8-K: Denali Therapeutics Announces Fourth Quarter and Full Year 2024 Financial Results, Highlights Accelerated Approval Path for MPS II Program

Denali Therapeutics reported its Q4 and full year 2024 financial results, highlighting progress in its ETV programs and a potential accelerated approval for its lead program in MPS II.

Summary

• Denali Therapeutics reported financial results for the fourth quarter and year ended December 31, 2024.
• The company is preparing for a potential accelerated approval for its lead program in MPS II (Hunter syndrome).
• Denali is gearing up for the potential commercial launch of tividenofusp alfa in late 2025 or early 2026.
• The company aims to advance one to two programs to the clinic annually.
• In February 2025, Denali presented Phase 1/2 study results for tividenofusp alfa, showing robust biomarker reductions and improvements in hearing, cognition, and adaptive behavior.
• Denali plans to submit a BLA for tividenofusp alfa under the accelerated approval pathway in early 2025.
• The FDA granted Breakthrough Therapy designation to tividenofusp alfa in January 2025.
• Denali is expanding target enrollment for neuronopathic participants in the Phase 2/3 COMPASS study to 42 patients.
• Following positive Phase 1/2 results for DNL126 in Sanfilippo syndrome Type A, Denali plans to engage with the FDA for accelerated approval.
• Dosing continues in the Phase 1/2 study of DNL593 for GRN-related frontotemporal dementia.
• Topline results from the HEALEY ALS platform trial for DNL343 showed the primary endpoint was not met.
• Biogen is leading the global Phase 2b LUMA study for BIIB122 in Parkinson's disease, with enrollment expected to complete in 2025.
• Denali began dosing in the Phase 2a BEACON study for BIIB122 in LRRK2-associated Parkinson's disease in December 2024.
• Denali expects to advance one to two additional programs to the clinic per year over the next three years across its TV-enabled franchises.
• Cash, cash equivalents, and marketable securities were approximately $1.19 billion as of December 31, 2024.
• Denali anticipates an increase of approximately 10% to 15% in cash operating expenses for 2025 compared to 2024.
• Net losses were $114.8 million and $422.8 million for the quarter and year ended December 31, 2024, respectively.
• There was no collaboration revenue for the year ended December 31, 2024, compared to $330.5 million for the year ended December 31, 2023.
• Total research and development expenses were $99.8 million and $396.4 million for the quarter and year ended December 31, 2024, respectively.
• General and administrative expenses were $30.1 million and $105.4 million for the quarter and year ended December 31, 2024, respectively.
• Denali entered into an equity distribution agreement to offer and sell shares of common stock with aggregate gross proceeds of up to $400 million from time to time.
• Denali terminated its equity distribution agreement, dated February 28, 2022.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While there is progress in clinical programs and a strong cash position, the increased net losses and lack of collaboration revenue temper the positive aspects.

Positives

• Denali is on track for a potential accelerated approval for its lead program in MPS II.
• Tividenofusp alfa showed promising results in Phase 1/2 study, with sustained biomarker reductions and improvements in patient outcomes.
• The FDA granted Breakthrough Therapy designation to tividenofusp alfa, providing enhanced regulatory support.
• Denali has a strong cash position of approximately $1.19 billion as of December 31, 2024.
• Denali is actively advancing prelaunch activities to support tividenofusp alfa and potential future ETV programs.
• Denali plans to engage with the FDA for accelerated approval of DNL126 following positive Phase 1/2 results.
• Denali entered into an equity distribution agreement to offer and sell shares of common stock with aggregate gross proceeds of up to $400 million from time to time.

Negatives

• The primary endpoint was not met in the HEALEY ALS platform trial for DNL343.
• There was no collaboration revenue for the year ended December 31, 2024, compared to $330.5 million in 2023.
• Net losses were $422.8 million for the year ended December 31, 2024, compared to net losses of $145.2 million for the year end December 31, 2023.

Risks

• The success of Denali's programs depends on the development and regulatory approval of its product candidates.
• Clinical trial results may differ from preclinical or early clinical results.
• Denali relies on third parties for the manufacture and supply of its product candidates.
• The company's future operating expenses are expected to increase by 10% to 15% in 2025.
• The company is not obligated to sell, and the sales agents are not obligated to sell, any shares of common stock under the equity distribution agreement.
• No assurance can be given that the Company will sell any shares of common stock under the Agreement, or, if it does, as to the price or amount of shares of common stock that it sells or the dates when such sales will take place.

Future Outlook

Denali expects to advance one to two additional programs to the clinic per year over the next three years across its TV-enabled franchises and is preparing for the potential commercial launch of tividenofusp alfa in late 2025 or early 2026.

Management Comments

• In 2024, we made significant strides across our portfolio, particularly with our Enzyme Transport Vehicle (ETV) programs, achieving a path to a potential accelerated approval for our lead program in MPS II, said Ryan Watts, Ph.D., CEO of Denali.
• In 2025, we will continue expanding our capabilities as we prepare for our first potential product launch of tividenofusp alfa.
• In addition, we are prioritizing opportunities to expand and accelerate our TV portfolio and aim to advance one to two programs to the clinic annually.

Industry Context

Denali's focus on neurodegenerative and lysosomal storage diseases aligns with the growing need for treatments in these areas. The company's Enzyme Transport Vehicle (ETV) technology represents a novel approach to drug delivery across the blood-brain barrier, a significant challenge in treating neurological disorders.

Comparison to Industry Standards

• Denali's approach to targeting neurodegenerative diseases with blood-brain barrier crossing technology is comparable to companies like Biohaven (now part of Pfizer) and Cerevel Therapeutics, which are also developing novel therapies for neurological disorders.
• The accelerated approval pathway for tividenofusp alfa is similar to strategies employed by other biotech companies developing treatments for rare diseases, such as Sarepta Therapeutics and Biomarin Pharmaceutical.
• Denali's cash position of $1.19 billion is relatively strong compared to other biotech companies of similar size, providing financial flexibility for ongoing research and development activities.

Stakeholder Impact

• Shareholders may be impacted by the potential accelerated approval of tividenofusp alfa and the company's financial performance.
• Patients with Hunter syndrome (MPS II) could benefit from the potential commercial availability of tividenofusp alfa.
• Employees are involved in the ongoing clinical trials and pre-launch activities.
• The equity distribution agreement could dilute existing shareholders.

Next Steps

• Denali plans to submit a BLA for tividenofusp alfa under the accelerated approval pathway in early 2025.
• The company will continue to enroll patients in the global Phase 2/3 COMPASS study.
• Denali plans to engage with the FDA to align on a pathway for accelerated approval of DNL126.
• Further analyses are anticipated later in 2025 for DNL343, including neurofilament light (NfL) and other fluid biomarkers, data from pre-specified subgroups, as well as extended findings from the active treatment extension period.
• Biogen is expected to complete enrollment in the global Phase 2b LUMA study for BIIB122 in 2025.
• Denali expects to advance one to two additional programs to the clinic per year over the next three years across its TV-enabled franchises.

Key Dates