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Denali Therapeutics Inc. (DNLI) Up 7.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Denali Therapeutics Inc. (DNLI - Free Report) . Shares have added about 7.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Denali Therapeutics Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Denali’s Q4 Loss Wider Than Expected, Revenues Down

Denali incurred a loss of 62 cents per share in fourth-quarter 2021, wider than the Zacks Consensus Estimate of a loss of 41 cents. In the year-ago quarter, the company reported earnings of $1.91 per share.

Collaboration revenues came in at $12.5 million in the reported quarter, missing the Zacks Consensus Estimate of $38 million and declining from $316.8 million in the year-ago period. The year-over-year decline was primarily owing to a decrease in revenues from the company’s collaboration with Biogen.

Quarter in Detail

Research and development expenses were $67.9 million in the quarter under review compared with $54.7 million in the year-ago period, primarily driven by an increase in personnel-related costs.

General and administrative expenses were $21.8 million, up from $18 million in the year-ago quarter due to an increase in personnel-related costs, including stock-based compensation, primarily due to higher headcount and additional equity award grants.

Cash, cash equivalents and marketable securities were approximately $1.3 billion as of Dec 31, 2021.

Full-Year Results

In 2021, Denali Therapeutics generated revenues of $48.7 million, reflecting a significant year-over-year decline from the year-ago figure of $335.7 million.

In the same period, the company reported a loss of $2.39 per share versus earnings of 63 cents in the year-ago period.

2022 Guidance

Denali anticipates an increase in cash operating expenses by 25-30% for 2022 from the year-ago period.

Recent Updates

Denali is collaborating with Biogen to advance its LRRK2 inhibitor program to address Parkinson’s disease (PD). Both DNLI and Biogen plan to initiate dosing PD patients with their investigational LRRK2 inhibitor, DNL151, in two separate clinical studies in 2022. While the phase IIb LUMA study will evaluate the inhibitor in PD patients without LRRK2 mutations, the phase III LIGHTHOUSE study will evaluate DNL151 in PD patients with LRRK2 mutations. Biogen will lead both the studies.

Denali remains on track to begin dosing patients in phase II/III study evaluating DNL310, an investigational brain-penetrant enzyme replacement therapy, to treat Hunter syndrome in first-half 2022.

The company has also partnered with Sanofi for its two separate receptor-interacting serine/threonine protein kinase 1 ("RIPK1") inhibitor programs to address neurological diseases using central nervous system (CNS)-penetrant RIPK1 inhibitors and peripheral inflammatory diseases using non-CNS penetrant RIPK1 inhibitors.

Sanofi continues to enroll patients in a phase II study of DNL758, a peripherally-restricted small molecule inhibitor of RIPK1, in patients with cutaneous lupus erythematosus (CLE), which has already commenced dosing. Sanofi also plans to evaluate the candidate in a phase II study in ulcerative colitis.

Sanofi also plans to start dosing patients with DNL788, its CNS-penetrant RIPK1 inhibitor, in a phase II HIMALAYA study in first-quarter 2022 to treat ALS. A phase II study is also being planned to evaluate the candidate in multiple sclerosis indication.

Denali also has a collaboration and option agreement with Takeda whereby it granted the latter an option to develop and commercialize certain biologic products that are enabled by Denali’s delivery technology and intended for the treatment of neurodegenerative disorders.

Last November, Takeda exercised its option to the PTV:PGRN program. Takeda will now co-develop and co-commercialize DNL593, an investigational therapy for frontotemporal dementia-granulin. A phase I/II study evaluating the candidate in healthy volunteers is expected to begin in first-quarter 2022.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 23.73% due to these changes.

VGM Scores

Currently, Denali Therapeutics Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Denali Therapeutics Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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