Denali Therapeutics Slips After FDA Halts Pompe Disease Trial
The U.S. Food and Drug Administration placed a clinical hold on the company's Investigational New Drug application for DNL132, citing protocol concerns.
Denali Therapeutics Inc. (NASDAQ: DNLI) shares faced headwinds after the U.S. Food and Drug Administration (FDA) placed a clinical hold on its Investigational New Drug (IND) application for DNL132, a potential treatment for the rare genetic disorder Pompe disease.
The regulatory action, announced Thursday, pauses the initiation of a planned Phase 1 study, introducing an unexpected hurdle for a key candidate in Denali's pipeline. The stock slipped modestly in recent trading, with a decline of 0.4%, as investors weighed the potential for delays against the company's optimistic assessment of the situation.
According to a company statement, the FDA’s hold is not based on new safety concerns from animal studies but rather on the proposed trial design. The agency has requested a protocol amendment that includes a lower starting dose, revised inclusion criteria for participants, and specific safety monitoring and stopping rules. Denali confirmed that the FDA did not request any new nonclinical studies.
The company moved quickly to address the agency's concerns, stating it has already submitted a response. Denali characterized the expected setback as a "minimal delay" in the initiation of the Phase 1 trial.
Pompe disease is a debilitating and often fatal inherited disorder caused by a deficiency of the enzyme acid alpha-glucosidase (GAA). This leads to the buildup of glycogen, a complex sugar, in the body's cells, causing progressive muscle weakness and respiratory problems. The current standard of care is enzyme replacement therapy (ERT), a market dominated by players like Sanofi with its drugs Lumizyme and Nexviazyme and Amicus Therapeutics.
For a development-stage biotechnology firm like Denali, with a market capitalization of approximately $2.79 billion, a clinical hold can often signal significant delays and spook investors. Such holds can push timelines back by months or even a year as the company and regulators exchange information to resolve deficiencies, according to FDA guidelines.
However, the investment community’s reaction has been notably measured. In the 48 hours following the announcement, several Wall Street analysts reiterated their confidence in the company. Wedbush maintained its "Outperform" rating and nudged its price target up from $30 to $31. Separately, analysts at BTIG and Stifel reiterated their "Buy" ratings, with price targets of $32 and $37, respectively. The consensus analyst target price for Denali stands at $32.00.
This resilience may stem from the specifics of the FDA's request, which focuses on adjusting the trial protocol rather than questioning the drug's fundamental science or safety profile. Investors also appeared buoyed by a separate announcement of a $275 million synthetic royalty funding agreement with Royalty Pharma, shoring up the company's balance sheet as it navigates the development process.
Denali is a leader in developing therapies for neurodegenerative diseases and other rare conditions, leveraging its proprietary platform designed to shepherd large molecules across the blood-brain barrier. While DNL132 is an important program, the company’s broader pipeline includes candidates for conditions such as Parkinson's and Alzheimer's, providing a degree of diversification that may also be tempering investor concerns.
The path forward now depends on the FDA's review of Denali's response. While the company projects confidence, the ultimate timeline for lifting the hold and commencing the DNL132 trial remains in the hands of the regulators.