Denali Therapeutics: Two Shots On Goal For Parkinson’s Disease Treatment (NASDAQ:DNLI)

Denali Therapeutics Inc. (NASDAQ:DNLI) is a great speculative biotech play to look into. The reason why I state that is because this past year it has initiated two studies using a drug known as BIIB122 (formerly DNL151) to treat patients with Parkinson’s Disease.

Why I believe it can offer investors some added value is because of the two shots on goal for this indication. That is, one phase 3 study is focused on treating Parkinson’s Disease patients with a confirmed pathogenic mutation in the leucine-rich repeat kinase 2 (LRRK2) gene. The other phase 2b study is focused on early-stage Parkinson’s Disease, regardless of having a pathogenic mutation in LRRK2 gene. Another item to consider is that Denali already has the help of Biogen (BIIB) as a partner to advance and market this drug should it ultimately reach regulatory approval.

BIIB122 To Target Underlying Biological Pathway Of Parkinson’s Disease

As I noted in the beginning, both Denali and its partner Biogen are advancing BIIB122 for the treatment of patients with Parkinson’s Disease. The partnership agreement between both companies was formed back in 2020. Under the terms of the deal, both would co-develop and co-commercialize this drug in U.S. and China. On the other hand, Biogen would fully commercialize this drug for this indication in all other markets. It is expected that the global Parkinson’s Disease Market will reach a value of $6.70 billion by 2030.

I noted that there were two studies which were initiated during this year. The phase 2b LUMA study was initiated to use BIIB122 to treat early-stage Parkinson’s Disease (PD) patients. This trial will enroll about 640 patients who are between the ages of 30 and 80. These patients will be randomized to receive either oral BIIB122 or placebo once daily. The primary endpoint is time to confirmed worsening in Movement Disorder Society Unified Parkinson’s Disease Rating Scale ((MDS-UPDRS)) parts II and II combined score over the treatment duration. One key thing I want to point out about this study is that even though it is using LRRK2 drug BIIB122, it is targeting the entire early-stage Parkinson’s Disease population. On the other hand, the other phase 3 LIGHTHOUSE study I will talk about below only deals with PD patients who have a pathogenic mutation of LRRK2. Regardless, the point here is that Denali and Biogen have two shots on goal for PD patients.

The other phase 3 LIGHTHOUSE study was just initiated in October of 2022. It is still going to use BIIB122 to treat patients with PD, but again it will be those who have the pathogenic mutation of LRRK2. How is it possible that BIIB122 can be used as an LRRK2 target drug for both of these populations? It makes sense on why it would be used to target these patients with such a mutation, but how can it also be used for the entire PD population. It is because the drug was developed to go after the lysosomal system, which is important in processing proteins and lipids in brain cells. Thus, a dysfunction of the lysosomal system is believed to drive neurodegenerative disorders such as Parkinson’s Disease.

BIIB122 has the potential to restore lysosomal dysfunction and thus potentially slow the progression of PD. As you can see, both these approaches are why Denali and Biogen are able to both go after the LRRK2 pathogenic mutation found in PD patients and also target the entire early-stage Parkinson’s Disease (PD) patients. The bottom-line is that targeting LRRK2 has potential to target underlying biology of this neurodegenerative disorder. The primary endpoint for this study is also going to be time to confirmed worsening, as assessed using the Movement Disorder Society-Sponsored Revision of the Unified Parkinson’s Disease Rating Scale ((MDS-UPDRS)) over the treatment period up to 180 weeks.

Financials

According to the 10-Q SEC Filing, Denali Therapeutics had cash, cash equivalents and marketable securities of approximately $1.16 billion as of June 30, 2022. Based on this cash on hand, it stated that it would have enough cash to fund its operations for at least 12 months following the filing date of this 10-Q SEC Filing which was on August 8, 2022. Of course, biotechs never wait until the very end to raise cash. As such, it enacted a public offering where it sold a total of 11,933,962 shares of its common stock at a price of $26.50 per share. This includes the exercise in full by the underwriters of their option to purchase additional shares. Total gross proceeds from the offering, before deducting expenses, was $316 million. With this cash raise being completed just a few days ago, it should have no need to raise cash until late 2023 in my opinion.

Risks To Business

There are several risks that investors should be aware of before investing in this biotech. The first risk to consider would be with respect to the advancement of BIIB122 for the treatment of patients with Parkinson’s Disease. There is no guarantee that either of the two studies noted above, LUMA or LIGHTHOUSE will end up being successful.

However, the good news is that each of these studies is looking at different approaches. The phase 2b LUMA study is targeting all early-stage Parkinson’s Disease patients regardless of the pathogenic mutation of LRRK2. Whereas, the LIGHTHOUSE study is targeting these PD patients with pathogenic mutation of LRRK2.

A second risk to consider would be with respect to the financial situation. The recent cash raise did extend its runway, however, I believe that towards the end of 2023 Denali may have to consider raising funds again. Despite the program dealing with BIIB122 being a risk, there are many other candidates in the pipeline. Especially, a few which are in late-stage clinical development. For instance, it initiated recruitment of a phase 2/3 study known as COMPASS, which is expected to enroll up to 54 patients with Hunter Syndrome ((MPS II)). This study, along with an ongoing phase 1/2 study, could allow potential for regulatory approval of DNL310. It is planning to initiate a late-stage study for DNL343 for the treatment of patients with amyotrophic lateral sclerosis (ALS) as well. The reason why is because of phase 1 data and ongoing blinded phase 1b data which showed clinical activity.

Conclusion

The final conclusion is that Denali Therapeutics is a great speculative biotech play to look into. That’s because, as I noted in the beginning above, it has two shots on goal for targeting PD patients using BIIB122. There is one phase 2b study targeting early-stage PD patients (regardless of mutation) and then a phase 3 study which is just focused on targeting PD patients with a pathogenic LRRK2 mutation.

This drug is being advanced in collaboration with Biogen, which is good that it has a partner to help fund it and commercialize it. However, this isn’t the only partnership that it has. It has also been able to develop additional partner-led program with the use of DNL788, now known as SAR443820. Back in May of 2022, Denali and its partner Sanofi (SNY) initiated dosing of ALS patients in the phase 2 HIMALAYA study using SAR443820.

There is also a plan to explore the use of this very drug in a phase 2 study treating patients with Multiple Sclerosis (MS). While a second drug based on this partnership is also being advanced, which is SAR443122. This drug is a RIPK1 inhibitor which will be explored in a few programs. One phase 2 study using SAR443122 in cutaneous lupus erythematosus is ongoing and then another phase 2 study targeting patients with Ulcerative Colitis is being planned.

With two shots on goal with respect to BIIB122 for Parkinson’s Disease, plus a few partnerships already established, these are the reasons why I believe that Denali Therapeutics is a great speculative biotech play to look into.

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