Denali Therapeutics Inc. (DNLI) Q2 2026 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the second quarter 2026 financial results and business highlights. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Laura Hansen. Please go ahead.

Good afternoon, everyone, and thank you for joining us today to discuss Denali Therapeutics' second quarter 2026 financial results and business highlights. Earlier today, we issued our earnings press release and filed our quarterly report. The press release, financial tables, and today's presentation are available in the Investor Relations section of our website. Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements. These statements are based on our current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings and the cautionary language in today's press release and presentation for a discussion of these risks. Denali undertakes no obligation to update these forward-looking statements, except as required by law. Joining me today are Ryan Watts, our Chief Executive Officer; Katie Peng, our Chief Commercial Officer; Alexander Schuth, our Chief Operating and Financial Officer; and Peter Chin, our Chief Medical Officer, Head of Development. Ryan will begin with opening remarks. Katie will then provide an update on the U.S. launch of AVLAYAH. Ryan will return to discuss pipeline highlights, and Alex will review our financial results. Peter will join the team for the question-and-answer session. Ryan?

Thanks, Laura, and thank you, everyone, for joining us today. We will begin on Slide 5. This was a transformative quarter for Denali. We completed the first full quarter of the AVLAYAH launch, advanced two transport vehicle-enabled Alzheimer's disease programs into clinical development, and further strengthened our financial position. Before I discuss those highlights, I want to begin with why we are here. At Denali, our purpose is to transform life for people living with serious diseases. That includes children and adults with rare genetic diseases such as Hunter syndrome, Sanfilippo syndrome, FTD-GRN, and Pompe disease, as well as the millions of people living with common neurodegenerative diseases such as Alzheimer's disease and Parkinson's disease. Across both groups, our mission is the same: to bring the power of biologic medicine to the brain. Slide 6. The common challenge across many of these diseases is the blood-brain barrier. For over a decade, we have built the transport vehicle platform to address that challenge by engineering biologic medicines to cross the blood-brain barrier through receptor-mediated transport. Earlier this year, that work reached an important milestone. Slide 7. With FDA approval of AVLAYAH, Denali became a commercial company and began delivering our first medicine to patients. In the Hunter syndrome community, AVLAYAH is the first new FDA-approved therapy in nearly 20 years and a new treatment option designed to reach both the body and the brain. Importantly, AVLAYAH became the first approved medicine developed using our transport vehicle platform and the first FDA-approved biologic specifically designed to cross the blood-brain barrier. For Denali, AVLAYAH is much more than a product. It is the first proof that our platform can progress from scientific concept to an approved medicine for patients. Slide 8. We believe Denali today represents a powerful and differentiated combination to create significant value for patients, the healthcare system, and investors in the near and long term. We have a commercial product in AVLAYAH and an encouraging early launch. We have a broad clinical pipeline spanning rare genetic diseases and common neurodegenerative diseases, each with substantial market potential. We have a validated and scalable transport vehicle platform and scientific leadership in the field of BBB transport. We have the operational capabilities and financial strength to execute from discovery through development, manufacturing, and commercialization. Together, these attributes position Denali to create near-term growth and sustainable long-term value. Slide 9. Turning to the quarter, AVLAYAH generated $3.6 million in net product revenue in its first full commercial quarter. The positive response from the Hunter syndrome community and the physicians caring for these individuals reflects years of partnership with patients, families, advocacy organizations, and clinicians. We could not have achieved this milestone without their unwavering commitment to advancing new treatment options. I also want to recognize the outstanding execution by our commercial team in the early stages of this launch. In the pipeline, DNL628 targeting tau and DNL921 targeting Abeta both advanced into clinical development for Alzheimer's disease, with initial clinical data expected in 2027. And following the sale of our priority review voucher in July, our pro forma cash, cash equivalents, and marketable securities exceeded $1.1 billion. Slide 10. A key focus of today's call will be the AVLAYAH launch. Katie will walk through the early commercial indicators, what we are learning, and how we are building the foundation for continued growth.

Thank you, Ryan. On Slide 12, I'd like to start by reinforcing why we believe AVLAYAH is setting a new bar for the treatment of MPS II. For the first time, a therapy is designed to reach the whole body, including the brain, and can normalize key disease biomarkers, both in the CNS and peripherally. These data continue to reinforce physician confidence and resonance with families, supporting the strong momentum we are seeing in the launch. Slide 12. Hunter syndrome represents one of the more prevalent mucopolysaccharidoses and affects a meaningful patient population within the rare disease community. The U.S. opportunity is highly concentrated, with most eligible patients already identified and receiving conventional IDS enzyme replacement therapy at a relatively small number of specialized treatment centers. These are pediatric patients with pre-symptomatic or symptomatic neurologic manifestations who have not progressed to advanced neurologic impairment. We estimate that there are approximately 2,000 patients worldwide in the addressable market, including approximately 500 prevalent patients with Hunter syndrome in the United States. Based on the FDA-approved indication, approximately 75% of the U.S. prevalent population, or roughly 375 patients, are currently eligible for AVLAYAH. In addition, about 30 children are born each year with Hunter syndrome, providing an ongoing opportunity to initiate treatment early. Our ongoing Phase III COMPASS study is an important next step in advancing AVLAYAH, with the goal of supporting full approval and expansion of the label to include adults. Ultimately, our goal is to reach all eligible patients worldwide. Slide 13. Our launch is being executed against four core strategies. First, partnering closely with the Hunter syndrome community through a high-touch, community-centered approach. In rare diseases, families often learn from and support one another. We believe that positive experience with both AVLAYAH and the Denali team helps build trust, increase awareness, and encourage additional families to seek treatment. Second, helping physicians evaluate AVLAYAH and supporting treatment centers as they prepare to initiate therapy. Strong clinical conviction is creating urgency amongst physicians to switch eligible patients and engage payers to accelerate access. Third, helping each patient and family navigate the steps from prescription through their first infusion. And fourth, driving fast label-aligned coverage decisions that help remove payer roadblocks. After our first full quarter of launch, what has been particularly encouraging is how these four strategies have reinforced one another. Strong clinical conviction has driven physician and patient demand. That demand has accelerated payer coverage, and together, these dynamics are enabling more patients to begin therapy. Slide 14. Beginning with physicians, we entered the launch with a strong foundation. Before approval, more than 80% of physicians surveyed were already aware of AVLAYAH. 90% viewed the biomarker and clinical data as motivating to prescribe. Since approval, we have reached approximately 80% of targeted healthcare organizations with AVLAYAH's launch information through our field engagements, scientific exchange, educational webinars, and treatment center support. These activities have been highly impactful and are driving strong engagement across a significant number of treating physicians. Physicians consistently tell us that the ability to address neurologic manifestations is highly meaningful and that most patients experience neurologic symptoms at some point during the course of their disease. That belief is translating into action, as many treatment centers with eligible patients are working with families to navigate reimbursement and transition patients to AVLAYAH. Slide 15. We have seen equally strong engagement from patients and caregivers. Through our launch webinars focused on clinical data and access, as well as with Denali Patient Services, we reached more than 100 families. That represents greater than one quarter of the eligible U.S. patients. This high level of engagement reflects both the unmet need in Hunter syndrome and the extent to which families have followed the development of AVLAYAH. We are also seeing families share their experiences through advocacy networks and local media, helping other members of the community learn about the availability of a new treatment option. Slide 16. One of the most powerful aspects of launch has been hearing directly from families and advocates about their experience with AVLAYAH and Denali. They have described the opportunity to begin AVLAYAH as a source of hope and, in some cases, as the possibility of gaining more meaningful time with their children. They are careful not to draw clinical conclusions from individual experiences. However, these stories illustrate how much the approval of AVLAYAH means to this community that has waited many years for a therapy designed to reach both the brain and the body. We are also hearing very positive feedback about the way the Denali team is supporting families and healthcare organizations. For many patients, initiating a new therapy involves coordinating physicians, infusion centers, insurers, specialty distributors, and patient services. Our team works closely with each family and treatment center to help them navigate those steps. The feedback from families and advocacy organizations has consistently highlighted the responsiveness, compassion, and partnership of the Denali team. That experience matters. It builds confidence in treatment, helps patients move through the access process, and supports continuity once treatment begins. Slide 17. Now turning to payer access. We have made exceptional progress during the first quarter of launch. Commercial policies covering more than 50% of lives have already been established. As with many rare diseases, a significant portion of MPS II patients is covered by Medicaid. Recognizing that not every state will publish a product-specific policy, 14 state Medicaid programs publicly listed AVLAYAH as covered. Separately, we are also seeing managed Medicaid policies align their coverage with commercial plans. These results compare favorably with early coverage achieved by analogous rare disease launches. Importantly, the absence of published policy does not mean a patient cannot obtain access. To date, physicians and families have successfully used prior authorizations, appeals, and medical exceptions while formal policies are being developed. The willingness of physicians to initiate these requests reflects their conviction in AVLAYAH, and our payer and patient access teams are working closely with them to move eligible patients towards treatment. Slide 18. We are extremely pleased with the trajectory of the U.S. launch. In our first full commercial quarter, we generated $3.6 million in net product revenue and secured commercial coverage for more than 50% of covered lives. Before discussing the outlook, I want to briefly address our approach to communicating launch dynamics and metrics. We understand that visibility is important to our investors, and we are committed to maintaining an open dialogue. There are many factors that influence the trajectory of AVLAYAH adoption, and every patient journey is unique, from the initial expression of interest through reimbursement approval and ultimately dosing. In addition, because AVLAYAH is weight-based, the number of vials used can vary meaningfully between a newly-diagnosed infant and a 16-year-old adolescent. For the first two quarters of launch, we therefore plan to provide guidance on expected net product revenue for the following quarter. We believe that this approach, together with the prior quarter's reported net product revenue, will provide the clearest view of the launch trajectory during this early period. Before launch, we described an adoption curve that would build over time. We expected the earliest patients to be highly engaged families who were waiting for AVLAYAH and were prepared to move quickly through the medical exceptions process. That initial demand has been stronger than we anticipated, reflecting both the high awareness of AVLAYAH and the significant unmet need in the Hunter syndrome community. While many patients have already started therapies, others continue to move through the reimbursement and treatment journey. As payer coverage expands and treatment centers gain experience with AVLAYAH, we expect the patient journey from prescription to infusion to become increasingly efficient, enabling more eligible patients to begin treatment. Given the pace of adoption, expanding access, and continued strong execution, we expect Q3 net product revenue to be in the range of $10 million to $12 million. Most importantly, families continue to tell us that AVLAYAH and the support they receive from the Denali team is making a meaningful difference in their lives. Slide 19. The AVLAYAH launch also has significance beyond a single product. It establishes the first commercial foundation for our enzyme transport vehicle franchise across lysosomal storage disorders. The ETV platform is designed to reach the whole body, including the brain, and it provides opportunities across Hunter syndrome, Sanfilippo syndrome, FTD-GRN, Pompe disease, Gaucher disease, and Hurler syndrome. The ERT market alone represents more than a $9 billion opportunity. Across these diseases, we expect to benefit from shared scientific expertise, established relationships with treatment centers and advocacy organizations, and commercial capabilities that could be leveraged across future launches. Each patient we support and each treatment center we activate strengthens the infrastructure that can serve the broader ETV franchise. AVLAYAH is therefore both an important medicine for the Hunter syndrome community and an early demonstration of our ability to discover, develop, manufacture, and commercialize innovative therapies efficiently and successfully. We are proud of the start while recognizing that this is still the beginning of the launch. Our priorities remain expanding access, supporting a positive treatment experience, reaching additional eligible patients, and preparing for international expansion. With that, I'll turn it back to you, Ryan, to discuss the broader pipeline.

Thanks, Katie. Slide 21. Earlier I described AVLAYAH as the commercial foundation for Denali and the first proof that the transport vehicle platform can enable medicines for patients. I would now like to provide an update on the broader pipeline and then spend most of my time on our Alzheimer's disease programs. Our D3x3 strategy remains unchanged: deliver, develop, and discover. Over the 2026 to 2028 period, our goals are to build two growing commercial brands, generate five clinical proofs of concept, and advance four to six additional programs into the clinic through continued leadership and invention in blood-brain barrier technologies. Slide 22. Next, I would like to briefly update you on DNL593. DNL593 is a direct progranulin replacement therapy designed to deliver progranulin across the blood-brain barrier and restore the missing protein to key cell types in the brain, including the lysosome, where progranulin normally functions. Earlier this year, we regained full ownership and control of the program from Takeda. That provides us with greater flexibility over the development strategy and timing of the data analysis. We have decided to allow for a longer period of observation in the open-label extension portion of the ongoing Phase I/II study. We now expect data in the first half of 2027, updated from our prior expectation of results by the end of the year. The additional follow-up will allow us to better characterize treatment effects across multiple biomarkers, including neurofilament light chain, or NfL, which may change gradually following treatment. Pending the totality of the data, we also plan to explore whether a biomarker-driven accelerated approval path may be appropriate. NfL has regulatory precedent in the related neurodegenerative disease, ALS, although any potential path for DNL593 would require discussion and alignment with regulators. We are excited about DNL593 because it directly addresses the genetic cause of FTD-GRN by replacing progranulin. This week, the FDA granted orphan drug designation to DNL593 for FTD-GRN, underscoring the significant unmet need facing individuals affected by this disease and the potentially promising rationale of our approach with PTV:progranulin. Earlier, healthy volunteer data demonstrated dose-dependent increases in cerebrospinal fluid progranulin following intravenous administration, providing evidence of brain delivery and further validation of the transport vehicle platform. Slide 23. I will now turn to what we believe is one of the most exciting areas of our pipeline, Alzheimer's disease. A few weeks ago, I had the privilege of delivering a plenary presentation at the Alzheimer's Association International Conference in London. After working in Alzheimer's disease for more than 20 years, I believe the field has entered a transformative period because of extraordinary progress in three historically challenging areas: biology, biomarkers, and the blood-brain barrier. Human genetics and pharmacology are sharpening our understanding of the multifaceted biology of disease. Imaging and blood-based biomarkers are enabling earlier diagnosis and increasingly precise measurements of disease progression and treatment response. And brain transport technologies are creating the potential to deliver biologic medicines broadly throughout the brain. Together, these advances create new opportunities for the next generation of Alzheimer's therapies. Slide 24. We believe the next advances in Alzheimer's disease may depend on delivering therapies more effectively throughout the brain. Amyloid plaque clearance is now clinically validated, but currently available antibodies are limited by modest efficacy and the risk of amyloid-related imaging abnormalities, or ARIA. Tau reduction has also shown encouraging clinical signals, but current antisense approaches rely on intrathecal administration and may not achieve uniform distribution throughout the brain and have other limitations. Our two clinical programs are designed to address these limitations through better brain delivery. DNL921 is a potential best-in-class BBB-crossing anti-amyloid antibody designed to improve plaque engagement while reducing ARIA potential and peripheral immune activation. DNL628 is a potential first-in-class BBB-crossing tau antisense oligonucleotide designed for intravenous administration and broad uniform distribution throughout the capillary network. Slide 25. Starting with DNL921, one of the important features of transport vehicle-enabled delivery is the route of entry into the brain. When conventional anti-amyloid antibodies enter the brain, they concentrate around larger arteries and arterioles where vascular amyloid is present. We believe that localization contributes to ARIA risk. By engaging the transferrin receptor, antibody transport vehicle-enabled antibodies enter the brain through the extensive capillary network and distribute more evenly throughout the brain. In preclinical models, this route of entry was associated with substantially fewer MRI lesions than a conventional anti-amyloid antibody, including at dose levels that achieved strong target engagement. These data support our hypothesis that improved brain delivery and biodistribution may enhance plaque engagement while reducing ARIA potential. Slide 26. We've also engineered DNL921 to address the broader attributes required for a successful medicine. Unlike fusion approaches that append a transferrin receptor binding arm to an antibody, our transport vehicle binding is embedded directly into the Fc. DNL921 is designed to achieve robust brain concentrations while remaining intact and minimizing effects on immature reticulocytes. With the goal of preserving activity at amyloid plaques while reducing peripheral immune activation, DNL921 incorporates conditional effector function through our cisLALA design. Slide 29. Turning to DNL628, the central opportunity is to improve both distribution and convenience for antisense therapy. Intrathecally administered antisense oligonucleotides distribute from cerebrospinal fluid and can produce uneven exposure across brain regions with greater treatment burden for patients. By contrast, intravenous oligonucleotide transport vehicle, OTV delivery, uses the capillary network to distribute the antisense oligo broadly across the brain and spinal cord. This distribution includes key cell types involved in neurodegeneration, including neurons, astrocytes, and microglia. Slide 28. In mice expressing human tau and the human transferrin receptor, DNL628 produced robust reductions in MAPT RNA and tau protein. Importantly, tau protein reduction persisted for more than 12 weeks after dosing, supporting the potential for a practical dosing interval. These data support the design of the ongoing Phase Ib study where we are evaluating safety, dose selection, effects on tau levels, and imaging measures in people with biomarker-confirmed early Alzheimer's disease. Slide 29. Both Alzheimer's disease programs are now in clinical development. DNL628 Phase Ib study is ongoing, and we expect initial clinical biomarker data in the first half of 2027. For DNL921, the clinical trial application was submitted in the first half of this year, and we expect initial safety and clinical proof of concept data in 2027. These readouts will be important not only for individual programs but also for the broad validation of our oligonucleotide and antibody transport vehicle platforms in common neurodegenerative disease. Taken together, our progress this quarter demonstrates the breadth of Denali: a growing commercial business, broad clinical pipeline, and a repeatable platform capable of supporting multiple therapeutic modalities, all focused on delivering meaningful medicines to patients and families. Slide 30. With that, I will turn the call over to Alex to review our financial results.

Thank you, Ryan. Slide 31. I will close our prepared remarks today with a look at our portfolio, capital allocation priorities, and second quarter financial results. We have built a broad portfolio based on the transport vehicle platform, which is now clinically and commercially validated through AVLAYAH. This portfolio has the potential to create significant value in the near and long term, with each program designed to offer first- or best-in-class potential in its respective indication. And we are well capitalized to execute against it. Our portfolio has two key components. First, we have a pipeline of next-generation enzyme and protein replacement therapies designed to treat the whole body, including the brain. Across these programs, we can apply the clinical and regulatory learnings from AVLAYAH and leverage our existing capabilities in development, manufacturing, and commercialization. We estimate that each program represents a potential market opportunity ranging from approximately $500 million to more than $1 billion, creating a multi-billion-dollar opportunity across the franchise. These programs benefit from a well-established therapeutic modality, measurable biomarkers, and in certain diseases, the potential for biomarker-based accelerated development path. In addition, and shown on the right, is our portfolio targeting common neurodegenerative diseases. This includes two clinical-stage blood-brain barrier-enabled molecules targeting tau and amyloid beta for Alzheimer's disease with first- and/or best-in-class potential. If successful, these programs could reach millions of patients and represent substantial multi-billion-dollar market opportunities. Slide 32. Turning to the financials and capital allocation. We ended the second quarter with approximately $940 million in cash, cash equivalents, and marketable securities. In July, we received $195 million in proceeds from the sale of the rare pediatric disease priority review voucher awarded following the approval of AVLAYAH. Together, this brings our pro forma cash, cash equivalents, and marketable securities to more than $1.1 billion. This gives us flexibility to pursue three priorities with discipline. First, it allows us to invest in the execution of our portfolio, including the commercial activities for AVLAYAH as outlined by Katie, preparations for the potential launch of DNL126, or zafinofusp alfa, in 2027, and advancement of clinical programs. Second, we can continue to build capabilities and infrastructure for efficiency. In particular, our internal manufacturing facility in Salt Lake City provides opportunities for speed in development and attractive COGS as we bring additional products forward. Third, our balance sheet provides strategic flexibility with respect to potential future partnerships and diversified sources of capital. Slide 33. The complete details of our financial results are included in today's press release and Form 10-Q, so I will focus only on the key items. AVLAYAH generated $3.6 million in net product revenues during the first full quarter of commercial availability. Research and development expenses were $97 million compared with $102.7 million for the same period in 2025. The decrease primarily reflected the timing of AVLAYAH commercial supply manufacturing in the prior year period and lower external spending on small molecule programs. Selling, general, and administrative expenses were $36.3 million compared to $32.3 million in the second quarter of 2025. The increase primarily reflected investments to support the AVLAYAH commercial launch. As noted, we ended the quarter with approximately $940 million in cash, cash equivalents, and marketable securities before receipt of the $195 million in PRV proceeds in July. In closing, we believe Denali is entering this exciting next phase from a position of strength, with a commercial product, a broad pipeline, a validated platform, and the capabilities and capital to deliver value for patients and investors. With that, I will turn the call back to the operator to begin the Q&A session. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] We will take our first question, and the question comes from the line of Jessica Fye from JPMorgan.

Hello, this is Adam on for Jess. I just was curious, what in the launch so far has helped you come up with the next quarter's guidance? Can we assume that growth trajectory to continue through the end of the year? And could we see maybe OpEx guidance in the future?

Thanks, Adam. So, what's giving us confidence is all of the leading indicators are moving in a very positive direction. As you saw from the presentation, physician awareness is extremely high of the AVLAYAH data, and they're highly motivated to switch patients. In addition, we've seen tremendous engagement from families as well. And we've also had great success moving patients through reimbursement with the medical exceptions process. And as you can see, also we've had success with payer access, and we have now greater than 50% of commercial lives covered as of the end of Q2. So given all the dynamics are moving in the right direction, we feel very confident that the momentum will continue.

I can take the second part. This is Alex. I can take the second part on OpEx. So capital efficiency is very important to us, and we are pleased that we're able to keep OpEx flat in Q2 '26 versus Q2 '25 and actually slightly lower on a six-month basis, while at the same time preparing for the launch and advancing important new programs into the clinic. With respect to an outlook, we generally provide an outlook for the full year at the beginning of the year, so please stay tuned for that.

We will take our next question. And the question comes from Salveen Richter from Goldman Sachs.

Good afternoon. This is Lydia on for Salveen. Congrats on the progress and on your first earnings call. Could you just speak to the patient profile of the initial patients on therapy and kind of the breakdown between the newly diagnosed versus switched patients?

Great, thanks for that question, Lydia. So as you know, with this patient population, the majority of the patients are already treated on idursulfase. So we expect 90% of patients, prevalent patients, would be then switching. So the majority of that -- of course, we are seeing as well newly diagnosed patients being put on AVLAYAH, but the majority will come from patients that are switching. In terms of patient profiles, we initially believed that patients may skew to the younger population because those are the families that were most engaged and have been following the development of AVLAYAH. But we've been really pleased to see that what we can gather today is that it's very broad. In fact, patients across the different age groups within the pediatric population have demonstrated interest in being prescribed AVLAYAH.

We will take our next question. And the question comes from Andrew Tsai from Jefferies.

So maybe one more on Hunter. You're guiding to a strong sales number for Q3. And then I think in your prepared remarks, the original guidance for an S-shaped curve still seems to hold. So, to me, that would mean that come next year, could we be talking about a quarterly revenue number that's significantly larger than $10 million? Is that the right way to think about it? And then secondly, Biogen just shared their Phase II tau dataset. So I'd be curious to gauge your thoughts on the degree of efficacy they're seeing. How much do you think that is attributed to too much tau lowering, or is it the mode of administration or something else? It would be nice to gauge your views on these possibilities or variables around efficacy.

Thanks, Andrew. I'll start with the first part of your question. And yes, we still believe that this year is a foundational year. We talked about getting as many patients on therapy as possible. And we are definitely at the beginning stages of that S-curve. But of course, our goal is to tighten that S-shaped curve and bring in the inflection point as soon as possible. And that's why our focus on driving awareness, making sure the experience on AVLAYAH is very positive so that the community can further share that and drive the momentum. That will drive, as well as with payer access, that will drive that inflection point.

I'm happy to take the second question, Andrew. As you know, we spoke before the data was shared at AAIC in London, and then, of course, a lot came out after the data presentation, and I think our response is that, in general, it's the first dataset to show that tau lowering may lead to a clinical benefit. And I think what's probably the most compelling is you look across not just ADAS-Cog -- or sorry, CDR Sum of Boxes but also ADAS-Cog and MMSE, and you're seeing consistency in potential clinical benefit. I think the challenge is, as you have highlighted, is a question around why was there not a dose response? Why did the higher doses not lead to more efficacy? And I think just a couple of points without going into too much detail. Obviously, there were more discontinuations and adverse events in the higher doses. I think it's well understood with intrathecal administration that this is not uncommonly seen, including transient confusion. So I think we, like others, look forward to seeing more details and the differences between the doses and that may this actually be masking some of the efficacy. But in general, first dataset showing tau lowering and potential clinical benefit.

We will take our next question, and the question comes from Tazeen Ahmad from Bank of America.

I wanted to just focus on DNL593 for a second. I'm sorry if I missed this in your prepared remarks, but can you share any color on what level of data you plan to share when you release it? And what, in your view, would be good data? And then can you just clarify why you want to wait for NfL data? I think in the past you mentioned the focus was going to be on lysosomal function.

Thanks, Tazeen. I'm happy to take that. I think the most important point here is that as we've regained full rights to this program, we're now in a position where we can essentially drive the strategy on this program. And I think in our experience, I think point number one is that longer-term data is often needed when looking at biomarkers like NfL. And I think what's unique about FTD-GRN from, let's say, some of our other lysosomal storage disease programs, is that this is a haploinsufficiency in terms of the underlying disease. And as a result, as we look at some of the lysosomal biomarkers historically, there's elevation, but it's modest, not like what you see with heparan sulfate in Hunter syndrome. So what we've decided to do is we're trying to find an accelerated path. As you may have also noted, we received orphan disease designation for this program just recently as well. And so we think we have the best chance of seeing robust data specifically on the distal biomarkers such as NfL and more broadly, just looking at the entire biomarker set, including lysosomal biomarkers as well. So I think the key here is just giving this program the best chance of a potential accelerated path. Obviously, with data in hand, then we'd have to address that with regulators.

We will take our next question, and the question comes from Michael Yee from UBS.

Hi, this is [indiscernible] on for Michael. I just wanted to ask a couple more on the launch. Congratulations on such a strong number right out of the gate. Just wondering, given your comments around stronger than expected early demand and the fact that we sort of know the number of Hunter patients that are out there, do we expect a sort of bolus effect in the U.S. of these patients who are covered on the label now coming on? And then for these patients that are having to go through sort of medical exceptions and prior auth, do you have any sense of what the time is from like getting the scripts to actually getting infused?

Thank you for that question. So, in terms of what we expected, we definitely expected that pool of patients who've been following AVLAYAH's development very closely. And that pool of highly interested families is bigger than we initially had expected. But we are working through -- with the early experience, with these early families, though, we are seeing expansion into the broader patient population, as I described earlier. And so we're very excited about the fact that it's going beyond just those early families, and we're going to expect to see continued growth into the broader population. And as you stated, the total eligible population is around 375 that are considered pediatric patients in the U.S. In terms of -- I think your question was starting the interest to infusion and what's the timeline for that. As you know this early in launch and without payer coverage initially, although of course that's expanding now, there is huge variability in the time between patients expressing interest to when they actually get infused. So it's really hard to comment on that this early in launch. However, with payer coverage improving over time, that timeline should get more straightforward, more efficient.

We will take our next question. And the question comes from Sean Laaman from Morgan Stanley.

Hi, this is Mike Riad on for Sean. Congratulations on the strong start. Can you remind us how is progress going on for the adult confirmatory study? And given what you've learned so far, acknowledging it's only one quarter into the launch, is there anything that has changed your excitement or views as to how that adult study could influence launch trajectory or pricing?

So, what we're hearing today, certainly there are adult patients that are very much interested in getting treated with AVLAYAH. I think that's your question. I don't think launch price will change since we've already gone into market, even when we hopefully will get the label expansion. And I'll let Peter comment on the study.

Yes, and in terms of the COMPASS Phase II/III study, we're excited about reading out the study, which is set to end at the end of next year. It is going to be the basis for expanding the label both in the U.S. as a confirmatory study and for global -- potential global launches.

Thank you. That's very helpful. And then just thinking about the Q2 to Q3 revenue guidance and ramp, can you walk us through any key drivers of that acceleration? How much of it is coming from new patient starts versus patients converting to reimbursement?

So I think it's a combination of all those factors. So we're seeing, as I stated earlier, all of the leading indicators, the high level of engagement from physicians and families, the conviction that physicians have in going for a medical exceptions process, and then the fact that our payer coverage is getting better every day. I think all of those things are going to be contributing to the growth over the next quarter.

We will take our next question. And the question comes from the line of Paul Matteis from Stifel.

Great, thanks very much. I guess taking a step back, given everything you kind of understand around this patient population, the degree to which families are plugged in and were waiting for AVLAYAH, do you think you're seeing a bolus right now? And might we see some attenuation in the add rate later this year, or do you feel like this is actually potentially sustainable? And then as it relates to tau and the upcoming data next year, Ryan, I think you've talked about CSF tau data being an interesting early biomarker, given that PET changes can take some time. I'm wondering, though, do you think your CSF tau data for the shuttle will be comparable to the CSF tau data for an intrathecal drug, given that IT-administered drugs can maybe bias CSF biomarkers, given sort of the site of administration?

Thanks. I will take the bolus question first. And certainly you're correct, that we expected this bolus. The bolus is bigger than we expected. But I think the key thing that we're seeing is that this early experience from this initial patient population is translating to the broader population. And over time, especially as physicians gain more experience and the stories are shared more broadly through the patient community, we expect the growth to continue into the full eligible population.

Thanks, Katie. Paul, fantastic question. Obviously very mechanistic. Obviously, my kind of question. I think you're exactly right. It's really difficult to compare CSF tau in an intrathecally delivered molecule versus one that's delivered through capillaries through the transport vehicle through transferrin receptor. And the experience we have related to this is actually with early days of ETV:IDS, now AVLAYAH, and its comparison with intrathecal delivery of iduronate-2-sulfatase, where there's a regional very high concentration of enzyme. In this case, it would be high concentration of the antisense oligo, and so I think it's really apples to oranges in terms of like percent reduction and what we would correlate ultimately with clinical benefit. But what we can say is that our biodistribution is even and robust. So when we look at different cell types throughout the brain and brain regions, we get basically roughly the same knockdown of gene expression across these various cell types. So when we measure CSF levels of tau, we're confident that, that's the level of knockdown we're getting throughout the brain. And I think if you then relate that to maybe some disappointment in the maximal efficacy seen with intrathecal delivery, that may be simply because you're not penetrating deeper brain regions that may be impacted by tau and tau pathology. And then to the sort of first half of your question around CSF tau and tau PET, I think what's really remarkable, and I just -- we mentioned this at AAIC, intrathecal data has essentially proven that tau PET can be reversed. That was actually a fundamental question, and many mouse models actually had never really necessarily shown that. So in other words, if you reduce the expression of MAPT, which codes for tau, and then you reduce the expression of tau protein, over time you start to see a reduction in the tau PET signal. And if you look at the totality of the data, including the new data that's been presented, it seems like the shortest window is about a year from when they see tau PET reduction. The early dataset didn't really show much reduction at six months, and then they looked later. It was either 18 months or two years, this dataset shows that a year they're seeing, albeit variable from patient to patient. And actually, if you look at the datasets carefully, they've been published. Some patients get no tau reduction by PET and others get robust. We think this is actually heterogeneity in intrathecal delivery. And so the take-home is biodistribution is going to be critically important and different with the transport vehicle technology. And CSF tau will still be very informative, just like heparan sulfate CSF was informative for our Hunter program. But we're not comparing percent reductions because of exactly the point you made. These are fundamentally different delivery approaches.

We will take our next question, and the question comes from the line of Mayank Mamtani from B. Riley Securities. Please go ahead. Your line is open.

Congrats on a strong AVLAYAH launch. Maybe, Ryan, on the prior point on the OTV:MAPT strategy, are there any genetic tauopathies you could potentially look at? And just taking the logic that you're applying to the GRN program, so there are FTD MAPT tauopathies also that could be looked at. And then maybe just a higher-level question, there's a lot still we need to see from a biomarker standpoint in the CELIA study. What are sort of the right things to kind of look out for as you obviously think about the biomarkers you want to look at in your 628 cohort reading out next year?

Thanks, Mayank. Again, great questions. My take is -- I think with MAPT, the key point here is really focusing on tau reduction, showing that the OTV works, that you can deliver medicine systemically and get tau reduction. We're definitely interested in these genetic cell populations, but our experience actually with FTD-GRN is that initially it was very, very difficult to enroll, these more rare cases. And the tauopathies are not unlike FTD. And in fact, there are FTD sort of tauopathies. So sort of rare, hard to diagnose initially, and then you have to genetically diagnose them. So we're interested in that. I just don't think that it's the fastest path to really proving the platform and then subsequently driving for the first approval. In terms of what to look for, we're essentially looking for tau reduction in CSF, not really hitting a target. The genetic data in mice suggests that the haploinsufficiency loss of one copy of tau is highly protective in the Alzheimer's models. And so you could imagine somewhere between 25% and 70% reduction. But I think that fundamentally, what's actually very interesting about the dataset that has recently been presented is that there was a non-dose proportional reduction in tau. So as you go up 2x in dose and 4x in dose, there's only really about a 20% difference in overall tau reduction in that range. And yet there is sort of a different, obviously, AE profile for those higher doses. And so we feel like the CSF data for intrathecal is apples to oranges, but we look at our own data and our own preclinical data and what's sort of been published to set the tone that we really need to see CSF tau reduction as really a proof of the platform. I don't know, Peter, if you want to add anything there.

No, I think you covered it well. I think we're really focused on executing the program, generating the data that Ryan alluded to, and I think other potential indications is something that we can consider in the future.

We will take our next question. The question comes from the line of Ananda Ghosh from H.C. Wainwright & Co.

Congrats on the great quarter. I have actually two questions. In 2025 CTAD, Biogen presented some data using this zirconium dye where they tried to show their intrathecal, the tau modality, how well they distribute throughout the CNS. And you would see that it's a very poor distribution. Now, the question is that despite such a poor distribution, they do see, as you rightly mentioned, that they can move the clinical endpoints at least in a trend way. And so just wanted to get your thoughts on that aspect of it, that how did -- even with such a poor distribution, how can they see some efficacy with respect to both as a biomarker as well as from clinical endpoints? The second question is, there are also these ideas that, and especially from the donanemab trial, that in patients where you have low tau, there you can see those patients are much more amenable to either both anti-Abeta therapy or anti-tau therapy. So as you are thinking about your Phase Ib, is there a way to enrich patients with low tau in your Phase Ib trial population?

Yes, good questions. I'll try to be brief because we have a number of other questions. I think let's look at additional data that hopefully will be presented on BIIB080 to really understand that dynamic. But you're right. There's enormous heterogeneity. There is. And we've published this already in monkey. And so I think that the positive clinical signal across three different endpoints, ADAS-Cog, CDR Sum of Boxes, and MMSE, is really encouraging. And there are some patients that get really decent biodistribution in the particular study that you're referencing. And so I think that -- that's, I think, the main point.

We will take our next question, and the question comes from Joseph Thome from TD Cowen.

Hi, this is Jacob on the line for Joe. Kind of going along with patient enrichment or kind of patient selection, I was curious how you're thinking about some of these co-pathologies that often come along with AD, like alpha-synuclein and TDP-43 and how those could play a role in patient selection or kind of pre-specified subgroup analyses. And then just additionally, looking farther ahead, how you're thinking about what a bar might look like given some of the currently approved amyloid beta therapies on things like CDR-SB.

So I'll address the first one on the co-pathologies. And then, Peter, why don't you address the bar on -- I'm assuming what you're asking is the bar for approval or for, like, clear differentiation with the anti-amyloids. So I think with co-pathologies, the two, obviously, the most common co-pathology, which is, actually, in some ways, defines Alzheimer's, is Abeta plaque or amyloid plaque and tau neurofibrillary tangles. I think what you're referencing is also, it's been shown like, you see Lewy bodies and other sort of vascular pathologies. The challenge with those type of co-pathologies, there aren't imaging biomarkers yet that allow you to look at the level of, let's say, Lewy bodies that can also be observed with amyloid plaque or tau, and so at this point, our focus is on the two most common and prevalent. I'll add that there's, by the way, a fourth one, TDP-43 pathology, which I think represents roughly 30% of Alzheimer's. All of this being said, amyloid appears to be at the top of the cascade. So amyloid eventually drives the formation of tau pathology, and then tau pathology correlates with cognitive decline. And so we're keen on targeting both amyloid and tau. And I think as biomarkers improve, you'll be able to see -- hopefully we'll be able to identify patients that have other pathologies, which, in some ways, is probably complicating the clinical picture. With that in mind, I'll hand it to Peter to talk about what the bar might be for anti-amyloid approvals.

Yes, thank you, Ryan, and thanks for the question. I mean, I think I'll start by saying this is a very exciting time for Alzheimer's, and coming off the vast amount of data that was presented at AAIC, there's a lot that's being learned about different aspects of the patient populations. I think it's premature to say exactly where we're headed, but I do think that with all the data that's being generated and understanding both progression rates and response to different types of therapies, this is something that we'll definitely pay attention to both with targeting tau as well as with amyloid. I think from an amyloid perspective, we're very excited about the differentiating potential of DNL921. I think our goal is really to generate proof of concept with that first.

We will take our next question. The question comes from the line of Laura Chico from Wedbush.

Congrats, guys, on the quarter. Maybe one for Katie. I'm wondering if you could expand a little bit further, what capacity do the centers have for switch patients? Just wondering if there's any additional considerations that the physicians need to work through for a switch patient versus perhaps somebody that's new to treatment. You indicated in the webinars that you encompassed or encountered over 100 families or about greater than 25% of the eligible patient pool. So I guess I'm just trying to understand if there's any capacity considerations that we should be making as you're progressing here.

Thank you, Laura. That's a great question, and you're exactly right. There are definitely dynamics, both for the newly diagnosed patients and for the switchers. As you remember, the majority of the idursulfase patients are treated at home. And so these are patients coming back to the clinic. And definitely, infusion scheduling is one of the steps that families have to work through. And so with all the families coming back, there is a sequencing depending on the center, depending on if you're at a center that has specialized centers of care, they are going to have a little bit more capacity than other centers. So that is the dynamic that has significant variability that we're going to be working through. But what we've seen is the sense of urgency and the motivation from families have been very strong.

We will take our next question. And the question comes from Marc Goodman from Leerink Partners.

Hi, good evening, everyone. This is Alyssa on for Marc. I was wondering if you could help us think about the average price per patient for AVLAYAH, given the weight-based dosing and titration schedule? Since many patients will initially be up-titrating over the course of the first few months, when should we expect pricing to reach a steady-state run rate? And then secondly, on the manufacturing facility in Salt Lake City, do you have any plans to use that facility to manufacture commercial batches of AVLAYAH, or will that be used only for clinical manufacturing?

Great, thanks. I'll address the pricing question. So at maintenance for a 10-kilogram patient, it's roughly around $270,000 per year, and up to a 30-kg patient, which is about $800,000 per year. And as you described, there is a dose escalation described in our label. And what's been provided to physicians, and this is ultimately a physician's decision on how quickly to do the escalation, is that we expected the escalation to be about four weeks at each step before they get to maintenance dose. And there may be variability as patients dose escalate, depending, and it'll be very individualized and physician-guided.

And then I'll answer the second question. We do not have plans to manufacture in Salt Lake City for AVLAYAH. In fact, our plans are to go to larger scale with Lonza and onshore to Portsmouth to go to 6,000 liter.

We will take our next question. The question comes from Michael DiFiore from Evercore ISI.

Congrats on the progress so far. Two from me. Now that you have a full commercial quarter under your belt at this juncture, could you give us the number of patients on drug as well as the number of cumulative start forms, and if not, when might you be able to share this information? And the second question is, as patients switch off of ELAPRASE, have you seen any competitive response from Takeda, either on contracting pricing or account-level pushback for that matter?

Okay, let me see if I can address all the questions. So your first question was on start forms and patient numbers. So at this stage, we intentionally focused on communicating the overall trajectory rather than providing individual operational metrics. So I shared earlier why we have confidence, is we're seeing all of the progress with the various stakeholders within the ecosystems, with physicians being highly aware and engaged, families highly engaged and driving towards switching, as well as centers working through reimbursement and payer access. With regard to start forms, we also feel that at this point, start forms are not predictive of revenue, and it's because each individual patient journey is very unique. And the time, depending on what their insurance plan is, which centers they're getting treatment at, that is highly variable at this point. And we haven't provided guidance as to when in the future we may provide patient or start form information. For now, we really want our investors to rely on the revenue guidance because we feel like it's the most clear quantitative indicator of how our launch is progressing. Did you have one more question?

I did. Just regarding the switch off from ELAPRASE. Any competitive response from Takeda that you've seen?

So in terms of competitive response, you know, we've been very much focused on making sure that the clinical value and the biomarker data is well recognized. So I think we haven't seen a ton of pushback because it's very well recognized that ELAPRASE does not address neurologic manifestations. And we haven't seen the other activities that you've described, which is contracting, and I think you've described another one, but we haven't seen any activity related to that.

We will take our next question. The next question comes from Myles Minter from William Blair.

Hey, team, this is John on for Myles. Congrats on a strong first launch quarter. So for AVLAYAH, wondering if any of your commercial patients have previously been clinical trial participants, and wondering if you can give us any color on the cadence you expect for clinical trial participants to transition over to commercial therapy?

So the majority of patients that have started today are not actually our clinical trial patients. We expect all of our clinical trial patients to be able to convert to commercial patients by the end of this year.

We will take our next question. And the question comes from David Hoang from Deutsche Bank.

Hi, this is Rosemary on for David. Congrats on the quarter. I was just wondering how you might be thinking about the competitive landscape evolution for AVLAYAH, as there's some competitor resubmission happening this year and JCR Pharma's IZCARGO maybe having a global Phase III readout next year.

Thanks for that question. Of course, we're always very encouraged to see continued innovation in Hunter syndrome, but we are very confident in our biomarker and clinical evidence. As you know, we've shown normalization for the first time in this disease area for key disease biomarkers, and our focus is on executing on our launch and driving the momentum that we're seeing today.

Your next question comes from the line of Charles Moore from Baird.

Congrats on a great quarter. Just kind of following up on the last question, I recall your analogous trial for AVLAYAH included patients who had been treated with gene therapy. So looking toward the DNL126 trial, are there any patients there who have been treated with the gene therapy previously, considering that there's the possibility for a Sanfilippo gene therapy to be approved ahead of DNL126?

Peter, maybe I'll have you take that. I'll just make one comment. We haven't gone into great detail on the DNL126 patient population, but, obviously, presented new data earlier this year at WORLD and very excited about that program, but great question around the competitive landscape. Peter, do you want to add anything to that? I just don't think we've gone into much detail on the nature of those patients.

Yes, thanks, Ryan. I would just say we haven't presented the baseline characteristics of the full cohort yet, but we do intend to present the data early next year at the WORLDSymposium.

And I'll just add, great memory. We did have both gene therapy and cell therapy patients in the Hunter dataset, and where we saw robust normalization in those patients' data in terms of CSF heparan sulfate. But I think the key here is really focused on the sustained biomarker response across our ETV franchise.

This concludes today's question-and-answer session. I'll now hand the call back to Ryan Watts for closing remarks.

We thank everyone for joining the call today. We're very excited about where we are and look forward to continued momentum. Thanks, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.