It has been about a month since the last earnings report for Denali Therapeutics Inc. (DNLI Quick QuoteDNLI - Free Report) . Shares have added about 15.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Denali Therapeutics 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 Q1 Earnings Miss, Pipeline Progress in Focus

Denali incurred a first-quarter 2024 loss of 68 cents per share, wider than the Zacks Consensus Estimate of a loss of 67 cents but narrower than the year-ago quarter’s loss of 80 cents.

The year-over-year narrower loss was due to a decline in operating expenses.

In the absence of a marketed product, the company only recognizes revenues from ongoing collaborations in the top line. Denali did not generate any collaboration revenues in the reported quarter. The Zacks Consensus Estimate for revenues was pegged at $21 million. In the year-ago quarter, the company recorded collaboration revenues of $35 million.

Quarter in Detail

The bottom line also benefited from a non-cash gain of $14.5 million due to the divestiture of small molecule programs.

Research and development expenses fell 17% to $107 million in the quarter. The decrease was mainly attributable to a decrease in ETV:IDS program external expenses year.

General and administrative expenses declined 7% to $25.2 million due to a drop in professional services, facilities and other corporate costs.

As of Mar 31, 2024, cash, cash equivalents, and marketable securities were approximately $1.43 billion. In February, Denali announced the completion of a private investment in public equity financing with gross proceeds of $500 million.

Pipeline Updates

Denali has two wholly-owned, late-stage development programs — DNL310 for (Hunter syndrome) and DNL343 (eIF2B activator) — for amyotrophic lateral sclerosis (ALS).

DNL310 or tividenofusp alfa is an Enzyme Transport Vehicle (ETV)-enabled, iduronate-2-sulfatase (IDS) replacement therapy in development for MPS II (Hunter syndrome).  In February, DNLI presented new positive data from the ongoing phase I/II study of tividenofusp alfa in MPS II.

Denali is continuing dialogue with the Center for Drug Evaluation and Research (“CDER”) division of the FDA for the path ahead for tividenofusp alfa. Based on the same, Denali believes the division may be open to discussing an accelerated path for tividenofusp alfa. Denali looks forward to continuing the productive dialogue with CDER. Concurrently, the company is conducting the global phase II/III COMPASS study, which is expected to complete enrollment in 2024.

DNL343, an eIF2B activator, is being evaluated in a phase II/III HEALEY study to treat ALS. Enrollment is complete in Regimen G of the study.

Denali and Biogen are jointly evaluating an LRRK2 inhibitor BIIB122/DNL151 in development for the treatment of Parkinson’s disease (PD).

In February, Denali executed a funding agreement with a third party related to a global phase IIa study of BIIB122/DNL151. Denali plans to operationalize the study to evaluate safety and biomarkers associated with BIIB122 in participants with PD and confirmed pathogenic variants of LRRK2. The phase IIa study will be initiated in 2024.

Biogen is conducting the ongoing global phase IIb LUMA study of BIIB122 in participants with early-stage PD.

Denali and partner Sanofi are co-developing SAR443820/DNL788. In February, Sanofi 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.

Sanofi continues to evaluate SAR443820 in another phase II study for the treatment of multiple sclerosis.

Denali and partner Sanofi are also developing SAR443122/DNL758 (eclitasertib), a peripheralRIPK1 inhibitor, for treating ulcerative colitis (UC). Sanofi is currently conducting a phase II study of the UC treatment candidate.



 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Denali Therapeutics has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

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

Outlook

Denali Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Denali Therapeutics belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Rocket Pharmaceuticals (RCKT Quick QuoteRCKT - Free Report) , has gained 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Rocket Pharmaceuticals reported revenues of $0 million in the last reported quarter, representing a year-over-year change of