Denali Therapeutics Inc. (DNLI) May 12, 2026 Conference Transcript

My pleasure to have our next presenting company, Denali Therapeutics. Sitting up here on stage with me is Alex Schuth, who is, 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 Zine for inviting us for a fantastic conference. But really also thank you for following us for many years now. Not that old. and and and the always very thoughtful um uh commentary and also much much appreciated so great to be here today um it's a special time for us uh at denali um as you know we just had our first drug approved um in march big transition for us um 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. So looking forward to the conversation and going deeper on all of those topics.

Yeah, so maybe let's start off with your first commercial launch. How is that going so far? And I've been asking everybody to pronounce the name of their drug so that we're saying it correctly.

So this one here, if you think about Star Wars, is Avleya. So once you think about Star Wars, you can also think about the Himalayas, and then you can also, you'll remember. So the drug's name is Avleya and it is, of course, indicated for the treatment of Hunter syndrome, a rare pediatric disease which has a severe neurodegenerative component and our technology, as you know, is designed to treat the whole body, including the brain. So a major unmet medical need in all of lysosomal storage disease and especially in Hunter, is that traditional enzyme replacement therapy doesn't cross through the blood-brain barrier. So 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. So with that, we achieved accelerated approval. So the drug was approved on March 24th. 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. So we're excited about the level of engagement. We're excited about the level of interest and importantly, across all patient segments. So while at some point we thought the first patients to be engaged might be the ones that are on the earlier diagnosis or younger, but in fact, we see that across all age groups and across all levels of severity. So 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 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. But 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? But from an engagement and an interest perspective, I think we're safe to say that we're ahead of expectations.

Okay. So it's exciting in that you have your first opportunity for a commercial launch, but to level set expectations, this is still an ultra rare disease. So what is your expectation for patient finding efforts? And, you know, what clip of uptake would be a good launch in your definition?

Yeah, great question. So first, with respect to the patient, so 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 so this is not as much of a finding and identifying the patient setting but about a switch setting right and switching very much depends on the level of enthusiasm in the patient community and in the and in the physician community so from that level from that perspective we're very encouraged about the early early indications that we see with respect to the market opportunity it is ultra rare but you know eloprase is a good is the standard of care is a good guidepost sells about 700 million dollars a year we believe that we have a drug that shows definitely some aspects that eloprase 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 clinical profile. So 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 Avlea and then DNO126 for Sanfilippo, that those together are a billion-dollar market opportunity. But I would say that that's on quite conservative assumptions.

Okay. So 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, right? It also has a subset in symptomatic and pre-symptomatic. But symptomatic and pre-symptomatic is essentially everyone, right? So it's in pediatric patients, which is about 70% of the patient population. And our commercial efforts are focused on that entire segment. So that's what we look at.

I think some have 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 read it. But at the same time, that gives our field team a really good opportunity to educate physicians on it. If you really look at it, it is really all pediatric patients. And again, for the treatment of neurologic manifestations. But it is pretty well established that in Hunter syndrome, essentially all patients either have or will develop neurologic manifestations. So 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 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 2-3 COMPAS study, 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 COMPAS 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.

What would you say is the level of undermet need for the adult population relative to the pediatric population?

Yeah, there is a very strong understanding that the current standard of care is not optimal. And when you speak with even older patients that are designated as non-neuronopathic, and by the way, that old distinction between neuronopathic and non-neuronopathic is really sort of fading away in clinical practice, as it's much an understanding that it's more of a a continuum, and essentially all patients have neurologic manifestations. So if you speak, for example, with some of the older patients, they will talk about hearing loss, right, that 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, so 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? So the context here is that we instituted a three-step dose escalation or a two-step until you get to the final dose. And 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. And we want to make sure that the early dosing happens in a medical setting where infusion-related reactions can be managed. So what that does require is that patients for the first about 12 doses or so, for the first three to four months come back into the hospital setting. But, I mean, it's early into the launch, but we do not see that as a barrier.

In terms of the ex-US rollouts, how should we be thinking about that?

Yeah, so our focus right now is definitely on the US, but much of the market opportunity is global. So 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 a separate one in Israel, we have many connections through the clinical trial in Europe as well, where we're working on a named patient sale. So 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. But with respect to our guidance, our focus, it's very much a U.S. launch at this point.

OK, great. So 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? And how strong is your pricing power? So maybe if we wanted to think about it in totality, what advice would you give us?

I mean, again, there is Elopraze, $700 million. We have a drug that is superior to Elopraze. We have a significant premium on the price to Alipraise. Also, remember, it is weight-based dosing, right? So what we see 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. So $700 million is, I think, a conservative guidepost of what we can achieve. Now, 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 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 and you may ask it as well and just to preempt that we will show metrics we just want to make sure that we have confidence in those what those metrics actually mean yeah right and 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 but we'll we'll we'll get there 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. And 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 1-2 and the phase 2-3 in an ultra-rare disease. It is, you know, almost all centers of excellence in one way or another. or if not direct, right, at least in one separation involved in this trial.

So if you had to find all the Hunter's 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, a treatment already being available before?

Yeah, so we actually know all of the patients in the U.S. already. I mean, you can through prescription data, right? This is very well documented. So we know where they are treated. And our field team has already been in touch with every single treating physician. So the identification of the patients will not be an obstacle.

So would you say that insurance coverage is going to be the main rate limiting factor here?

So we don't think so. 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, but that is also as expected. Some of these denials are just the normal routine if the reimbursement policy is not established. So we're quite encouraged about the reimbursement.

Okay. Maybe let's talk about San Filippo next. Just remind us where you are with that indication and sizing-wise how it would compare to Hunter.

Yeah. And thanks for asking this because we are very excited about Avalaya. but what we're also tremendously excited about is, of course, the proof of concept for blood-brain barrier transport more broadly, right? And 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 are the neurodegenerative diseases, right? We have the tau program and the A-beta program. The enzymes, we feel, is the commercial foundation of the company, And then neurodegeneration is sort of the upside potential. Now, the first next on deck on the enzyme replacement therapy franchise is DNA126 for San Filippo. So here, that's MPS3A. At the World Conference in San Diego in February, we showed very encouraging data from the phase 1-2 study where we have a mean 80% reduction of hiperon sulfate. Hiperonsulfate 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. So 80% mean reduction in hiperonsulfate normalization in some patients. So that gives us confidence that we have the data package to submit the BLA next year and potentially achieve approval by the end of next year.

What do you think of FDA's actual interpretation of HS? Because there's been some controversy around that.

In our conversations, you know, the FDA, so there was two years ago, there was the Reagan-Udall Foundation meeting, which brought together regulators, academics, industry, and patient groups. And the role of heparin sulfate was discussed and the market was qualified. I think some discussion was around the extent of reduction of hiperonsulfate, right? We don't know where the FDA's bar is, but we normalize hiperonsulfate for Hunter syndrome. And in Sanfilippo, we have 80% with some patients already normalizing, right? So 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. but we feel that it's maybe a tad bit smaller but it's about the same and are the doctors who treat San Filippo 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 you'd have we're just in Napa on a community event you have the MPS society and then you will have patients with MPS 2 and patients with MPS 3A they have a lot of cross interactions as well so a lot of synergy there okay and then i'm sorry if you mentioned it but 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 27 okay so that could be next year which is right next year that's right and in terms of the infrastructure that you've built would you just be able to leverage that for this 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, we can slot the next program, right? Which is also true for several of the other enzymes that we have, right? So the next one then is for Pompe disease, where we're about to start our first clinical study. That is for the first time then testing the benefit of transferrin receptor in the periphery, So more improved muscle distribution, bone distribution. So that will be an exciting expansion of our ETB portfolio.

And Pompeii is relatively speaking crowded, right? Because you do have Amicus and Sanofi there already. So what would you say is the added advantage?

So if you speak with KOLs and with families, patients are weak. They don't do really well. and mostly that is about the imperfect muscle distribution so 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 because muscle need lots of iron so if you want to drive something into muscle and bone transferrin receptor is the way to go so what we expect and we see this pre-clinically what we expect that we could probably really you know have a have a significant impact on on the musculoskeletal system okay i should actually say not amicus but biomarin um 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 transferrin could be much more notable and you know thus be potentially much more appealing for that's our that's um that's our hypothesis right that just like with hunter syndrome it's not it's avlea is not a incremental but a stepwise benefit over the standard of care and we would expect the same hopefully with pompey okay all right so um let's move on to parkinson's as we move up away from enzyme replacement type diseases, more into neurodegenerative diseases. So you've got this 151-BIB-122 partnership. So can you talk to us about what's going to be presented and what would be good data?

Yeah, happy to do that. So for context, this is our last remaining product, which is a small molecule. So when we started in Ali 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 or a separate company right now. The one remaining is the LARC2 inhibitor in collaboration with Biogen for Parkinson's. So this is very compelling biology, right? So mutations in LARC2 are one of the strongest genetic risk factors for Parkinson's disease. LARC2 is a kinase. The mutations are gain-of-function mutations. And when this kinase is overactive, the lysosome coalesces. And then when a lysosome coalesces, it doesn't process protein very well. Most of the neurodegenerative diseases are protein misfolding, protein accumulation diseases. So the effect here would be inhibit LARC2, improve lysosomal function, therefore improve neuronal health and improve outcome in Parkinson's. So that's the biology, very, very, very compelling biology. We also know that we have a good compound. We tested it in a large phase one, phase one 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 two and three. and it's a study that measures the rate of the progression of decline. So what we look for is for a clinically meaningful slowing in the rate of the progression of decline.

And would this be designed to be used instead of levodopa or with?

So it is a disease modifying. It would be the only and the first disease modifying treatment in Parkinson's disease, while levodoba is asymptomatic. And ultimately, you would probably expect those are two very different approaches that would be used in combination. The study, by the way, includes both treatment-naive patients and patients on levodoba.

Okay. Do you have a sense of where it would work better?

I think we have to wait for it. I think we have to wait for the data.

So LARC-2, a few companies are looking at LARC-2 as a target. So on the one hand, it's good because several people want to pursue it. But how do you think about differentiation if that's the case?

Yeah, so we have a very direct mechanism, right? It's a kinase. We have a kinase inhibitor. We know that overactive LARC2 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. But honestly, we can hypothesize preclinically, but we would have to, I think here, the right thing to do is wait for the clinical data, wait for it to read out, and then take it from there. The one point that I do want to make on this program is that there are two studies ongoing right now. 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 LARC-2 carriers. The strongest biologic rationale is in LARC-2 carriers. so 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 and what percent just remind us of parkinson's patients are lark 2 carriers yeah it's about it's about two to three percent of parkinson's so there are about a million parkinson's patients so there's about 20 to 30 000 patients in the u.s okay um in the few minutes we have i did want to talk about Biogen's read-through for their tau program to yours.

So 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? So Biogen is testing the tau hypothesis, but with a severe limitation on biodistribution, right? So 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 while 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 to so 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 Eloprase trial, and it didn't work, right? Intrathecal administration does not distribute the brain, does not distribute drug very well in the brain.

Okay and so 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 and that would not be good for the whole field.

How should we be thinking about differences in the safety profile between a brain shuttler like Denali's versus the approach that Biogen is using?

Yeah, I mean, it is the safety profile. Again, this is one of the great things about having a drug approved with Hunter syndrome, Avleya, this 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, so we know it is safe. Intrathecal administration is not perfect. It's not ideal at all, right, and a lumbar puncture with all the associated liability. So there is definitely a safety and convenience improvement, but really what we hope for is an efficacy benefit.

And then maybe last question is going to be on your 593 ASAT for FTD. Just talk to us about where you are in development there and when we should expect to see the next data set?

Yeah, so 593 is what we call PTV, protein transport vehicle enabled progranulin. So 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. So it is a mechanism that very directly addresses the lack of protein in these patients. We have shown in a phase one that we can deliver safely large quantities of progranulin up to 27-fold the physiological levels. Now in this phase 1b, what we look at in 40 patients with frontotemporal dementia granulin, if we can actually improve lysosomal function. So 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. So markers of lysosomal function, GM2, GM3, glucosal sphingosine is what we primarily look for. There is an outsized scenario where we also look at neurofilament, right? So neurofilament would be the ultimate determinant that we can actually improve neuronal health. But remember, it's only a six-month study. So in that short period of time, you know, it's not impossible, but really what we focus on here is improvement in lysosomal markers.

And what about the view that for neurofilaments, you need at least a year's worth of data because it seems like with other programs from other companies, it's been kind of a noisy result.

That's probably right. We saw in Hunter syndrome, it took two years to normalize. On the other hand, you have, you know, in some genetic forms of ALS, it took only six months. For first, it was six months to really reduce. So there is a lot of variability on neurofilament.

So what would you longer term want to see to feel confident in this program then?

Well, early on, improvement in lysosomal markers, longer term reduction in neurofilament, and that will give us the confidence to then actually go into an efficacy study.

Okay, perfect. With that, we are out of time. So thank you, Alex, for sitting with me for the last 30 minutes. And thanks, everybody, for joining.