Denali Therapeutics Inc. (NASDAQ: DNLI) has announced that its investigational drug, DNL343, an eIF2B inhibitor, did not meet the primary or key secondary endpoints in the Phase 2/3 HEALEY trial for amyotrophic lateral sclerosis (ALS) at the 24-week mark. This outcome has led BofA Securities to adjust its price target for Denali's stock, reducing it to $30 from $34, while maintaining a Buy rating.
The HEALEY trial's failure with DNL343 raises questions about the future development of the drug. BofA Securities has removed DNL343 from their valuation model, citing uncertainty. Analysts at BofA noted that the drug's contribution to their valuation was limited, accounting for only $4 per share.
Analyst Optimism Despite Setback
Despite the disappointing trial results, BofA Securities remains positive about Denali's overall prospects. The firm highlights Denali's unique brain delivery platform as a key strength, anticipating its application across various central nervous system indications. Denali's strong financial position, characterized by a current ratio of 9.98x and more cash than debt, further supports this optimism.
Upcoming Milestones for Denali
The year 2025 is projected to be significant for Denali, with plans to submit a biologics license application (BLA) for tividenofusp alfa, a treatment for Hunter syndrome, in early 2025. This submission could potentially lead to Denali's transition into a commercial organization later in the year.
BofA Securities suggests that any decline in Denali's stock price following the trial results could present a buying opportunity, reaffirming confidence in the company's long-term potential and ability to overcome the recent setback.
Additional Analyst Perspectives
InvestingPro Fair Value analysis indicates that Denali's stock may be undervalued at current levels. However, it's worth noting that seven analysts have recently revised their earnings expectations downward. Other analyst firms, such as Baird and Stifel, have initiated coverage on Denali with Outperform and Buy ratings, respectively. Jefferies has also maintained a Buy rating, raising Denali's target to $45.
Denali's Broader Pipeline
Denali Therapeutics remains committed to its research and development efforts, particularly with its Transport Vehicle platform. Despite the failure of the K2 Phase 2 study of oditrasertib for multiple sclerosis, the company continues to advance its drug development programs.
