Alector: Potential In Neurology & Cancer Treatments (NASDAQ:ALEC)

Alector, Inc. (NASDAQ:ALEC) is a great speculative biotech play to look into. That’s because it is using a drug known as AL001 for the treatment of patients with frontotemporal dementia with progranulin mutation (FTD-GRN) in an ongoing phase 3 study. This is a global late-stage study known as INFRONT-3, which is currently enrolling both at-risk and symptomatic patients with FTD-GRN. Another attempt at using AL001 is for FTD patients, but those who specifically harbor the C9orf72 mutation. As such, it has a phase 2 study targeting both FTD-GRN and FTD-C9orf72 patients. Other indications for which AL001 is being developed for are Alzheimer’s Disease (AD) and Parkinson’s Disease (PD). Most importantly, this biotech is not handling the AL001 program alone. It has already established a partnership for the use of AL001 for all these indications with GSK Plc (GSK). Then, it has 3 other drugs in the pipeline for AD which have been partnered with AbbVie (ABBV). Lastly, it has an oncology portfolio in which it is advancing a few drugs on. The most notable one would be AL008, which is being developed for the treatment of patients with solid tumors. I have high hopes for this program because it targets the CD47-SIRP-alpha pathway. As I have written on Trillium Therapeutics and Forty Seven Inc. in the past, such biotechs specifically targeting CD47 have ultimately been acquired. These cancer drugs work well in blood cancers, but it remains to be seen how they perform in solid tumors instead. With a large pipeline with multiple partnerships, plus a major phase 3 trial readout for AL001 in 2023, I believe it is a great speculative biotech play to look into.

AL001 For Treatment Of Patients with Frontotemporal Dementia

The main drug in the pipeline to go over involves the use of AL001, which is being developed to treat patients with frontotemporal dementia (FTD) with progranulin mutation (FTD-GRN). Frontotemporal dementia deals with a group of brain disorders that primarily affect the frontal and temporal lobes of the brain. There are multiple areas that are affected like behavior and personality. The biggest issue of all with this disease is that the lobes shrink (also known as atrophy). FTD often occurs between the ages of 40 and 65, but can happen later on as well. Another major thing to note is that it can happen in about 10% to 20% of dementia cases. There are several symptoms that are associated with this disease and they are:

• Lack of judgement
• Inappropriate behavior
• Speech problems
• Muscle weakness
• Walking issues

While more treatment options are needed for these patients, it’s also important to highlight that it is a huge market opportunity. That’s because there is a split up of the FTD population that can be targeted using AL001. These are dealing with U.S. and Europe patients and they are:

• 15,000 symptomatic patients
• 120,000 at risk patients

This is further broken down depending upon the genetic mutation of FTD for these U.S. and European patients. For instance, about 24,000 patients exist in these territories with FTD and GRN mutation. In essence, FTD-GRN represents about 5% to 10% of all FTD patients.

This program is in excellent shape, because it is currently exploring the use of the monoclonal antibody AL001 in a phase 3 trial known as INFRONT-3. This study expects to recruit up to 180 people who have FTD-GRN. The first patient was dosed back in July of 2020. It is very important that I note that this late-stage study is recruiting such FTD-GRN mutation patients who are both symptomatic and pre-symptomatic. Patients in the study will be randomized to receive either AL001 or placebo intravenously once every 4 weeks. There will be an option if they want to move to an open-label study to continue to receive treatment with Alector’s drug as well. The primary endpoint of this study is something known as global CDR plus NACC FTLD score is calculated in total based on individual ratings of the eight domains. In order to understand the scoring system, it’s important to highlight the CDR score meaning. They are as follows:

• Normal (score of 0)
• Questionable or minimally impaired (score of 0.5)
• Mildly but definitely impaired (score of 1)
• Moderately impaired (score of 2)
• Severely impaired (score of 3)

The reason why this score exists is for clinicians to understand disease severity. This score looks at multiple aspects such as: Language, behavior, memory, judgement and functional activities. Secondary endpoints will be safety and biomarkers to note for the GRN mutation.

Alector was able to establish a partnership with GSK for the use of AL001 and AL101 in treating patients with neurodegenerative diseases. GSK was to pay Alector an upfront payment of about $700 million and then potential milestone payments of about $1.5 billion. The split up is as follows:

• Alector will focus on developing AL001 in certain orphan neurodegenerative diseases
• GSK will focus on developing AL101 for Alzheimer’s and Parkinson’s Disease

Both companies will end up co-commercializing and sharing profits in the United States, while GSK will end up retaining exclusive commercialization rights across the globe. The use of AL001 is also being explored for the treatment of patients with Frontotemporal dementia (FTD) with the C9orf72 mutation. The use of this drug is also being explored in the phase 2 study known as INFRONT-2. The use of AL001 is going after this different mutation, which is still targeting patients with FTD. Data from the INFRONT-2 study showed that FTD-C9orf72 patients given AL001 had seen a trend towards an annual delay in disease progression of about 54% relative to the matched control cohort. In addition, this treatment resulted in a two- to threefold increase in progranulin above physiological levels. Not only does this show that AL001 is active for this patient population, but it may be appropriate for other neurodegenerative diseases as well.

Financials

According to the 10-Q SEC filing, Alector had cash, cash equivalents and marketable securities of $868.6 million as of March 31, 2022. The company has always maintained a good amount of cash on hand to fund its pipeline. However, in January of 2022, it received a $200 million payment from its partner GSK which was a huge boost. It believes that the current cash on hand is enough to fund its operations into mid-2024. I don’t believe it will need to raise cash any time soon. Especially, since it has established partnerships for a majority of its pipeline. If it does need to raise cash again, I don’t believe it will need to do so until mid-2023.

Risks To Business

There are a few risks that investors should be aware of before investing in this speculative biotech. The first of which involves the use of AL001 for the treatment of patients with FTD-GRN and FTD-C9orf72. The initial 12-month data looks good, but there is no guarantee that the ongoing phase 3 INFRONT-3 study will achieve the same clinical success. What also matters is that GSK is a partner for AL001 involving both of these target indications, plus several others. This means that if this big pharma is not satisfied with the clinical data released from the phase 3 study, it may choose to terminate the partnership. As such, these are huge risk factors for the company. The good news is that it has several other drugs in the pipeline, most of which have also already been partnered with. With respect to the financial risk, I don’t believe it will need to raise cash until mid-2023. However, the markets for the time being are not in great shape. As such, it’s possible that most biotechs won’t wait until next year to raise cash. Especially, if the markets start to crash even further. Having said that, it may choose to raise cash earlier than anticipated.

Conclusion

The final conclusion is that Alector is a great speculative biotech play to look into. That’s because it has several shots on goal, plus the fact that it has already established several partnerships for many of its drugs. I think it has done well to show proof of concept for AL001 in being able to show clinical activity in patients with FTD-GRN and FTD-C9orf72 at the 12-month time point. The major downside is that results from the phase 3 INFRONT-3 study are not expected to be released until 2023. The pipeline is very diverse for Alector and as such, I believe it has a good shot at achieving clinical success for one of its drugs. One drug that I’m pretty confident on would be AL008, which is the company’s dual function SIRP-alpha inhibitor and Fc gamma receptor activator antibody. With this targeting the CD47 pathway, it has huge potential in possibly being able to treat patients with solid tumors. Alector has already established a regional licensing agreement with Innovent to develop and commercialize AL008 for oncology indications in China. Based on initial proof of concept for AL001 in FTD indications, plus an expanding pipeline full of partnerships, these are the reasons why I believe Alector is a great speculative biotech play to look into.