which it could be complementary to other therapies.

SKYCLARYS from Biogen now annualizing around $500 million a year. Do you think that kind of generally defines the market? Or is it likely to be much bigger with either -- for whatever reason, broader penetration and/or global expansion?

Yes. I mean I think the -- it's wonderful to have an approved therapy for patients living with FA and both the acquisition of Reata as well as the performance of SKYCLARYS, I think, has sort of validated the value creation opportunity in FA. But SKYCLARYS doesn't really go after the root cause of Friedreich ataxia. And so I think in general, the field is very much looking forward to a therapy that goes after sort of the fundamental root cause of FA and believes that, that can create enormous value for patients.

Maybe we can turn to the Fuchs endothelial corneal dystrophy program that you mentioned initially. You recently had some Phase I data for DT-168. Remind us what this condition is, what causes it and how you're solving it?

Yes. So Fuchs corneal dystrophy is a progressive corneal disease. And it's actually diagnosed relatively early and readily, often in annual eye exam at an optometrist office. And it's thought to be quite frequently diagnosed. The Centers for Disease Control has an IRIS Registry that estimates approximately 2 million diagnosed cases of Fuchs corneal dystrophy in the United States. And unfortunately, there are no real disease-modifying treatments for Fuchs corneal dystrophy. So patients are unfortunately in a situation of sort of subject to a progressive loss of visual quality until the disease is so advanced that the treatment at that point would be to get a cadaveric corneal transplant surgery. And so patients are in this situation where you kind of suffer through this progression until it's so bad that it justifies a surgical procedure. And so that's the current state of affairs in Fuchs corneal dystrophy. Mechanistically, this is driven by a loss of cellular health of the interlayer of the cornea, which is the corneal endothelial monocellular layer. And the reason these cells are dysfunctional is they carry a single mutation. Now this has been known to have a big family history component. But it wasn't until maybe a decade ago that the specific gene was identified as the TCF4 gene that causes this cellular dysfunction, which then leads to Fuchs corneal dystrophy. And the mutation is called CTG18.1 in about 60% to 80% of patients with Fuchs corneal dystrophy. And the reason this mutation causes the disease is that the single bad allele of TCF4 creates a toxic RNA. And that toxic RNA creates a foci, which you can see under a microscope. So if you take cells from -- that would be typically discarded from a corneal transplant, and you look under the microscope, you can see these RNA toxic foci in the nucleus. And so what we've been able to do is create a GeneTAC molecule, which is DT-168, that dials down the expression of that toxic RNA. And you can see these foci vanish after drug treatment in cells taken from corneal transplant patients, ex vivo. And so the opportunity now exists to potentially modify the course of this condition, and we've been able to formulate this as an eye drop, which is remarkable. And so the exciting possibility here is to have an eye drop that would slow or stop the progression of Fuchs because if you can get rid of the foci and allow the cells to stay healthy and survive, there is the potential to change the course of the disease.

What can you learn from kind of an early Phase I study to inform next steps? So maybe take us through that.

So the Phase I study that we conducted was primarily to confirm the tolerability and safety of the eye drop in healthy volunteers, and we're delighted to say that the study went well and that eye drops were well-tolerated. So our focus now is on trying to see if we can generate evidence that DT-168 does what it was designed to do in the cornea of patients with Fuchs. And so we've been looking for whether a biomarker could exist for this type of a situation. And the literature really doesn't have any demonstrated biomarker. So we ran a study looking at whether you can detect splice defects as a result of these toxic RNA foci, and we were able to successfully identify splice markers that show a difference in corneal cells from Fuchs patients versus corneal cells from unaffected individuals. And those splice differences were large enough that we felt that it could potentially serve as a biomarker for the DT-168. And so to conduct this type of clinical study, what we would be doing is taking patients who are already scheduled for corneal transplant anyway and treat them for approximately a month or more with DT-168 eye drops so that when those corneal cells are available, we can look to see if the splicing was, in fact, affected in a therapeutic fashion as a result of 168 eye drops. And so that's a very exciting. It's a novel design. There's some limitations to this approach because you can't take a pretreatment baseline version. But if it works, it would be really a remarkable demonstration that DT-168, in fact, does, as an eye drop, what it was designed to do, which then sets us up for dose selection and a longer-term study looking for the ability to slow or stop progression of Fuchs.

So you might not have the benefit of a baseline, which might make the results very hard to interpret. On the other hand, if you had a comparator arm untreated, still a bunch of noise that it might start to give you...

Right, right. And we have that at this point. So we have the data for splicing from untreated individuals, and we have splice data from unaffected individuals. And so we can see that what a normal splice pattern might look like and what an untreated splice pattern looks like. So the idea here is, is the treatment effect large enough that it actually looks closer to the unaffected individuals than the untreated individuals.

What kind of -- how tight is that data? Or what kind of variability is it, which will kind of determine the sample size you might need to have a more precise answer?

Yes. We published that and presented it at the Eyecelerator meeting just prior to ARVO this year. And so that data is in our corporate deck. And you could see across several splice events that there is a nice separation between affected and unaffected splice levels. So our initial approach is to go in with a few dozen individuals as a sample size to start, but it's an exploratory study, and we'll find out as we go whether this approach gives us confirmation of the activity of 168.

What are approval endpoints you might contemplate for a registration trial?

That's something we're evaluating in a separate trial that we're running. It's the observational study, is how we're terming it. And there, we're looking at 3 domains of endpoints because no one's really run clinical studies with these endpoints in Fuchs corneal dystrophy. So we're looking at visual quality measures to see how reliable they are, how do they -- how noisy are those endpoints. We're looking at a second set of domain, which is a measure of corneal edema, which is functionally the driver of the poor visual quality. And so we can now directly measure corneal edema with precision instruments. There is a Scheimpflug tomography approach to measuring corneal edema. And so we're deploying that. And then we've got a third domain, which is trying to borrow, if you will, a page from the geographic atrophy playbook, trying to look at imaging endpoints. And so we're looking at directly visualizing the corneal endothelial cells using specular microscopy. And so once we have results from our observational study, which is now fully enrolled and we have approximately 100 individuals that we'll be following up on, we will be able to choose endpoints and potentially patient enrollment criteria to inform a registrational trial.

Given the mechanism, would you generally expect a stabilization effect? Or is there any reason to think you might actually improve the corneas?

Well, from an unmet-need standpoint, anything that would slow or stop the progression of Fuchs would be highly welcome already. And so that's our base case target, is to see if 168 can improve that. Now of course, if, in any disease condition, one can actually reverse disease, that's always a remarkable thing. But at the moment, we've heard universally that anything that would slow or stop the progression of Fuchs would be welcome.

You also have a DM1 program. When do you expect to select a development candidate? And how quickly could that move into clinical data?

We expect to select a DC this year. And then alongside the selection is when we'll be able to project a likely path to both getting in the clinic and potentially clinical data.

Again, like leveraging the advantage of a small molecule benefit to target beyond muscle components of the disease, how are you thinking about kind of the positioning of this relative to some of the other more advanced therapeutics that have already reached Phase III?

There's many opportunities for us to potentially be best-in-class. First is that the molecule has a mechanism that works upstream of all of the other mechanisms that are further along. And as a result, this pharmacology we've seen in cells from patients is much more profound than has been seen with the molecules that are further in development. And so that's, of course, the most exciting possibility. In addition, we have selectivity for the mutant DMPK allele. We distribute very widely across a wide range of tissues and don't require any sort of transferrin receptor-mediated modality. We have also potentially a subcu route of administration option, whereas all the other therapies are intravenous. So between selectivity, distribution, inherent pharmacology, there's lots of opportunity here to be potentially best-in-class.

And do you have the resources to advance all the programs? Or do you think you're going to have to partner any?

We have -- we ended the quarter with $216 million. We feel that we have plenty of capital to execute on trying to get to hopefully a clinical POC on one of these.

We're looking forward to the updates across the portfolio.

Thank you so much.

Thanks so much for joining, and thanks, everyone, for tuning in.

Thank you. Appreciate it.