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Denali drug for rare brain disease disappoints investors

Diseases of the brain are notoriously difficult to treat, in large part because of what’s known as the blood-brain barrier. This wall of cells acts like a gatekeeper, allowing essential nutrients into the brain while keeping toxins and harmful microbes out.

Unfortunately for drug developers, the barrier also restricts what medicines are allowed through. Large-molecule drugs like DNL310 can have a particularly hard time getting past.

For Denali, whose research focuses on neurodegenerative diseases, finding a way into the brain is crucial. The company has been trying to address this challenge with a technology that uses engineered antibodies to encourage cells in the barrier to transport drugs to the brain. The promise of this technology, according to Stifel analyst Paul Matteis, is responsible for more than half of Denali’s market valuation.

Denali claims the latest update from the DNL310 study provides further evidence that its technology is working as intended.

The study has three cohorts, with five patients in the first, about 17 in the second and a planned eight in the third. Measuring the levels of those two sugar compounds, known as heparan sulfate and dermatan sulfate, the new data show that cohort A had a 90% average reduction in the former and a 75% average reduction in the latter after 24 weeks of treatment. Among 10 evaluable patients from cohort B, heparan sulfate reductions after 13 weeks were 86% to 92%, while dermatan sulfate reductions were 62% to 76%.

Denali noted how most patients experienced a rapid response to treatment, which suggests DNL310 is crossing the blood-brain barrier and affecting the tissues of the central nervous system.

But while those updates were viewed positive, the neurofilament data missed the mark, according to some analysts. “At best, they are uninterpretable,” wrote Matteis in a note to clients, adding that they will likely be discouraging to some investors, since neurofilament “is viewed as a more objective way to prove” the sugar compound levels in the cerobrospinal fluid can translate to a benefit in the brain.

Schimmer, too, wrote that the neurofilament data were not what his team was hoping for. Neurofilament levels increased roughly 35% over the six month period, “suggesting ongoing neuronal cell death despite treatment.”

Schimmer claimed Denali’s most difficult task ahead is to design a later-stage study, for which results likely won’t be available for three or more years. Denali said, with the latest data in hand, it’s “accelerating efforts” to start a pivotal Phase 2/3 study in first half of 2022.