Denali Therapeutics DNLI has performed well in the past 12 months amid a volatile market. Shares of the company have gained 26.6% against the industry’s decline of 14.3%. The stock has also outperformed the sector and the S&P 500 Index in this time frame.
Denali is developing a broad portfolio of product candidates engineered to cross the blood-brain barrier for the treatment of neurodegenerative and lysosomal storage diseases. The upward price trajectory can be attributed to positive pipeline updates.
DNLI Outperforms Industry, Sector & S&P 500
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DNLI’s Pipeline Promise Potential
Denali recently announced expected milestones for 2025 and its priorities to further advance its portfolio.
The company’s wholly owned program, DNL310 or tividenofusp alfa, is an Enzyme Transport Vehicle-enabled iduronate-2-sulfatase (IDS) replacement therapy in development for MPS II (Hunter syndrome).
Denali stated that it is on track to submit a biologics license application (BLA) for tividenofusp alfa for Hunter syndrome in early 2025 under the accelerated approval pathway. It is gearing up for a launch of tividenofusp alfa in the United States in late 2025 or early 2026. The FDA recently granted the Breakthrough Therapy Designation to the drug for this indication.
DNLI is evaluating DNL126 for Sanfilippo syndrome type A (MPS IIIA). Preliminary data from the ongoing phase I/II study of DNL126 have demonstrated a substantial reduction in cerebrospinal fluid heparan sulfate (CSF HS) levels from baseline, including normalization. Denali will seek alignment with the FDA on a path for accelerated approval based on these encouraging results. The candidate has been selected for the FDA “Support for clinical Trials Advancing Rare disease Therapeutics” (START) program, designed to accelerate the development of rare disease therapeutics.
Denali and partner Biogen BIIB have collaborated to develop and commercialize small molecule inhibitors of LRRK2. Biogen is conducting the global phase IIb LUMA study, which is evaluating the ability of BIIB122 to slow disease progression as compared to placebo in approximately 640 participants with early-stage Parkinson's disease.
Denali recently initiated dosing in a global mid-stage study, BEACON, on BIIB122 (DNL151) in LRRK2-associated Parkinson's disease with the aim to generate biomarker and safety data to inform how LRRK2 inhibition may impact this disease.
Another candidate in DNLI’s deep pipeline is TAK-594/DNL593, which is being evaluated for GRN-related frontotemporal dementia: Data from the ongoing phase I/II study of DNL593 have demonstrated dose-dependent increases in CSF progranulin levels, consistent with robust brain delivery of DNL593, in healthy volunteers. Dosing is ongoing.
Denali also has multiple early-stage clinical and preclinical programs in its pipeline.
DNLI’s Collaborations With Bigwigs: A Positive
Denali has collaborated with Biogen for BIIB122/DNL151 in Parkinson’s disease and with Takeda for TAK-594/DNL593 in FTD-GRN. It has equal commercial rights for both the candidates in the United States.
DNLI is also entitled to receive royalty payments for SAR443122/DNL758. It is licensed to Sanofi SNY and under development for ulcerative colitis.
The influx of cash, either as milestone or royalty payments, bodes well for Denali.
Denali Therapeutics Inc. Price, Consensus and EPS Surprise
Denali Therapeutics Inc. price-consensus-eps-surprise-chart | Denali Therapeutics Inc. Quote
DNLI’s Sound Cash Position
Denali has a sound cash position, which ensures that the company will be able to fund its ongoing pipeline programs. Cash, cash equivalents, and marketable securities totaled approximately $1.28 billion as of Sept. 30, 2024. Denali anticipates its cash runway to extend into 2028.
Recent Pipeline Setbacks: A Concern for DNLI
Though Denali has made encouraging pipeline progress, there have been a few setbacks.
The company recently announced disappointing top-line results from an analysis of Regimen G of the phase II/III HEALEY ALS Platform Trial on pipeline candidate DNL343. The HEALEY platform trial is evaluating eIF2B agonist DNL343 in the treatment of amyotrophic lateral sclerosis (ALS).
Results showed that the study did not meet the primary endpoint of efficacy in slowing disease progression as compared to placebo. The primary endpoint was evaluated as a change in disease severity over time as measured by the ALS Functional Rating Scale-Revised (ALSFRS-R) and survival through week 24. Key secondary endpoints, measuring muscle strength and respiratory function, were also not statistically different between the active and placebo groups at week 24.
Denali and partner Sanofi were co-developing SAR443820/DNL788. However, Sanofi informed Denali that the K2 phase II study evaluating the safety and efficacy of oditrasertib (SAR443820/DNL788) on serum neurofilament light chain levels in participants with multiple sclerosis was discontinued. The decision was taken after the study did not meet the primary and key secondary endpoints.
We remind investors that Sanofi had earlier discontinued the development of SAR443820/DNL788 for the treatment of ALS, based on the results of the phase II HIMALAYA study, which did not meet the primary endpoint.
Conclusion
Large biotech companies are considered safe havens for investors interested in this sector.
A potential approval of tividenofusp alfa should be a significant boost for DNLI. The company’s sound cash position is a positive and ensures DNLI’s ability to fund ongoing programs.
However, pipeline setbacks are a cause of concern. Investors should also wait for the successful commercialization of tividenofusp alfa upon a potential approval.
Denali currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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