Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the Biotech Analysts. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative, so for this session, we have Denali Therapeutics with CEO, Ryan Watts. Welcome. Yeah, great to be here. Thank you, Jeff. So for those who may not be as familiar with Denali, can you provide a brief introduction? Yeah. So Denali has been in existence for a little over nine years. We're going on our tenth year, and we founded the company with the goal to number one, defeat degeneration. Nothing like setting, you know, very ambitious goals in an area that, at least nine years ago, not very popular area to develop medicines for Alzheimer's, Parkinson's, and ALS. And I think the second goal was to cross the blood-brain barrier, to find a way of getting medicines effectively across the blood-brain barrier to treat various diseases. And so we set out, at the time, both engineering small molecules and large molecules with the hope of developing a platform that allowed us to consistently bring medicines into the brain. And I think the last nine years have been for us nothing short of, you know, incredible and exciting and obviously challenging. I think obviously with the most recent news, we're now on our path to really our first approval of a medicine using the technologies that we've invented. And so that was the ultimate goal, and now we see ourselves as hopefully the leader in the field around blood-brain barrier engineering and the ability to get multiple modalities across the blood-brain barrier. I'm sure we're gonna go into many details about those programs now. Great. Maybe let's start with DNL310 for Hunter Syndrome. DNL 310, sorry. The phase II/3 COMPASS study is expected to complete enrollment this year. Can you just talk about the study design? Yeah, I'd love to. In fact, probably should just tell you a little bit about DNL310 and the tividenofusp alfa, is what it's called now, and actually some recent news that we just shared, you know, a couple of days ago around our intention to file a BLA on the accelerated approval path based on our successful meeting with the FDA. But let's just step back a little bit and talk about the technology that enables that enzyme to cross the blood-brain barrier. And so I think as many of you know, enzyme replacement therapies have been a very successful approach to treating monogenic diseases, specifically lysosomal storage diseases. The challenge has been that most enzymes, if not all of them, do not readily cross the blood-brain barrier. The question is: how do you get an enzyme that can work in treating the body, also treat the brain? We began engineering technologies using the Fc portion of an IgG to bind a transferrin receptor to cross the blood-brain barrier. The first data that we got really proving that this technology could work was in 2020, showing that the primary substrate for the enzyme in the DNL310 program, which is idursulfase and Hunter syndrome, this MPS II disease, that we could actually normalize the heparan sulfate in cerebrospinal fluid, showing that the enzyme could not only treat the periphery, but also cross the blood-brain barrier and have this robust effect. And so from that point, we began engaging with the FDA on what it would take to get an approval in this therapeutic area, and a lot of discussion around the phase III trial design. Our original design was no active comparator. I mean, frankly, most patients, if not all patients in these rare diseases, do not want to go on either a placebo or active comparator. And at the time, the FDA was, you know, I think, very adamant about a active comparator study. So the COMPASS study has two arms. One focuses on the primary goal, which is neuronopathic Hunter syndrome, and it's a comparison, basically, in a two-to-one ratio of our active drug, tividenofusp alfa, compared to idursulfase, right? So, head-to-head. The primary endpoint, a two-year endpoint and one-year endpoint of heparan sulfate, and then basically looking at behavior and cognition at two years, but basically, as we engaged with the FDA time and time again, we wanted to lay the foundation for a potential accelerated approval path, and so those conversations have been ongoing for four years since our initial clinical data, and then with the effort of basically the patient community, academics, academic physicians, and industry, we joined forces and worked with the Reagan-Udall Foundation to basically have a discussion around heparan sulfate as a potential surrogate biomarker, reasonably likely to predict clinical benefit, and that happened earlier this year, and after that, we start to see basically a change in the FDA's opinion around this potential biomarker. You know, very excited to report that we're now have announced that we will be filing in early 2025 for accelerated approval for this particular program. The COMPASS study continues to enroll. It's enrolled well, and obviously that study will be an important confirmatory study for a shift to full approval based on the readout of that particular study. Now, for Hunter syndrome, how does the disease differ between neuronopathic and non-neuronopathic patients and how they're treated? Right. So Hunter syndrome, again, monogenic disease, loss of iduronate-2-sulfatase. The majority of patients have neurological deficits, and it's not an all or nothing. It's, you know, there's neuronopathic and non-neuronopathic, but actually, in reality, it's kind of a spectrum. More than 70% of patients have neurological deficits. And so what happens is these patients, primarily boys, it's an X-linked disease, develop relatively normally, and about age two, you start to see, in age three in particular, dropping off the developmental curve, where about 30% will continue actually to develop cognitively normally, generally speaking, but will have a lot of features, you know, facial features and bone features, because this is a whole body disease. And so, the approved medicine can treat the body, but unfortunately does not treat the brain, doesn't cross the blood-brain barrier. So, example of that, heparan sulfate, which is a biomarker we're talking about, is the substrate for the enzyme. The approved therapy will reduce heparan sulfate in the body, but remains very high in the brain, like tenfold elevated in cerebrospinal fluid. And so it seems like there's two populations, but we've noticed that even in you know, even in the non-neuropathic, there can be you know, neurological symptoms, and as you might expect, based on the severity of the mutation. And that's how they basically differ. Our goal is to treat the whole body and brain. So ours is an enzyme replacement therapy that can cross the blood-brain barrier, but the data that we just shared at SSIEM, in addition to robust biomarker data in brain, we also see robust effects in the periphery as well, including liver volume. And so that would be the ultimate goal, is to replace the standard of care. Mentioning about the data from SSIEM, can you just talk a little bit more about some of the highlights of the results that you guys had presented? Yeah. So part of the press release on Tuesday, I mean, the major focus obviously was the agreement with the FDA on our path forward for accelerated approval, but the other portion is basically new data from the COMPASS. Let's put them into, like, three categories. So one is CNS biomarker data, so continued normalization of CSF heparan sulfate. That's greater than 90% reduction in HS, and now out to plus, you know, two years and beyond. The second data, which I'm very excited about, is that, you know, as a trained neuroscientist, is that all patients have now shown normalization of NfL, which is a biomarker of neurodegeneration. So that's, you know, ranges depending on what the starting point of NfL is, anywhere between 50% to 80% or 90% reduction in NfL, but the reality is that they're all in a normal range. Interestingly, you can normalize heparan sulfate pretty rapidly, then you see these lysosomal biomarkers restore, and then ultimately NfL. But what we also showed is that NfL reduces more rapidly in younger patients. The sooner you can intervene, the more... and normalizes, you know, the enzyme activity in brain, the sooner you actually see NfL normalizing in these younger patients, including patients that have either missense mutations or severe mutations. Then the other category of data was a continued improvement on behavior and cognition. Actually, what's interesting about the cognition scores is that a number of our patients age out or perform out of the Bayley and have to go to the Kaufman, so we're seeing improvement in that category as well. Then, as I'd already mentioned, peripheral endpoints, we're seeing, you know, even improvement relative to standard of care. Great. Maybe shifting to DNL126. Can you just talk a little bit more about this program? Yeah. So DNL126 is similar to DNL310. It's an enzyme engineered to cross the blood-brain barrier using the transport vehicle technology as well, again, binding to transferrin receptor and getting across the blood-brain barrier. And it's a MPS IIIA, so Sanfilippo, same basically biomarker, which is heparan sulfate. And I think the goal here is basically, you know, robust effects on heparan sulfate and benefit in terms of neurological symptoms. Now, the difference between Sanfilippo and Hunter syndrome is that these patients are largely neurological in symptoms, and there is no standard of care because of, as I mentioned before, enzymes don't readily cross the blood-brain barrier. So no enzyme has been developed that can really cross the blood-brain barrier and treat Sanfilippo. So that's unique. Hunter is both body and brain, and Sanfilippo is largely just brain. Endpoints, however, like, will be very similar, both the cognitive and behavioral endpoints, but also the biomarkers will essentially be identical, so we have these validated assays, we can use them in Sanfilippo as we have in Hunter syndrome, and maybe just one other point, which, you know, with this shift in the FDA, which I think is a much needed shift in using biomarkers in rare disease, we've also expanded our enzyme transport vehicle in terms of the number of targets. We've now added two additional targets, so that would be four. We believe we can build a lasting, you know, business, basically a commercial foundation, based on the enzyme transport vehicle, as we then explore other areas like our oligo transport and our antibody transport. You kind of just touched upon this but, you know, given the alignment with the FDA for DNL310, this seems to bode well for DNL126. Maybe you could just talk about your thoughts on the read-throughs between the programs from that. Yeah. So I think the one thing I didn't mention is that we, because of the shift in the last several months with the FDA, we are rethinking the design of the phase I/II study for the Sanfilippo program. Right now, it was very small dose finding, then leap to a phase III, which is also, it's rare disease, so it's not enormous. But now what we wanna do is really build out that phase I/II to have the data package for an accelerated approval for DNL126 as well. And that's, I think, very important because the faster we can get to patients, the better, obviously. But heparan sulfate now being accepted as a potential surrogate biomarker, reasonably likely to predict clinical benefit, is exactly where we'd be going with DNL126. And then, as I mentioned, sort of beyond that, these other programs would be identical. We will focus on biomarkers as well as a potential path to accelerated approval. And so I think we were expecting DNL126 phase I/II biomarker and safety data by year-end, but you know, you just mentioned how you're rethinking the design of the phase I/II. But so are there any impacts to that readout? Yeah. Just a little- I think in general, we're still guiding towards data by year-end, but obviously, it would be an interim look at an ongoing phase I/II study. What matters most today is expanding that study, and we also received START designation for that program. That allows us to have more constant dialogue with the FDA, and it's perfect because now we're saying, "Okay, what is the data that we need for an accelerated path for DNL126?" And actually, that's the purpose of START, is to accelerate programs to approval. Our mindset now is how do we design that. You know, we still have intent to see interim data and share that data. So what should we expect to see from that interim data? You know, how, you know, how should we judge whether it's a good update or not? Then, you know, maybe on timing, 'cause if you're rethinking any aspects of the phase one two, when might we hear- Yeah ... more definitively what you're- That's a good question. So no change in guidance on timing, but I think the expectations are to see robust effects on heparan sulfate as a primary biomarker. I think we've learned a lot about NfL, and we've learned that it takes longer for that data to mature, and so we're not guiding on any insight in NfL. Also, you know, if we're fortunate to have younger patients or less severe patients, we may see more robust effects on certain biomarkers like NfL. But basically, it's showing that the drug is active, that it's getting across the blood-brain barrier, and we're having a robust effect on heparan sulfate, would be like the initial look at that data. Now, my expectation from that is that this just further confirms that this platform has broad applicability. This is now a second disease. It's definitely a distinct disease, you know, a distinct enzyme, but I think there's a lot of linearity in the enzyme replacement therapy field, and imagining these biomarkers translating to clinical benefit. Great. Let's shift to ATV:Aβ. You know, looking at the current landscape for Alzheimer's disease, you know, what do you think is needed to move the needle meaningfully for uptake? Yeah, so I wanna go back to Denali's original goal, which was to defeat degeneration. You know, let's face it, like, nine years ago, setting that type of goal didn't make a lot of sense. Let's think about the last two years in the Alzheimer's space, and leaps and bounds in terms of approved medicine. I know there's a lot of debate around the separation of those curves in terms of clinical benefit for patients, but the reality is that APP, and specifically A-beta, is linked to Alzheimer's disease, and now we have evidence that removing plaque can lead to clinical benefit. I think the most important thing is to remove plaque early, and frankly, in a prevention setting. That would be, in my mind, removing plaque in our mid-sixties would be the way I would approach, you know, the Alzheimer's field, and then never really essentially having a risk of developing Alzheimer's disease. So when we think about that, what does that mean? We need a safe and easy way of removing amyloid. And right now, the challenge is to anti-A-beta approaches, and I think it's as much perception as anything is the safety profile for these molecules. And also I think the onerous, you know, monitoring for safety effects, specifically ARIA, amyloid-related imaging abnormalities, and this vasogenic edema that was reported way back in two thousand and eight. And so now the need is to develop a medicine that has robust plaque reduction, but less ARIA. And we have a paper that's currently in review. It's accessible via bioRxiv, that shows that the technology that we've invented can reduce plaque but have substantially less ARIA in animal models. And I think some of the early clinical data from competitors in the field may suggest as much. So if you use transferrin receptor to cross the blood-brain barrier or CD98, it's possible that your biodistribution is different, and you don't have this vascular accumulation that's affecting adversely the blood vessels in the brain, where you have cerebral amyloid angiopathy. So right now, we're obviously very excited about ATV:Aβ, where we have both a TFR and a CD98 approach that we're advancing, you know, now independently. We will likely select one, but this is fast track for us to get into the clinic and show that we can reduce plaque more safely than what we see currently in the landscape. And so on that last point, I guess when you're looking at TFR versus CD98, can you just talk about the relative advantages between the two methods and how you'll decide- Yeah ... going forward? In addition to the paper that I just mentioned or the data that we have on bioRxiv, we have a second one that compares head-to-head the biodistribution between CD98 and TFR. And, you know, we had recently last year presented our first transport vehicle targeting CD98. Obviously, in twenty twenty was the first publication on transferrin receptor, and now we have these two different receptors. And the... What's interesting is that their kinetics are quite different. So transferrin receptor drives a very large Cmax, so it's perfect for enzymes. It's actually perfect for antisense oligos, because not only does it get across the blood-brain barrier, but transferrin receptor also drives some cellular internalization. For lysosomes, for, in particular, antisense oligos, TFR seems to be the ideal receptor. CD98 has a slower uptake but a more sustained exposure. Essentially, what we're gonna have to do is just compare them head-to-head to see which one is better based on mainly antibody targets. Enzymes, it's really TFR; antisense oligos, it's really TFR. It's these other molecules that fall in that sort of middle category, especially the antibodies like, you know, basically A-beta or TREM2, or HER2 in the case of oncology, where we will be comparing head-to-head with CD98. It just gives us another option of a molecule with a different profile, different kinetic profile, and I think that's why we find it exciting. Now, Biogen recently terminated its license to the ATV:Aβ program. Can you just talk about this update, what led to Biogen's decision, and, you know, if there's any read-through to BIIB122? Yeah. So, obviously, BIIB122 is our LRRK2 inhibitor, so very different category. Basically, there's been a lot of shift in Biogen's strategy around neuro and around Alzheimer's. When we did the deal originally, it was the era of aducanumab that was in 2020, and a lot of that's evolved. Earlier this year, Biogen returned the rights of aducanumab, basically completely discontinued Aduhelm. And the way that that deal was structured is that Biogen had rights to essentially an A-beta arm and associated backups. The first thing that we do when we get this program back is basically to replace those arms with arms that we've been working on for CD98, and again, compare them head-to-head and move forward. We're very excited to have the program back. That being said, we have had, and continue to have, a great collaboration with Biogen on LRRK2. That's really the remaining molecule in that collaboration. I think what we're happy about is that we have a lot of flexibility on our TV platform in terms of ownership of all the, you know, the vast majority of our molecules going forward. We do have several programs in collaboration with Takeda, which have also been, I think, really productive collaborations. So the short answer to your question is that there's no effect on BIIB122, which is the LRRK2 inhibitor. That particular program is in a large phase II/III, essentially, Parkinson's disease study, 640 patients, and continuing to enroll with a one-year endpoint on UPDRS, and that's being operationalized by Biogen. So then, did Biogen have the opportunity to license your CD98 or TFR candidates? And, you know, what gives you confidence? You kinda touched upon that you've since looked at yours compared it head-to-head, but maybe can you just talk a little bit more about that? Yeah. What gives you confidence on those compared to the Biogen license candidates? Yeah. So Biogen has no more. So the short answer is that Biogen did not have the ability to access CD98. The deal was very specific to TFR and very specific to selected A-beta arms, so we could not replace the A-beta arms once they were selected. So it's that, I think, probably the driving force behind really the discontinuation of that particular program. At this point, our collaboration with Biogen is solely on the LRRK2 small molecule program. I will add one point, that we also initiated a biomarker study for LRRK2. You may recall that in the Biogen, in our collaboration with Biogen, we discontinued the Lighthouse study, which was a large LRRK2 study, and we folded really LRRK2 carriers into the LUMA study. But we realized that there's a whole population of patients that are not having access to drug, and we're not getting the biomarker data that we could use for maybe an accelerated path. And so we separately initiated a basically phase IIa biomarker focus study. So that's the breadth of that. But... Going forward, you know, we will not be working with Biogen on any of the transport vehicle technology programs. What do you hope to learn from that phase IIa, since LUMA is still ongoing? Yeah. So that phase IIa is all about LRRK2 carriers, and a broader inclusion criteria, and everything related to LRRK2 downstream biomarkers. So one of the things that we learned early on is that when you inhibit LRRK2 in LRRK2 carriers, there's a lipid profile that's what you might expect to see in GBA mutation carriers, which in and of itself is super interesting, so suggesting that LRRK2 and GBA have a relationship. We can actually correct that phospholipid profile in CSF, and what we wanna do is get a more robust data set showing that we can achieve that in clinical testing, and then associated downstream biomarkers, for example, like NfL. As we've already discussed, NfL at length for Hunter syndrome, that seems to be, like, the biomarker linked to neurodegeneration. So that would be some of the endpoints in that biomarker-focused study. Great. Maybe moving on to RIPK1. You know, what gives you confidence in the oral inhibitors for MS and ulcerative colitis? I guess given that one is CNS and one is peripheral disease, you know, how do your two RIPK1 compounds differ? Yeah. So maybe I'll step back and just talk about the small molecule portfolio that we have and the partnerships. So we just discussed at length LRRK2 and our collaboration with Biogen. The RIP kinase collaboration has been another fruitful collaboration, where essentially, Sanofi has really led the effort to explore RIPK inhibition in a number of diseases: MS, ALS, ulcerative colitis. Actually, some very interesting data that was published in a post, right? I think it will probably be published, if not published soon, in text. We looked at RIPK inhibition in COVID, in sort of acute response, looking at inflammatory response and associated cytokines, and saw a robust effect that was with a peripheral inhibitor. But it was at a time where the vaccines were just coming online. Sanofi has just been an incredible partner to explore this mechanism across many different disease areas. In terms of, like, expectations, that's really a question for them, and that was why we did this deal, is that they have expertise in immunology and would explore it in indications that we either don't have expertise or actually have not invested in understanding the biology. I think the confidence in RIPK is that RIP kinase one is downstream of TNF receptor one. From really a validated immunological pathway, there are very few pathways as validated as TNF and TNF receptor one. The question is, in that signaling cascade, how important is RIP kinase in each of those diseases? So in many ways, it's a very attractive pathway, in search of the right indication, and I think Sanofi has been willing to place these phase II bets to look at biomarkers and to look at clinical endpoints to identify the right indication where RIP kinase inhibition would be effective. Can you just talk about the phase II study for DNL758, you know, kind of the rationale behind that in ulcerative colitis, and what would you wanna see to consider it a success? Yeah. So again, the way that this particular collaboration has evolved and the way that it was originally designed is that that is entirely Sanofi's effort. The peripheral inhibitor is something that we invented and they licensed. We essentially out-licensed it. So I'm not the right person to ask. I appreciate the question, but I would ask our colleagues at Sanofi ultimately what they are looking for in that ulcerative colitis study. Okay. Maybe to briefly touch upon the DNL343 and the phase II/3 Healy ALS platform trial. Just given how difficult it is to develop therapies for ALS, you know, what would you want to see to have confidence in the program, and when could we expect to see data? Yeah. ALS has been a pretty up-and-down drug development, therapeutic area, and I think, you know, rightly so, there's been a lot of focus from legislators, from the patient community, really driving for faster, you know, trials and faster solutions in ALS. I think what's really interesting is if you frame the most recent drug development efforts in ALS, and let's take, like, tofersen as an example, very robust biomarker data, not obviously robust data as it comes to the six-month, you know, clinical endpoint. And what we thought about is with our ALS efforts, obviously we have one recent failure as well. RIP kinase inhibitor failed in ALS. It was a large study, 300-plus patients. You know, great data, very clear result. We were confident that RIPK inhibition does not lead to a clinical benefit in ALS, so we have an answer. The advantage of Healy for us is the ability to operationalize that study. So Healy is, like, extraordinary at being able to enroll these studies, where I think regimen G, you know, they've done a number of regimens, and they have a... The model is that patients have a high probability of getting active drug in a disease that's essentially a death sentence. Most people that are diagnosed with ALS live for about two years, and so the study is designed, that's a three-to-one ratio, and of active drug to placebo. We have 240 patients, and the goal here is to see early clinical signs of clinical efficacy to decide if we would invest more in the program. I think maybe two years ago or a year ago, most people would hope that these would be registrational. I'm not convinced that the data within the last year or two build confidence, that six-month studies are really designed to be registrational in terms of clinical efficacy, so we'll have to wait and see. But that's, you know, that's basically the background around Healy. A comment or two around eIF2B. So eIF2B is a translation initiation factor, and the way that we went after this particular program is that when you activate eIF2B, you put cells that are otherwise in a in what we call the integrated stress response. They're in a stressed environment, they no longer translate proteins, and you can reinitiate protein translation with the eIF2B activators. And so it's a very broad mechanism, and what we've seen is, you know, TDP-43 aggregates can be dissolved when you treat with DNL343 or eIF2B activators. So that's the underlying mechanism. Great. Maybe one question on your OTV platform. Yeah. Can you just talk about this platform? You know, what are you most excited about it, and which targets do you think, you know, will likely get prioritized early on? Yeah. So we started off this conversation talking about the enzyme transport vehicle platform, or what we call the, you know, the franchise. Now we're at a point where we think we can launch multiple enzymes. I think for us, the next really exciting franchise is the oligo transport vehicle franchise. And the O- the OTV franchise is basically a, an approach to get antisense oligos across the blood-brain barrier. And we just recently published this work in Science Translational Medicine. And I have to admit, like, stepping back, I didn't think that this would work. And our Chief Scientific Officer at the time, Joe Lewcock, we initiated a collaboration to test it, and we were surprised to see that basically we get ASOs across the blood-brain barrier using the transport vehicle technology. And so as we thought about this, you know, this field is evolving pretty rapidly, using transferrin receptor to deliver to muscle, using transferrin receptor to deliver to brain, ASOs, enzymes. And we wanted to make sure that our initial programs proved brain delivery, okay? And, you know, we could have considered going after muscle or other areas, or we could go after, for example, like SMA, where it's spinal cord. But we really wanted to go after targets that proved the technology. So our first selection of targets were those that I think are the most exciting and may have the biggest impact. So MAPT, which codes for tau, and that would be in Alzheimer's disease and tauopathies, and SNCA, which codes for alpha-synuclein, which of course would be for Parkinson's disease. So those are the two most advanced programs. Earlier this year, we raised additional capital that allowed us to selectively expand our franchises and to accelerate, so as you saw earlier this week, we have a major effort on accelerating our first approval and building out the enzyme franchise, but in terms of expansion, we're looking at areas like the OTV, other targets that may not be the huge Alzheimer's and Parkinson's targets, and so we have a number of ASO programs that are in sort of that mid-size, we think, high probability of success area that will be used in the OTV, but as of today, the IND-enabling programs are MAPT and SNCA for the OTV. Now, with the updates earlier this week, that you know gives you you know a faster path to market potentially. And then given the amount of cash that you have, that obviously can you know exceed most of the readouts in the near term. How are you thinking about capital allocation? Maybe you can talk about that and you know 'cause obviously you guys have a lot of different programs. Yeah. So we're funded, we think, well into 2028. Obviously, with selective expansion and acceleration, we're gonna put allocation to areas that we think can drive, you know, success in the nearer term. The enzyme franchise would be one of those examples. Another area that is a nearer term, you know, capital need but long term really benefits us, is building our own clinical manufacturing. So later this year, our clinical manufacturing facility will be online. We predict for each enzyme, we'll save almost 40% per enzyme in manufacturing costs by doing it ourselves, which is pretty, you know, substantial, and that's as you think about expanding this. So we see that as a nearer term, you know, capital expenditure that will give this long-term benefit in our ability to manufacture, to move fast, and to have the flexibility. I think if we just step back and look at Denali, we have the commercial foundation on the horizon for the enzyme transport vehicle, that franchise. We'd love to see that transition for the oligo transport vehicle and for the antibody transport vehicle. The most advanced antibody transport vehicle molecule will be A-beta. So obviously, that's gonna be a significant spend, but a very significant upside. And then we have, of course, MAPT and SNCA. And so we will see this building of the enzyme franchise launching there and then feeding that into these other indications as we build Denali over time. Great. Well, let's leave it there. Thanks so much for your time. Yeah. Thank you. Appreciate it.