Before discussing this morning's analyst activity, here is some more background on DNLI: Denali is a biotech company focused on neurodegenerative diseases. Those include Alzheimer's disease, Parkinson's disease, amyotrophic lateral sclerosis, or ALS. The brain is the most complex organ in the human body and tacking neurodegenerative diseases has proven very difficult in the medical field. Alzheimers is sort of a ‘holy grail' in biotech because there aren't any therapies on the market that slow the debilitating disease. Alzheimer's is the most expensive disease in America, costing more than cancer and heart disease, according to the Alzheimer's Association.
Denali's pipeline consists of six core and five seed programs. The company's most advanced program targets LRRK2 for the treatment of Parkinson's disease and has a product candidate (DNL201) currently in Phase 1 development. However, FDA placed DNL201 on a partial clinical hold in order to impose an exposure cap in the Phase 1 study based on preclinical toxicity study findings (safety concerns). The company believes the current dose level cap will be sufficient to inhibit LRRK2 50% on average over the dosing period and should effectively normalize LRRK2 kinase activity. Data from the study is expected in the first half of 2018.
Its next most advanced program targets RIPK1 for the treatment of Alzheimer's disease and ALS and currently has a product candidate in IND-enabling studies with a CTA filing planned for early 2018. The company's lead RIPK1 product candidate, DNL747, is a potent, selective and brain penetrant small molecule inhibitor of RIPK1 for Alzheimer's disease and ALS. Denali plans to submit a CTA for DNL747 in early 2018 and initiate a Phase 1 clinical trial in healthy volunteers in the first half of 2018. In addition, the company has four core programs in preclinical development that use proprietary BBB platform technology.
Key Licensing Agreement
On June 17, 2016, DNLI entered into an Exclusive License Agreement with Genentech. The agreement gives us access to Genentech’s preclinical stage LRRK2 small molecule program, which can be used to enhance and further progress its in-house LRRK2 program for Parkinson’s disease. As consideration, it paid an upfront fee of $8.5 million and a technology transfer fee of $1.5 million, both of which are included in research and development expense for the year ended December 31, 2016 as there is no alternative future use of the rights acquired in other research and development projects.
DNLI may owe Genentech milestone payments upon the achievement of certain development, regulatory, and commercial milestones, up to a maximum of $315.0 million in the aggregate, as well as royalties on net sales of licensed products ranging from low to high single-digit percentages, with the exact royalty rate dependent on various factors.
Quiet Period Expiration
So far this morning, there have been at least four analysts to publish new research on DNLI, with the majority of the notes landing on the bullish side. The initiation that stands out the most is JP Morgan's Overweight and $24 price target, representing upside of 54%. Evercore ISI also is very optimistic on its prospects, assigning an Outperform and $23 target, with Morgan Stanley also siding on the bullish side with an Overweight.
Goldman Sachs is leaning more on the cautious side with a Neutral. However, it does have a price target of $19 on the stock, which still represents a 22% gain from current prices. It seems a little odd that Goldman would forecast solid double digit gains for the stock, but, would stick with a more cautious rating.
Overall, though, with the stock down sharply from its opening a few weeks back, the analyst community appears to be positive on the stock and sees strong upside potential from the stock this year.