Shares of Denali Therapeutics DNLI rose marginally yesterday after the company reported third-quarter results on Wednesday.

Denali incurred a third-quarter 2024 loss of 63 cents per share, wider than the Zacks Consensus Estimate of a loss of 60 cents. The company reported a loss of 72 cents in the year-ago quarter.

The bottom line improved year over year despite a rise in operating expenses, mainly due to an increase in the number of shares outstanding.

In the absence of a marketed product, the company only recognizes revenues from ongoing collaborations. Denali did not generate collaboration revenues in the reported quarter. The Zacks Consensus Estimate for revenues was pegged at $21 million. In the year-ago quarter, the company recorded collaboration revenues of $1.3 million.

Shares of DNLI have risen 37.9% year to date against the industry’s 2.4% decline.

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Highlights of DNLI’s Q3

Research and development expenses increased 9.5% to $98.2 million in the quarter. The increase was primarily due to rising costs in various clinical stage programs, including ETV:IDS, eIF2B, ETV:SGSH, and LRRK2, reflecting their continued progress in clinical trials.

General and administrative expenses decreased 1.4% to $24.9 million.

As of Sept. 30, 2024, cash, cash equivalents, and marketable securities amounted to approximately $1.28 billion.

In February, Denali announced the completion of a private investment in public equity financing with gross proceeds of $500 million.

Denali has updated its 2024 guidance for cash operating expenses. It now anticipates the metric to increase approximately 5-10% compared to the 2023 level.

DNLI Makes Encouraging Pipeline Progress

Denali has two wholly-owned, late-stage development programs — DNL310 for (Hunter syndrome) and DNL343 (eIF2B activator) — for amyotrophic lateral sclerosis (ALS).

DNL310, or tividenofusp alfa, is an Enzyme Transport Vehicle (ETV)- enabled iduronate-2-sulfatase (IDS) replacement therapy in development for MPS II (Hunter syndrome).

In September, Denali announced that its meeting with the FDA's Center for Drug Evaluation and Research (“CDER”) division to advance DNL310 was successful.

The meeting with CDER outlined a path for Denali to file a biologics license application (BLA) seeking accelerated approval of tividenofusp alfa (DNL310) for the treatment of MPS II and its subsequent conversion to full approval.

Denali agreed with the CDER that cerebrospinal fluid heparan sulfate (CSF HS) is reasonably likely to predict clinical benefit and can be used as a surrogate endpoint to support accelerated approval for tividenofusp alfa in MPS II.

Denali plans to submit the BLA under the accelerated approval pathway in early 2025.

DNL343, an eIF2B activator, is being evaluated in a phase II/III HEALEY study to treat ALS. Enrollment has been completed in Regimen G of the study.

Denali and Biogen BIIB are jointly evaluating a LRRK2 inhibitor BIIB122/DNL151 in development to treat Parkinson’s disease (PD).

Biogen is conducting the ongoing global phase IIb LUMA study of BIIB122 in participants with early-stage Parkinson’s disease.

Denali has initiated the screening of participants for the global phase IIa study to evaluate safety and biomarkers associated with BIIB122 in participants with PD and confirmed pathogenic variants of LRRK2.

Denali and partner Sanofi SNY are co-developing SAR443820/DNL788. Last month, 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.

Meanwhile, Denali and partner Sanofi are also developing SAR443122/DNL758 (eclitasertib), a peripheralRIPK1 inhibitor, for the treatment of ulcerative colitis (UC). Sanofi is currently conducting a phase II study on this candidate.

Denali also has multiple early-stage clinical and preclinical programs in its pipeline.

The FDA has selected its experimental candidate, DNL126, to support clinical trials advancing the rare disease therapeutics (START) Pilot Program. The candidate is an investigational enzyme replacement therapy designed to cross the BBB to potentially treat MPS IIIA (Sanfilippo syndrome type A).

Denali announced that preliminary data from up to 25 weeks of dosing in the ongoing open-label phase I/II study in MPS IIIA participants demonstrate a significant reduction in CSF HS levels from baseline, including normalization. The safety profile supports continued development.

Our Take on DNLI’s Q3 Performance

The pipeline progress has been encouraging, and the cash position is sound. Denali’s pipeline holds potential, and the successful development of any of the candidates should be a significant boost to the company.

DNLI's Zacks Rank and Stock to Consider

Denali currently carries a Zacks Rank #3 (Hold).

A better-ranked stock from the drug/biotech industry is Amicus Therapeutics FOLD, sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, estimates for Amicus Therapeutics’ 2024 earnings per share (EPS) have moved up from 20 to 22 cents. EPS estimates for 2025 have moved north 3 cents to 53 cents during the same period. FOLD’s earnings beat estimates in three of the trailing four quarters and missed the mark once, delivering an average surprise of 27.09%.


 

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