Denali Drops 7% In After-Market On Halt Of DNL747 Drug Study

Denali Therapeutics Inc. (DNLI) announced that it is pausing clinical studies of DNL747, its neurological drug candidate for the treatment of Alzheimer’s disease and ALS, sending shares down some 7% in after-market trading on Tuesday.

The stock dropped almost 7% to $23.95 in late market trading after the biotech company said that the decision was made following results from Phase 1b studies of the small molecule RIPK1 inhibitor DNL747 in Alzheimer’s disease and amyotrophic lateral sclerosis (ALS).

The study was conducted in partnership with Sanofi (SNYNF) to develop small molecule inhibitors of the RIPK1 enzyme, a new class of potential therapeutic agents for a range of neurological and inflammatory diseases, including ALS.

The data demonstrated “emerging evidence that higher levels of target inhibition may be required for maximizing efficacy, and challenges to achieving higher doses imposed by molecule-specific toxicity findings with DNL747”.

“Together with our partner Sanofi, we have decided to pause clinical studies with DNL747 and focus our efforts on accelerating development of DNL788, which we believe has superior drug properties and a more rapid path toward proof-of-concept clinical studies in patients in multiple neurological indications,” said Denali CEO Ryan Watts.

RIPK1, receptor-interacting serine/threonine-protein kinase 1, is a critical signaling protein in the TNF receptor pathway, which regulates inflammation and cell death in tissues throughout the body.

Denali reported that data from the completed Phase 1 study with peripherally-restricted RIPK1 inhibitor DNL758 in healthy patients display an encouraging profile, as the molecule appears safe and tolerable at doses tested. Denali partner Sanofi is in charge of the development of DNL758 and is currently planning further clinical studies in multiple indications based on successful Phase 1 data.

Investors have been enthusiastic about Denali, pushing shares up 56% so far this year to trade at $25.71 as of Tuesday’s close.

Earlier this month, five-star analyst Andrew Fein at H.C. Wainwright reiterated a Buy rating on the stock with a $28 price target, saying that Denali’s blood brain pressure barrier (BBB) transport vehicle platform, which leverages receptor-mediated transcytosis (RMT) as a noninvasive strategy for enhancing brain exposure of biotherapeutics, can present a broad future value driver for the company.

Denali scores 5 Buys from Wall Street analysts adding up the Strong Buy consensus for the stock. With an average price target of $27.60, analysts still expect shares to add a moderate 7.3% over the coming 12 months. (See Denali stock analysis on TipRanks).

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