My pleasure to have our next presenting company, Denali Therapeutics. Sitting up here on stage with me is Alexander Schuth, who's of course Chief Operating Officer, as well as CFO, double duty. Alex, thank you for making the hopefully short trip over to see us in the desert today.
All right. Well, again, thank you to Geoff Meacham for inviting us for a fantastic conference. Really also thank you for following us for many years now.
I'm not that old.
The always very thoughtful, commentary and also much, much appreciated. Great to be here today. It's a special time for us, at Denali. As you know, we just had our first drug approved, in March.
Big transition for us. Big moment for Denali, but also a big moment for the Hunter syndrome community, and I think importantly also a really big moment for the whole field of blood-brain barrier transport. Looking forward to the conversation and going deeper on all of those topics.
Yeah. Maybe let's start off with your first commercial launch. How is that going so far? I've been asking everybody to pronounce the name of their drug so that we're saying it correctly.
This one here, if you think about Star Wars.
Yeah
Is AVLAYAH.
Okay.
Okay?
AVLAYAH
Once you think about Star Wars, You can also think about the Himalayas.
Okay
The drug's name is AVLAYAH. It is of course indicated for the treatment of Hunter syndrome.
Yep
A rare pediatric disease, which has a severe neurodegenerative component. Our technology, as you know, is designed to treat the whole body, including the brain. A major unmet medical need in all of lysosomal storage disease, and especially in Hunter syndrome, is that traditional enzyme replacement therapy doesn't cross through the blood-brain barrier. We have shown in our clinical trials that we can very effectively deliver the drug to the brain, normalized all biomarkers, showed stabilization and improvement in measures of function. With that, we achieved accelerated approval. The drug was approved on March 24. We're very excited about the early days of that launch.
Yeah. So can you share a little bit of how that's looking?
Yeah. Very much so. We're excited about the level of engagement. We're excited about the level of interest, and importantly, across all patient segments. While at some point we thought the first patients to be engaged might be the ones that are on the earliers, on the earlier diagnosis or younger, but in fact, we see that across all age groups and across all levels of severity.
We have indicated at our quarterly report that we now have the first patients that are actually on drug in the commercial setting. These are not patients that came up from our clinical studies, but that actually were not associated with that. In one case, it was a very quick transition. It took three and a half weeks after approval to go through the medical exception process.
We're also quite encouraged with respect to the number of start forms that we're seeing. We're not sharing that number yet, I know you may ask, the reason why we don't share this, Net, we want to have more confidence in what the start forms actually mean.
We want to have one quarter of experience, how long does it take us to get in this sort of buy and build setting, to get through the multi-step process to actually turn start forms into revenues? From an engagement and an interest perspective, I think we're safe to say that we're ahead of expectations.
It's exciting in that you have your first opportunity for a commercial launch, but to levels set expectations, this is still an ultra rare disease. What is your expectation for patient finding efforts? Y ou know, what clip of uptake would be a good launch in your definition?
Yeah, great question. First with respect to the patient, it is ultra rare, but is a unique because there has been a standard of care on the market for 20 years, and essentially every patient with Hunter syndrome is identified.
This is not as much of a finding and identifying the patient setting, but about a switch, a switch setting, right? Switching very much depends on the level of enthusiasm in the patient community and in the physician community.
From that level, from that perspective, we're very encouraged about the early indications that we see. With respect to the market opportunity, it is ultra rare, but you know, ELAPRASE is a good, is the standard of care, is a good guidepost. It sells about $700 million a year. We believe that we have a drug that shows definitely some aspects that ELAPRASE cannot do. It can get into the brain, it can treat the whole body.
With respect to pricing, right, there is a premium that was justified based on the based on the clinical profile. We see that this can be a very substantial market opportunity. What we guide to is typically we look at our first two enzymes together, so that's AVLAYAH and then DNL126 for Sanfilippo, that those together are a $1 billion market opportunity. It's the, I would say that that's on quite conservative assumptions.
Okay. What do you think is going to be the criteria for patients to want to switch?
We actually see, I mean, from the early interactions, we see a lot of interest in switching, and as I mentioned, across the patient segments, right? The way the label is written right now, it is indicated for the treatment of neurologic manifestations in pediatric patients.
Yeah.
Right? It also has a subset about in symptomatic and pre-symptomatic. Symptomatic and pre-symptomatic is essentially everyone, right? It's in pediatric patients, which is about 70% of the patient population. Our commercial efforts are focused on that entire segment. That's, that's what we look at.
Okay. I think some had thought that the label was a little bit more limited than was expected when it first came out. Like, is that a right interpretation?
Yeah, we don't see it that way. I mean, I will give you, it does read a bit clunky at first when you, when you read it. At the same time, that gives our field team a really good opportunity to educate physicians on it. If you really look at it is really all pediatric patients and again, with for the treatment of neurologic manifestations.
It is pretty well established that in Hunter syndrome, essentially all patients either have or will develop neurologic manifestations. If you really talk about it, the treatment of neurologic manifestations is not a limitation. In fact, it actually highlights the key attribute of our drug that it actually gets into the brain what the standard of care is not able to do.
There is also a limitation on less, not less than five kilograms.
Which is essentially a three month old child, which was linked to that this was the patient population that we studied, and it was important to the FDA to mirror the label as closely to the study population as possible.
Okay. Do you foresee that label changing over time?
We do. We do expect that with the readout of the confirmatory study, that's the phase II/III COMPASS study.
Yeah
which we expect data by the end of next year, so a little over a year and a half ago, that the label would be expanded. In the COMPASS study, we have adult patients. We have patients up to 26 years of age, so we would expect that the limitation to pediatrics would be lifted. Yeah.
What would you say is the level of unmet need for the adult population relative to the pediatric population?
There is a very strong understanding that the current standard of care is not optimal. When you speak with even older patients that are designated as non-neuropathic, and by the way, that old distinction between neuropathic and non-neuropathic is really sort of fading away in clinical practice, as it's much an understanding that it's more of a continuum, and essentially all patients have neurologic manifestations.
If you speak, for example, with some of the older patients, they will talk about hearing loss, right? They have reduced hearing. We have shown very definitively an improvement in hearing. We have anecdotal evidence that some of our children don't need hearing aids anymore. Older patients will talk about brain fog. They will talk about even irritability, right?
Those are neurocognitive and behavioral symptoms that, a drug that can actually cross through the blood-brain barrier can address.
Okay. What are you hearing on feedback about the dose escalation aspect of the drug? How are doctors adjusting to that?
Yeah. It's going very smooth, right? The context here is that we instituted a 3-step dose escalation or a 2-step until you get to the final dose. The context here was really with respect to the patient experience, right? Enzyme replacement therapy, all enzyme replacement therapy is associated with infusion-related reactions. We want to make sure that the early dosing happens in a medical setting where infusion-related reactions can be managed.
What that does require is that patients for the first about 12 doses or so, for the first 3 to 4 months, come back into the hospital setting. I mean, it's early into the launch.
Yeah
We do not see that as a barrier.
Okay. In terms of the ex-U.S. rollouts.
Yeah
How should we be thinking about that?
Yeah. Our focus right now is definitely on the U.S., but much of the market opportunity is global. What we have set in place is distribution agreements, covering actually most parts of the world, so in LATAM, in the Middle East, in Asia-Pacific, actually separate one in Israel.
We have many connections through the clinical trial in Europe as well, where we are working on a named patient sale. We are establishing those relationships with the physicians and with the families, and we do work wherever possible and however possible to bring those patients onto commercial drug. With respect to our guidance, our focus, it is very much a U.S. launch at this point.
Okay, great. As you think about, how this launch is going to mature, you know, how do we set expectations? Because investors always want to get a sense of what the peak sales opportunity is going to be, and how long is it going to take to get there.
Yeah
How strong is your pricing power. maybe if we wanted to think about it in totality.
Yeah
What advice would you give us?
I mean, again, there's ELAPRASE, $700 million. We have a drug that is superior to ELAPRASE. We have a significant premium on the price to ELAPRASE. Also, remember, it is weight-based dosing.
Right. What we see in our, in our trials, or what we would expect that as children live longer, as they grow older, as they grow heavier, right, the price per patient would also increase. $700 million is, I think, a conservative guidepost of what we can achieve. What the slope looks like. right?
I think we will have to wait for some time as we really understand what does it take between the start form? What does it take to actually turn that into revenues? We're gathering experience right now on that. What does it take to As the reimbursement policies are not in place yet, neither with the commercial insurers nor with Medicaid, of course, we're gathering that experience. We are getting the question, when do you show more metrics, right?
You may ask that as well. Just to pre-empt that, we will show metrics. We just want to make sure that we have confidence in those, what those metrics actually mean.
Yeah.
Right? That's why we don't want to speak about start forms too soon without really with confidence being able to say, "Once we have a start form, on average, it takes us this long to translate that person into a commercial person." We'll get there. Yeah.
Is there any reason to think that some doctors might wait until you get a full approval before embracing this drug?
We have not heard that, right? We have not heard that at all. I think part of that is the very close engagement of the physician community in the clinical trial. It was a relatively large clinical trial program. 110 patients. right?
Between the phase I/II and the phase II/III. In an ultra-rare disease, it is, you know, almost all centers of excellence in one way or another are, if not direct, right, at least in one separation involved in this trial.
If you had to find Hunter, all the Hunter patients in the U.S., how long do you think it would take you to do that, just given what you had said a few minutes ago about this being a rare disease, but you know, treatment already being available before?
Yeah. We actually know all of the patients in the U.S. already. I mean, you can.
Yeah
Through prescription data, right? This is very well documented, so we know where they are treated. Our field team has already been in touch with every single treating physician. The identification of the patients will not be an obstacle.
Right. Would you say that insurance coverage is going to be the main, rate limiting factor here?
We don't think so. We have engaged with all major payer systems, the national ones, the regional ones. We have a very strong payer team in-house that is working on that. Many of the patients that came early on, the prior authorization process, the medical acceptance process has gone smooth. We have had some denials, that is also as expected. Some of these denials are just the normal routine if the reimbursement policy is not established. We're quite encouraged about the reimbursement.
Okay. Maybe let's talk about Sanfilippo next.
Yeah.
Just remind us where you are with that indication and sizing-wise, how it would compare to Hunter?
Yeah. Thanks for asking this because we are very excited about AVLAYAH, but what we're also tremendously excited about is, of course, the proof of concept for blood-brain barrier transport more broadly, right?
We have a broad portfolio enabled by the Transport Vehicle. On one hand, a whole what we call the franchise of enzyme replacement therapy, and then beyond that is, are the neurodegenerative diseases.
Right.
Right? We have the tau program and the A-beta program. The enzymes, we feel, is the commercial foundation of the company. Then neurodegeneration is sort of the upside potential. The first next on deck on the enzyme replacement therapy franchise is DNL126 for Sanfilippo. Here, that's MPS IIIA. At the World Conference in San Diego in February, we showed very encouraging data from the phase I-II study, where we have a mean 80% reduction of heparan sulfate.
Yeah.
Heparan sulfate is the biomarker measured in CSF, is the biomarker that is qualified by the FDA as being reasonably likely to predict clinical benefit and therefore the basis of accelerated approval. 80% mean reduction in heparan sulfate normalization in some patients. That gives us confidence that we have the data package to submit the BLA next year, and-
Yeah
-potentially achieve approval by the end of next year.
What do you think of FDA's actual interpretation of HS? There's been some controversy around that.
In our conversations, you know, the FDA. Two years ago, there was the Reagan-Udall Foundation meeting, which brought together regulators, academics, industry, and patient groups, and the role of Heparan sulfate was discussed.
Yeah
The marker was qualified. I think some discussion was around the extent of reduction of Heparan sulfate, right?
Right.
We don't know where the FDA's bar is, but we normalize Heparan sulfate for Hunter syndrome. In Sanfilippo, we have 80% with some patients already normalizing, right? We feel very good about the extent of that. I didn't answer your question on the size of Sanfilippo. Generally, we think Sanfilippo is about the same market size as Hunter syndrome. Epidemiology is not as well understood because there is no standard of care.
Yeah.
We feel that it's maybe a tad bit smaller, but it's about the same.
Are the doctors who treat Sanfilippo the same as those who treat Hunter?
There is almost perfect overlap.
between the two of them. Very similar, treatment centers, treating physicians. The communities are often together as well, so We're just in Napa on a community event. You have the MPS Society, and then you will have patients with MPS II and patients with MPS IIIA. They have a lot of cross, interactions as well, so a lot of synergy there.
Okay. I'm sorry if you mentioned it, when is it the plan for the BLA filing here?
BLA filing in 2027, and potentially approval, depending on when the BLA filing happens, also in 2027.
Okay.
So-
That could be next year, which is right around the corner.
That's next year. That's right.
In terms of the infrastructure that you've built, would you just be able to leverage that for this?
Almost-
additional?
Almost perfect synergy on the infrastructure. We do not expect to expand the team. Obviously, some marketing material has to be made, et cetera, but other than that, it's we can slot the next program right in, which is also true for several of the other enzymes.
Right
The next one is for Pompe disease, where we're about to start our first clinical study. That is for the first time testing the benefit of transferrin receptor in the periphery, right? More improved muscle distribution, bone distribution, so that will be an exciting expansion of our ETV portfolio.
Pompe is relatively speaking crowded, right? Because you do have Amicus and Sanofi there already. What would you say is the added advantage?
If you speak with KOLs and with families, patients are weak. They don't do really well. Mostly that is about the imperfect muscle distribution. Standard enzyme replacement therapy relies on mannose-6-phosphate receptor. Mannose-6-phosphate receptor is not very highly expressed on the muscle, but what is highly expressed is transferrin receptor, 'cause muscle need lots of iron. If you want to drive something into muscle and bone, transferrin receptor is the way to go. What we expect, and we see this preclinically, what we expect that we could probably really, you know, have a significant impact on the musculoskeletal system.
Okay. I should actually say not Amicus, but BioMarin. That switch rate from Sanofi to the now BioMarin asset was a little bit slower than what people anticipated. Do you think that it's because those are not particularly differentiated assets from each other, and your focus on-
Yeah
transferrin could be much more notable and, you know, thus being potentially much more appealing for physicians?
That's our hypothesis, right? That just like with Hunter syndrome, AVLAYAH is not an incremental, but a stepwise benefit over the standard of care.
Yeah.
We would expect the same, hopefully, with Pompe. Yeah.
Okay. All right. Let's move on to Parkinson's as we move up.
Yeah
away from enzyme replacement type diseases more into neurodegenerative diseases. You've got this DNL151, BIIB122 partnership. Can you talk to us about what's going to be presented and what would be good data?
Yeah. Happy to do that. For context, this is our last remaining product, which is a small molecule. When we started Denali 10 years ago, we had large molecules and small molecules. Once we had confidence in the transport vehicle, we spun out all of our preclinical small molecules. They're a separate company right now. The one remaining is the LRRK2 inhibitor, in collaboration with Biogen for Parkinson's.
This is very compelling biology, right? Mutations in LRRK2 are one of the strongest genetic risk factors for Parkinson's disease. LRRK2 is a kinase. The mutations are gain-of-function mutations, and when this kinase is overactive, the lysosome coalesces. When a lysosome coalesces, it doesn't process protein very well. Most of the neurodegenerative diseases are protein misfolding.
protein accumulation diseases. The effect here would be inhibit LRRK2, improve lysosomal function, therefore improve neuronal health and improve outcome in Parkinson's, right? That's the biology. Very compelling biology. We also know that we have a good compound. We tested it in a large phase I, phase I-B study, where we showed a dose-dependent improvement in lysosomal function. The study that we'll read out, which is led by Biogen, so also the timing is determined by Biogen, is a 650 patient study with a clinical endpoint. It's UPDRS, the Unified Parkinson's Disease Rating Scale, part 2 and 3. It's a study that measures the rate of the progression of decline.
What we look for is for a clinically meaningful slowing in the rate of the progression of decline.
Would this be designed to be used instead of levodopa or with?
It is a disease-modifying.
It is actually it would be the only and the first disease-modifying treatment in Parkinson's disease, while levodopa is a symptomatic.
Ultimately, those are two very different approaches.
Yeah
right? That would be used in combination. Yeah.
Okay.
The study, by the way, includes both treatment-naive patients and patients on levodopa.
Okay. Do you have a sense of where it would work better?
I think we have to wait for it.
Okay
to wait for the data. Yeah, yeah.
LRRK2, a few companies are looking at LRRK2-
Yeah
as a target.
Yeah.
On the one hand, it's good.
Yep
several people want to pursue it. How do you think about differentiation, if that's the case?
Yeah. We have a very direct mechanism, right? It's a kinase. We have a kinase inhibitor. We know that overactive LRRK2 leads to dysfunctional lysosomes. We have shown that we can improve lysosomal function. Other approaches are a bit more indirect, either as protein degraders or other approaches. Honestly, we can hypothesize pre-clinically, but I think here the right thing to do is wait for the clinical data, wait for it to read out, take it from there. The one point that I do want to make on this program is that there are 2 studies ongoing right now, right?
There is one that we just talked about, which is reading out with Biogen, which is an idiopathic Parkinson's disease, and there is a second study called BEACON, which is only in LRRK2 carriers. The strongest biologic rationale is in LRRK2 carriers. The real decision about the future of this program would have to be made in the context of the readout of both of those studies, which would be by the end of this year.
What %, just remind us, of Parkinson's patients are LRRK2 carriers?
Yeah. It's about 2%-3% of Parkinson's. There are about 1 million Parkinson's patients, so there's about 20,000-30,000 patients.
patients in the U.S.
Okay. in the few minutes we have, I did want to talk about Biogen's read-through.
Yeah
For their tau program to yours. Is there a scenario where their readout does not bode well for Denali?
It's a good question. I mean, we think the readouts are skewed in our favor, right? Biogen is testing the tau hypothesis.
Yeah
With a severe limitation on biodistribution, right? Biogen's ASO in collaboration with Ionis is intrathecally administered, which has liabilities in itself, but the real limitation is that you do not have perfect distribution throughout the CNS. The big advantage of going through the bloodstream with transferrin receptor, 300 miles of blood vessels in the brain, every neuron has its adjacent capillary.
We have like perfect access to. If Biogen sees some link between tau reduction and cognition and improvement in cognition, that's fantastic, right? If they don't see anything, it might be the issue on just imperfect biodistribution. I'll give you an example. An analogy is back to Hunter syndrome. Takeda, a long time ago, ran an intrathecal ELAPRASE trial, it didn't work, right?
Intrathecal administration does not distribute the brain, does not distribute drug very well in the brain.
Okay. Basically what you're saying is unless it doesn't show anything at all, it's good for Denali?
I think there is an outside scenario where patients might actually get worse, but it's probably unlikely.
not be good for the whole field. Yeah.
How should we be thinking about differences in the safety profile between a brain shuttler, like Denali's versus the approach that Biogen's using?
Yeah. I mean, it is the safety profile. Again, we've, one of the great things about having a drug approved with Hunter syndrome, AVLAYAH. There's very strong support for the safety profile. We have patients on drug for over five years now, dosed weekly, 15 milligrams per kilogram, so high dose week, so we know it is safe. Intrathecal administration is not perfect. It's not ideal at all, right? The lumbar puncture with all the associated liabilities. There is definitely a safety and convenience improvement, but really what we hope for is a efficacy benefit.
Okay. Then maybe last question is going to be on your DNL593 asset for FTD.
Yeah. Yeah.
Just talk to us about where you are in development there and when we should expect to see the next data set.
Yeah. DNL593 is what we call PTV, protein transport vehicle-enabled progranulin. This is an FTD.
Frontotemporal dementia. A subset of those patients lacks progranulin. Progranulin, again, is a lysosomal protein. It is important for lysosomal function. We substitute progranulin, so it's a very direct mechanism. You can almost think about enzyme replacement therapy. This is like protein replacement therapy. It is a mechanism that very directly addresses the lack of protein in these patients.
We had shown in a phase I that we can deliver safely large quantities of progranulin, up to 27-fold the physiological levels. Now, in this phase I-B, what we look at in 40 patients with frontotemporal dementia progranulin, if we can actually improve lysosomal function. By the end of this year, the study will read out, and we will look at proximal and distal markers of lysosomal function and then neuronal health.
Markers of lysosomal function, GM2, GM3, glucosylsphingosine, is what we primarily look for. There is an outsize scenario where we also look at neurofilament. Right? Neurofilament would be the ultimate determinant that we can actually improve neuronal health. Remember, it's only a 6-month study.
Yeah.
In that short period of time, you know, it's not impossible, but really what we focus on here is improvement in lysosomal markers.
What about the view that for neurofilaments you need at least a year's worth of data? It seems like with other programs.
Yeah
from other companies, it's been kind of a noisy result.
That's probably right. We saw in Hunter syndrome it took 2 years to normalize. On the other hand, you have, you know, in some genetic forms of ALS, it took only 6 months.
Right.
For first one was six months to really reduce. There is a lot of variability on-
Yeah
on neurofilament.
Yeah. What would you longer term want to see to feel confident in this program then?
Well, for an early on, improvement in lysosomal markers. Longer term, reduction in neurofilament.
That will give us the confidence to then actually go into an efficacy study.
Okay. Perfect. With that, we are out of time. Thank you, Alex Schuth.
All right.
for sitting with me for the last about 30 minutes, and thanks everybody for joining.
Fantastic. Thank you. If you've ever done something big