A month has gone by since the last earnings report for Denali Therapeutics Inc. (DNLI). Shares have lost about 21.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Denali Therapeutics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
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.
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.
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 are jointly evaluating an 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 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.
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -25.93% due to these changes.
Currently, Denali Therapeutics has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Denali Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Denali Therapeutics is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Agios Pharmaceuticals (AGIO), a stock from the same industry, has gained 7.1%. The company reported its results for the quarter ended September 2024 more than a month ago.
Agios Pharmaceuticals reported revenues of $8.96 million in the last reported quarter, representing a year-over-year change of +21.1%. EPS of $4.20 for the same period compares with -$1.64 a year ago.
For the current quarter, Agios Pharmaceuticals is expected to post a loss of $1.71 per share, indicating a change of +0.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Agios Pharmaceuticals. Also, the stock has a VGM Score of F.
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