Denali Therapeutics Partners with Sanofi

In a big biotech partnership, Denali Therapeutics (NASDAQ:DNLI) announced on Thursday (November 1) it will work with Sanofi (NYSE:SNY) to develop drugs for neurological and inflammatory diseases.

The companies will jointly develop RIPK1 inhibitor molecules, which could treat Alzheimer’s disease (AD), amyotrophic lateral sclerosis (ALS), multiple sclerosis (MS) and more.

Sanofi will pay Denali US$125 million as an front payment, with future milestone payments in relation to the drugs produced potentially pushing past US$1 billion. Other highlights from the deal include the companies sharing some costs and development, along with an unequal structure of funding for development.

“With its considerable infrastructure and experience in both clinical development and commercial functions, Sanofi is an ideal partner for Denali to maximize the clinical and commercial success of our RIPK1 program,” CEO of Denali, Ryan Watts, said in the press release.

The deal is expected to close in the upcoming months, according to approvals and other customary regulations.

In addition to the upfront payment, other milestone payments will be for future development payments and commercial milestones. The companies will share comercial profits and losses from two of Denali’s drug candidates, DNL747 and DNL758, both of which are RIPK1 inhibitors.

As for developmental costs, both parties have a role in different stages of development. Each company will cover the cost of its own development for the trials, except for the Phase 3 trials; Sanofi and Denali will split the costs 70 and 30 percent, respectively.

DNL747 is a small molecule inhibitor which can pass through the blood-brain barrier. Currently in Phase 1 trials, the drug may be used as a treatment for AD and ALS. Trials for these indications are expected to start soon.

For this candidate, the profits and losses will be split only in the US and China. Denali will receive royalty payments from the drug in other regions. For AD, the company will continue developing the drug in Phase 2 trials.

Sanofi, on the other hand, will spearhead development for the drug of the same trials for MS and ALS. This includes future Phase 3 trials for all current neurological indications.

The second drug candidate, DNL758, is heading in a different direction, even with targeting the same inhibitors. This is due to the drug no passing through the blood-brain barrier. The drug is in development for systemic inflammatory diseases, such as psoriasis.

Sanofi will lead clinical development activities for all of these indications with DNL758. The trials are expected to begin mid-2019.

In addition, the companies have included pre-clinical RIPK1 inhibitor molecules. The names, or specific indications for these drugs, were not mentioned.

Aside from the named drug candidates, Denali has a robust pipeline using biomarkers to match trials with the best patients and dose for clinical development. The company is working on small and large molecules for an array of neurological diseases and the dermatology indications.

This isn’t Denali’s first Big Pharma indication, either. The company previously partnered with Takeda Pharmaceuticals (TSE:4502) for three programs in its pipeline.

Sanofi is global pharmaceutical company known for top global pharmaceutical sales.

Investor Takeaway

Over the trading period, Denali’s share price increased 12.85 percent to close at US$16.33  on Thursday.

Sanofi’s share price made just under a one percent gain to US$45.13 over the same time period.

Analyst ratings on TipRanks suggests shares of Denali could  increase further to US$30 over the next year. The company’s rating sits at a “Moderate Buy.”

Barclays analyst Emmanuel Papadakis released an investor report for Sanofi upgrading his position to a “Hold.”

For this collaboration, investors can look forward to further development for all RIPK1 inhibitors involved. This includes mid-2019 trials for DNL758 and early clinical development for DNL747 coming up.

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Securities Disclosure: I, Gabrielle Lakusta, hold no direct investment interest in any company mentioned in this article.