Alector, Inc. (NASDAQ:ALEC) Q4 2023 Earnings Call Transcript
Alector, Inc. (NASDAQ:ALEC) Q4 2023 Earnings Call Transcript February 27, 2024
Alector, Inc. beats earnings expectations. Reported EPS is $-0.49, expectations were $-0.8. Alector, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to Alector’s Q4 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speaker for today, Katie Hogan. Please go ahead.
Katie Hogan: Thank you, operator and hello everyone. Earlier this afternoon, we released our financial results for the fourth quarter and full year 2023. The press release is available on our website at www.alector.com and our 10-K was filed with the Securities and Exchange Commission this afternoon. Joining me on the call today are Dr. Arnon Rosenthal, Co-Founder and CEO; Dr. Sara Kenkare-Mitra, President and Head of Research and Development; Dr. Gary Romano, Chief Medical Officer; and Dr. Marc Grasso, Chief Financial Officer. After our formal remarks, we will open the call for Q&A. I’d like to note that during this call, we’ll be making a number of forward-looking statements. Please take a moment to review our slide on the webcast, which contains our forward-looking statement disclosure and we also encourage you to review our SEC filings for more information. I would now like to turn the call over to Arnon Rosenthal, Chief Executive Officer. Arnon?
Arnon Rosenthal: Thank you, Katie. Good afternoon, everyone and thank you for joining Alector for our fourth quarter and full year 2023 financial results conference call. I’ll begin by highlighting the broad mechanistic potential of our immuno-neurology candidates. Our candidates include microglia, the brain’s primary immune cells to combat neurodegeneration by containing multiple classes of misfolded protein, maintaining brain health and overall function and supporting the maintenance of healthy synapsis, astrocytes, oligodendrocytes, the blood brain barrier and the vasculature. By harnessing microglia, our candidates aim to comprehensively address the complex pathology of neurodegenerative diseases, potentially providing long-lasting clinical benefits across multiple disease stages.
Our investigational drug candidates have the potential to be effective as standalone therapies or in combination with other treatments, particularly those targeting misfolded proteins. The broad disease fighting mechanisms that our drugs activate as well as the potential synergy between our immuno-neurology candidates and therapies directed against misfolded proteins has the potential to elicit a more potent therapeutic benefit with longer durability and better efficacy at multiple disease stages compared to current therapies against misfolded proteins. As we reflect on the past year, I am pleased to highlight that 2023 was marked by successful clinical execution and clarity around timelines for our advanced clinical development programs. We achieved significant milestones in our late-stage programs, reinforcing Alector’s standing as a pioneer in immuno-neurology.
Importantly, we completed trial enrollment for our two lead programs. This includes the pivotal INFRONT-3 Phase 3 trial of our programming elevating candidate, latozinemab, in frontotemporal dementia with progranulin gene mutation or FTD-GRN and INVOKE-2 Phase 2 trial of our TREM2 candidate, AL002 in early Alzheimer’s disease. In partnership with GSK, we also recently dosed the first participant in PROGRESS-AD, the Phase 2 clinical trial of AL101 in early Alzheimer’s disease. Furthermore, in February 2024, the FDA granted Breakthrough Therapy designation to latozinemab for FTD-GRN marking another significant achievement. It is worth noting that although FTD is a complex disease clinically, we have developed a straightforward approach to correcting progranulin deficiency, the underlying cause of the disease.
Collectively, these advancements move us closer to potential meaningful data readout this year and next. In January, we also further strengthened our balance sheet with the completion of $75 million follow-on financing, which Marc will touch on further. Later in this call, Sara will provide insight in our early research and development efforts, including Alector’s brain carrier technology platform. Our commitment to addressing neurodegeneration remains unwavering. And with our advanced pipeline, strong cash position, we are well equipped for meaningful value creation in the next phase of our growth. This year, we will continue to focus on delivering and translating our progress into meaningful impact. An important event will be to anticipate the data readout from INVOKE-2 Phase 2 trial of AL002 in the first quarter.
This will potentially be a major step forward in elucidating our immuno-neurology hypothesis. Together with the support from our partners, we are committed to advancing neurodegenerative disease research, reflecting our firm belief in the immuno-neurology potential. With that, I will turn it over to Gary to talk about our goals and expectations for our clinical development program. Gary?
Gary Romano: Thank you, Arnon. I’ll begin with our AL002 program, the most advanced TREM2 program in clinical development for Alzheimer’s disease. AL002 is a novel investigational humanized monoclonal antibody that binds to and activates TREM2, a key microglial receptor that senses pathological changes in the brain. Binding of AL002 to the TREM2 receptor triggers microglial signaling pathways, which increase microglial proliferation, survival and function, enhancing the effectiveness of microglia to protect the brain against insults, including age-related neurodegenerative disease. We completed our Phase 1 trial of AL002 in healthy volunteers, which demonstrated both dose-dependent target engagement and activation of microglia.
In the trial, AL002 is also shown to be well tolerated. Our ongoing INVOKE-2 Phase 2b study of AL002 is a randomized double-blind placebo-controlled common closed design study of up to 96 weeks of treatment with AL002, in which 381 participants with early Alzheimer’s disease were randomized. The study includes three doses of AL002 that demonstrated robust target engagement and increased microbial signaling in Phase 1. INVOKE-2 completed enrollment ahead of schedule in September of last year. The primary clinical outcome measure for this study is the CDR Sum of Boxes. We are also collecting secondary clinical and functional outcome assessments, including the ADAS-Cog13 and ADCS-ADL-MCI from which we will derive treatment effects on the Integrated Alzheimer’s Rating Scale, or iADRS.
The trial will also deliver a robust biomarker package, reflecting target engagement as well as treatment effects on microglial activity and Alzheimer’s pathophysiology. Treatment effects on Alzheimer’s pathophysiology will be assessed with CSF and plasma biomarkers of abeta and tau as well as both amyloid and tau PET. And we’ll also have biomarkers of astrogliosis, neuroinflammation, synaptic health and neurodegeneration. We intend to use the proportional analysis approach with this study, which will enable us to use all of the data collected in this common closed design trial, meaning that it will include data from all participants out to 48 weeks and also include additional longer term follow-up from those participants who are in the study for up to 96 weeks.
We also have a long-term extension where we will remain blinded to treatment assignment and thus can provide additional information on long-term safety and also on treatment effects on clinical outcome measures and biomarkers. As we reported last year at AAIC a subset of participants in the ongoing INVOKE-2 trial have had treatment-emergent MRI findings that resemble the amyloid-related imaging abnormality for ARIA that has been observed with anti-amyloid therapies. These MRI findings are indistinguishable from ARIA with regard to the MRI features, incidents, timing of onset and resolution, relatedness to the number of APOE4 alleles as well as to the frequency and spectrum of associated clinical manifestations. In the current trial population that includes APOE4 heterozygous and APOE4 non-carriers, analysis of the still-blinded data shows an incidence of ARIA-E and ARIA-H of approximately 20%.
Of those with ARIA-E, approximately 90% have been asymptomatic and most symptomatic participants have had mild and self-limited presentations. Most relevant from a clinical perspective, the incidence of clinically serious ARIA that is those with ARIA related SAEs is just under 1% of all participants that have been dosed. An independent data monitoring committee reviews data from this trial regularly and continues to recommend that the trial proceed. Our goals for INVOKE-2 trial and for AL002 in the long-term are to slow the progression of Alzheimer’s disease by therapeutic restoration of microglial function. While one of the potential effects of TREM2 agonism maybe to increase the clearance of misfolded proteins, including amyloid, we expect AL002 to also amplify the broader beneficial effects of healthy microglia on the brain.
This includes maintaining synaptic connections, supporting astrocyte and oligodendrocyte function, preserving the blood brain barrier in vasculature and upholding immune tolerance. Thus, our expectation is that the restoration of microglial function by AL002 will reduce the brain’s vulnerability to neurodegenerative disease and that the INVOKE-2 trial will demonstrate treatment related slowing of Alzheimer’s disease progression as demonstrated by a combination of clinical, functional and biomarker readouts. Given the multiple mechanisms by which healthy microglia protect the brain against neurodegenerative disease, we hypothesized that by the end of development, AL002 may ultimately display stronger efficacy than current therapies that target individual misfolded proteins.
Through its novel and complementary mechanism of action, we expect AL002 to be effective either as a standalone therapy or in combination with anti-amyloid therapies. Given that agonism of TREM2 has the potential to reduce the brains vulnerability to neurodegenerative disease through these multiple downstream mechanisms, we believe that treatment of benefits of AL002 may manifest differently from what we have seen in the anti-amyloid antibody trials. For example, with regard to biomarker responses, lowering cerebral amyloid PET signal to the 20 to 30 centiloid threshold, which for anti-amyloid antibodies appears to be a necessary condition for clinical efficacy, may not be relevant to this mechanism of action that goes beyond amyloid clearance.
Additionally, optimal disease stages for intervention maybe broader. Unlike therapeutics targeting amyloid or tau, we do not expect the beneficial effects of healthy microglia to be limited to specific pathophysiological stages of disease and thus AL002 has potential to benefit patients from preclinical Alzheimer’s disease through advanced dementia. I’ll now turn to latozinemab, our novel first-in-class progranulin elevating candidate and the most advanced therapeutic and clinical development for the treatment of frontotemporal dementia. You may recall that latozinemab has previously received both orphan drug designation for FTD and fast-track designation for FTD granulin from FDA. We are pleased to share that in February, FDA granted latozinemab breakthrough therapy designation for FTD granulin based on our INFRONT-2 Phase 2 clinical trial data.
FDA’s breakthrough therapy designation is granted to expedite the development and review of drugs that are intended to treat a serious condition when preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint. With this designation, we look forward to continued productive conversations with the FDA, recognizing the unmet need for people living with FTD granulin, a serious condition for which there are no FDA-approved treatment options available. In October 2023, we achieved target enrollment of the pivotal randomized double-blind placebo-controlled INFRONT-3 Phase 3 clinical trial of latozinemab, randomizing 103 participants with symptomatic FTD granulin and 16 participants who are pre-symptomatic and at risk for FTD granulin.
Our goal was to enroll 90 to 100 symptomatic participants supported by feedback from FDA and EMA. We are actively progressing the INFRONT-3 trial in partnership with GSK and look forward to the pivotal Phase 3 data readout following the 96-week treatment period. I’d like to now turn to AL101, our second product candidate in our progranulin portfolio that we are developing in partnership with GSK. Like latozinemab, AL101 is a monoclonal antibody that blocks sortilin to elevate progranulin levels. It’s distinct pharmacokinetic and pharmacodynamic properties have potential to enable dosing regimens that maybe more suitable for use in the treatment of larger indications, such as Alzheimer’s disease. Our Phase 1 study in healthy volunteers demonstrated that AL101 was well tolerated and increased progranulin levels in plasma and CSF in a dose-dependent manner.
In August 2023, Alector and GSK received FDA clearance of its IND application for AL101 in the treatment of early Alzheimer’s disease. The rationale for treatment of Alzheimer’s disease is that genetic variance that results in modest reductions of progranulin levels are associated with an increased risk of developing Alzheimer’s disease. Conversely, in animal models of Alzheimer’s disease, elevation of progranulin has been shown to be protected. In February of this year, the first participant was dosed in the PROGRESS-AD study of AL101, which is being operationalized by our partner, GSK. PROGRESS-AD is a randomized double-blind placebo-controlled Phase 2 clinical trial of AL101, enrolling approximately 282 patients with early Alzheimer’s disease at multiple sites globally.
The 36-week study is designed to assess the safety and efficacy of two dose levels of AL101 compared to placebo. Participants are randomized to one of three dose groups receiving AL101 or placebo intravenously. The primary endpoint of the study is disease progression as measured by the CDR Sum of Boxes. The trial also employs other clinical and functional outcome assessments and biomarkers. We look forward to sharing additional information on PROGRESS-AD as the trial advances. With that overview, I will now turn the call over to Sara to provide an update on our early research pipeline. Sara?
Sara Kenkare-Mitra: Thank you, Gary. We are making meaningful strides in progressing our research portfolio to fuel our development pipeline and set the stage for our long-term growth. Our drug discovery engine is fine-tuned through a decade of deep biological exploration and expertise in neuroscience as well as strong expertise and experience in antibody, protein engineering and preclinical development. We have also developed a modular and scalable target discovery platform, which seamlessly integrates generics, multi-omics and in-house generated wet lab data to uncover novel targets. The system further improves predictions through machine learning-based target identification, multidimensional functional validation and data integration with AI-based analysis.
Our overall integrated approach allows us to move swiftly from target identification to the development of late-stage first-in-class immuno-neurology drug candidates. In addition to our target and drug discovery engine, we have also made progress on our proprietary blood-brain barrier technology. While our late-stage clinical candidates show brain penetration and target engagement, we are developing a proprietary versatile blood-brain barrier technology called Alector Brain Carrier, or ABC, to strive to lower efficacious doses with favorable safety and efficacy and enable delivery of additional novel drugs into the CNS. We intend to selectively deploy our technology in a fit-for-purpose manner on our next-generation programs that are currently in our early portfolio.
ABC Technology is a toolbox approach incorporating a suite of single chain variable fragments, antigen binding fragments or variable heavy chain domains that bind to target at the blood-brain barrier, such as transferrin and CD98 heavy chain with varying affinity. We have been able to achieve greater than tenfold increase in vein concentrations of multiple cargoes and demonstrated deep brain penetration to cell types of interest like neurons and microglia. The modular nature of this technology allows the affinity, valency and format of the final therapeutic to be harmonized with the mechanism of action and cell type specificity of the associated cargo. We are also leveraging our ABC technology to advance the development of protein replacement therapies for neurodegenerative diseases, which aligns with our focus on genetic risk factors.
Our technology’s adaptability is demonstrated through versatile bispecific formats, complemented by customizable Fc adaptations for optimized effective function, half-life and single chain configuration. Based on the translatability of preclinical safety and efficacy studies, our technology appears to exhibit a favorable safety profile even when actively engaging with Fc. We look forward to sharing more details about our innovative research portfolio, including our Alector Brain Carrier Technology during a virtual event later this year. I’ll now turn it over to Marc to provide an update on our financial results. Marc?
Marc Grasso: Thank you, Sara. As summarized in our fourth quarter and full year 2023 financial results, which we made available after the market closed today, we are in a strong cash position to deliver against our strategic objectives. We continue to focus on fiscal management and program prioritization and as of December 31, 2023, our cash, cash equivalents and short-term investments totaled $548.9 million, strengthening our financial position, we completed a follow-on financing in January of this year, raising $75 million in gross proceeds. Inclusive of this raise, our cash runway is now through 2026, approximately a full year beyond the expected FTD-GRN Pivotal Phase 3, INFRONT-3 data readout and approximately 2 years beyond our TREM2 Phase 2 INVOKE-2 data readout.
Further, we are now also in a position to selectively accelerate investment in our innovative proprietary portfolio, including programs enhanced by our proprietary Alector Brain Carrier Technology platform. We appreciate the support of significant new investors as well as participation from our existing shareholders. Now turning to our operating results. Collaboration revenue for the fourth quarter was $15.2 million compared to $14.4 million for the same period in 2022. Collaboration revenue for the year was $97.1 million compared to $133.6 million in 2022. Total research and development expenses for the fourth quarter were $47.7 million compared to $54.5 million for the same period in 2022. Total research and development expenses for the year were $192.1 million compared to $210.4 million in 2022.
Total general and administrative expenses for the quarter were $14.9 million compared to $15.4 million for the same period in 2022. Total general and administrative expenses for the year were $56.7 million compared to $61 million in 2022. For 2024, we estimate our collaboration revenue to be between $60 million and $70 million. Our anticipated total research and development expenses are estimated to be between $210 million and $230 million and total anticipated general and administrative expenses are estimated to be between $60 million and $70 million. In December, Alector hosted two virtual research and development events discussing our TREM2 and progranulin programs in detail. The events included presentations from leading scientific and clinical experts.
We encourage those who didn’t have an opportunity to participate in the live events to watch the replays located under the Investor Events and Presentations section of our website. We remain focused on advancing our novel portfolio and Alector Brain Carrier Technology to treat neurodegenerative diseases. We look forward to providing additional updates as we advance our work. That concludes our prepared comments for today’s call. Operator, you may now open the line for questions.
See also 44 Countries With Hot and Wet Equatorial Climate and 15 Countries With Most Cyber Crime In The World.
To continue reading the Q&A session, please click here.
