Stifel 2026 Healthcare Conference - DENALI THERAPEUTICS INC

Financial Performance:

• Q2 commercial revenue for Avalea reached $7.8 million, significantly exceeding previous guidance of $10-$12 million, driven by accelerated payer coverage expansion and rapid patient switching from clinical trials.
• Q4 commercial revenue is guided at $30-$32 million, representing a more predictable growth phase following an initial steep ramp-up.
• As of the call, approximately 70% of commercial lives are covered, with Medicaid coverage in 20 states.
• The company ended the last quarter with $1.01 billion in cash, providing sufficient capital to progress early-stage programs independently.

Guidance and Future Outlook:

• Revenue growth is expected to follow an S-shaped curve; while the initial ramp was faster than anticipated, future growth is projected to be more measured.
• Avalea: Goal is to transition 100% of the 375 eligible U.S. Hunter's disease patients (within label) to treatment.
• COMPASS Trial: Data expected to read out in the first half of 2028, with a potential NDA filing in 2028; the trial is designed to confirm clinical and functional endpoints in a placebo-controlled setting.
• San Felipe (SDSH): Planning a filing in 2027 based on a cohort of 20 patients; detailed data to be presented at a World Conference early next year.
• Alzheimer's (A-beta): Phase 1 study in healthy volunteers has commenced to assess safety, immunogenicity, and CNS exposure; patient data to evaluate plaque clearance is expected shortly thereafter.
• Tau Program: First clinical readout will focus on CSF tau knockdown (approx. 3 months), with tau PET pathology data requiring 18 months of follow-up.
• Progranulin: Extended study endpoint from 6 to 12 months; data expected in 2027 to assess NFL and clinical impact.

Business Segments and Product Lines:

• Avalea (Hunter's Disease): Strong market interest with broad impact reported across neuropathic symptoms; physician consensus suggests a high unmet need in the overlapping population.
• San Felipe (SDSH): Leveraging heparan sulfate reduction as the basis for accelerated approval; >80% reduction observed in dose-finding cohorts with many patients normalizing levels.
• Pompe Disease (DNL952): Utilizing Transferrin Receptor (TFR) delivery to improve muscle and lysosomal uptake; Phase 1 study involves a switching strategy with existing patients, monitoring urine GLO34 and serum creatine kinase as biomarkers.
• Alzheimer's (A-beta, DNL921): Differentiated platform using direct FC domain engineering for TFR binding (no appended sequences) to potentially reduce immunogenicity and anemia risks compared to competitors like Roche's Trontinemab; includes engineered effector function for plaque clearance.
• Alzheimer's (Tau): TFR-mediated systemic delivery aimed at even CNS biodistribution, distinguishing the approach from Biogen's intrathecal ASO therapy regarding safety windows and biodistribution.
• Zafi Program: Scheduled to reach market shortly after Avalea.

Market and Competitive Landscape:

• Hunter's Disease: Focused on capturing the eligible label population (375 of 500 U.S. patients) and expanding into broader symptomatic groups.
• Pompe Disease: Addressing inadequate tissue engagement and unmet medical need in muscle/diaphragm among patients on existing first and second-generation ERTs, which struggle with low M6P receptor uptake.
• Alzheimer's A-beta: Competing with Roche's Trontinemab; Denali highlights potential safety advantages regarding immunogenicity and anemia risk due to its engineered binding mechanism.
• Alzheimer's Tau: Viewing Biogen's recent data as a validation of the field's potential despite concerns over inverse dose-response and clinical efficacy correlation; Denali aims to mitigate these issues via systemic delivery.

Risks and Challenges:

• Placebo-Controlled Trials: Risk associated with the COMPASS trial moving from open-label to placebo-controlled for functional endpoints, though the company expresses high confidence based on extensive prior biomarker data.
• Biomarker Variability: Neurofilament light chain (NFL) kinetics vary significantly across disease indications, complicating the interpretation of the Progranulin study results.
• Regulatory Pathways: Reliance on accelerated approval based on heparan sulfate reduction for San Felipe requires successful confirmation of clinical benefit in confirmatory trials.
• Trial Design: Challenges in powering rare disease trials and defining appropriate endpoints for Alzheimer's therapies (e.g., ARIA incidence rates require larger populations for statistical significance).

Management Commentary and Tone:

• Management conveyed high confidence in the Avalea launch trajectory and the robustness of their TFR platform across multiple therapeutic areas.
• Tone was optimistic regarding the pipeline, emphasizing the potential for broad patient impact and strategic differentiation in the crowded Alzheimer's space.
• CFO/CSO noted the company's strong capital position allows for independent development of early-stage assets while retaining flexibility for future partnerships.

Analyst Questions and Answers:

• Patient Segmentation: Clarified that while the label covers 375 patients, real-world interest suggests efficacy across a broader population with neuropathic symptoms.
• COMPASS Trial Design: Confirmed the study is robustly powered using Phase 1/2 data, including behavioral and cognitive endpoints, to predict placebo arm behavior.
• San Felipe Biomarkers: Neurofilament data will be collected to corroborate heparan sulfate reductions as a downstream disease impact marker.
• Pompe Differentiation: Explained that current ERTs fail to address muscle uptake due to low M6P receptor density, a gap Denali's TFR platform addresses.
• Alzheimer's Safety: Detailed preclinical data suggesting the platform avoids anemia by preventing simultaneous binding to TFR and FC gamma receptors.
• Subcutaneous Administration: Disclosed exploration of sub-Q dosing for the A-beta molecule, though exact paradigms are not yet defined.
• Partnership Strategy: Indicated a "prove first, partner later" approach for Alzheimer's assets, pending initial data readouts.

Other Key Points:

• Platform Synergy: The TFR delivery platform is highlighted as a core competency enabling diverse delivery challenges in Lysosomal Storage Diseases and neurodegeneration.
• Biomarker Strategy: Emphasized that CSF antibody levels are not a reliable proxy for brain exposure due to capillary-mediated distribution; target engagement and downstream biomarkers (e.g., plaque clearance) are the true efficacy indicators.
• Study Extensions: The Progranulin study was extended to 12 months to ensure sufficient observation time for meaningful NFL signal detection.
• Portfolio Status: The company is currently advancing three enzyme programs (Avalea, Zafi, SDHS/Pompe) alongside two Alzheimer's programs (A-beta, Tau).