Denali Q4 Earnings Beat Estimates, Hunter Syndrome Drug in Focus

Denali Therapeutics DNLI reported a fourth-quarter 2024 loss of 67 cents per share, narrower than the Zacks Consensus Estimate of a loss of 83 cents. The company reported a loss of 86 cents in the year-ago quarter.

The loss per share improved year over year due to a decline in total operating expenses and 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 $26 million.

Shares of DNLI have lost 8% in the past year compared with the industry’s 8% decline.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Highlights of DNLI’s Q4 Results

Research and development expenses decreased 7.4% to $99.8 million. The decrease was primarily due to a decline in personnel-related expenses, including a decrease in salary and stock-based compensation expenses, other research and development costs, as well as a decline in small molecule programs and other external expenses, primarily driven by the divestiture of its preclinical small molecule programs in March 2024.

General and administrative expenses increased 21.3% to $30 million due to activities related to the planned submission of a biologics license application (BLA) for tividenofusp alfa in early 2025 and preparations for a commercial launch in late 2025 or early 2026.

As of Dec. 31, 2024, cash, cash equivalents, and marketable securities amounted to approximately $1.19 billion.

DNLI Makes Encouraging Pipeline Progress

Denali remains on track to submit a BLA for tividenofusp alfa or DNL310 for the treatment of MPS II (Hunter syndrome), under the accelerated approval pathway in early 2025, and is preparing for a commercial launch in late 2025 or early 2026.

In January 2025, the FDA granted Breakthrough Therapy designation to tividenofusp alfa, an Enzyme Transport Vehicle (ETV)-enabled iduronate-2-sulfatase (IDS) replacement therapy.

Denali continues to enroll patients in the global phase II/III COMPASS study, which aims to support global regulatory approvals. In January 2025, it expanded target enrollment for neuronopathic participants (Cohort A) to 42 patients, reflecting steady progress in recruitment and data collection.

DNL343, an eIF2B activator, is being evaluated in a phase II/III HEALEY study to treat amyotrophic lateral sclerosis (ALS). However, last month, Denali announced that the primary endpoint was not met in the HEALEY ALS platform trial and additional data is anticipated later in 2025.

Denali is also evaluating DNL126 for the treatment of Sanfilippo syndrome type A (MPS IIIA). It plans to engage with the FDA to align on a pathway for accelerated approval of DNL126 based on initial positive phase I/II results demonstrating proof of concept for Sanfilippo syndrome.

The phase I/II study continues to enroll participants with Sanfilippo syndrome.

DNL126 has received FDA Orphan Disease designation and Fast Track status.

The candidate has also been selected for the FDA’s Support for clinical Trials Advancing Rare disease Therapeutics program. This pilot initiative aims to accelerate the development of rare disease treatments.

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

Biogen is leading the global phase IIb LUMA study, evaluating BIIB122's impact on disease progression in early-stage PD, with enrollment of approximately 640 participants. The study is expected to be completed in 2025. Denali is conducting the phase IIa BEACON study, specifically enrolling participants with LRRK2-associated PD to assess how LRRK2 inhibition may impact this disease. Dosing in BEACON began in December 2024.

Another candidate in DNLI’s pipeline is TAK-594/DNL593. Dosing is ongoing in the phase I/II study of DNL593 in the treatment of progranulin (GRN)-related frontotemporal dementia (FTD-GRN).

Denali and partner Sanofi SNY were co-developing SAR443820/DNL788. However, last year, Sanofi informed Denali that the K2 phase II study evaluating the safety and efficacy of oditrasertib (SAR443820/DNL788) on serumneurofilament 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.

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

Denali Therapeutics Inc. Price, Consensus and EPS Surprise

Denali Therapeutics Inc. price-consensus-eps-surprise-chart | Denali Therapeutics Inc. Quote

Denali’s 2024 Results

The company reported a loss of $2.57 per share, narrower than the Zacks Consensus Estimate of a loss of $2.71. It incurred a loss of $1.06 per share in 2023. The loss increased in 2024 despite a decline in R&D expenses due to absence of revenues.

In 2023, DNLI earned $330.5 million in revenues. DNLI recognized $293.9 million in revenues in April 2023 under the Biogen Collaboration Agreement as a result of Biogen exercising its option to license its ATV:Abeta program.

Our Take on DNLI’s Performance

Denali’s performance in the fourth-quarter and full-year 2024 performance is encouraging. A potential approval of tividenofusp alfa should be a significant boost for DNLI. The company’s sound cash position is a positive and ensures its ability to fund ongoing programs.

Zacks Rank

Denali currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

This article originally published on Zacks Investment Research (zacks.com).

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