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Denali Therapeutics Stock Crashes; Why Investors Are Questioning Its Entire Pipeline

Denali Therapeutics (DNLI) unveiled promising test results in Hunter syndrome, but DNLI stock tanked on Monday as investors questioned the viability of the biotech’s broader platform.




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In an interim analysis, Denali’s drug had a positive impact on biomarkers specifically related to Hunter syndrome, a disease in which the body can’t properly dispose of damaging molecules.

But Denali reported “high variability” in levels of neurofilament, a highly scrutinized biomarker tied to Denali’s broader platform. So, doubts regarding neurofilament could cast a pall over Denali’s entire drug platform.

“While the exact dynamics of neurofilament during early development are poorly understood, more data will be required to refine whether neurofilament will be a good biomarker for (Hunter syndrome) and other neurodegenerative diseases,” BTIG analyst Thomas Shrader said in a note to clients.

On the stock market today, DNLI stock crashed 15.3% to 54.14.

DNLI Stock Crashes On Mixed Results

Denali evaluated its treatment in 15 patients with Hunter syndrome. It measured the level of heparin sulfate, a biomarker related to Hunter syndrome. In all patients, the level normalized. Twelve patients hit normal heparin sulfate levels by week seven, a speed Denali deemed “rapid.”

The biotech company says this suggests its treatment is successfully bypassing the blood-brain barrier. The blood-brain barrier is the body’s mechanism for preventing bad actors from entering the brain, but it also does a good job of preventing medicine from doing the same.

Further, 10 out of 15 patients had normal GM3 ganglioside, another marker associated with Hunter syndrome.

But DNLI stock tumbled on the variable neurofilament biomarker. Neurofilament is a protein that shows up in the blood and cerebrospinal fluid when cells are injured. Denali is hoping to treat similar diseases by looking for the neurofilament biomarker.

Wedbush analyst Laura Chico says the varied neurofilament reading could be due to the low numbers of patients. She has an outperform rating and 73 price target on DNLI stock.

“While data tied to neurofilament exhibited variability, we think this is to be expected given the limited size of the (groups) and look to other biomarkers as more informative assessments on treatment effects,” she said in a report to clients.

Safety Data Are ‘Reassuring’

DNLI stock touched an eight-month low.

But BTIG’s Shrader called the heparin sulfate results “terrific” and the safety data “reassuring.” The most common side effects related to treatment included infusion-related reactions, which occurred in 71% of patients. One patient had a severe reaction.

“However, we found it reassuring that a patient had infusion-related reaction severe adverse events after two different doses — but remained on study,” he said.

Shrader has a neutral rating on DNLI stock.

DNLI stock has a strong Relative Strength Rating of 90 out of a best-possible 99, according to IBD Digital. The RS Rating measures a stock’s 12-month performance.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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