In a June 26 research note, analyst Andrew Fein reported that H.C. Wainwright & Co. initiated coverage on Denali Therapeutics Inc. (DNLI:NASDAQ) with a Buy rating and a $28 per share target price. The life sciences firm is currently trading at around $20.81 per share.
Among H.C. Wainwright's investment thesis on Denali is the belief that the biotech's pipeline offers short- and long-term value that the Street may not fully appreciate at this time, Fein highlighted.
Denali's lead candidate DNL201, a leucine-rich repeat kinase 2 (LRRK2) inhibitor is a case in point, he wrote. Biomarker data are expected in Q4/19, representing a potential inflection point for the stock. Also, Fein purported that while the potential for DNL201 in Parkinson's patients with LRRK2 mutations, which accounts for only 1–2% of all people with the disease, has been factored into the share price, the "upside of the opportunity in the sporadic Parkinson's disease population" has not been.
Another significant point regarding DNL201, Fein indicated, is that Denali is the only company with an LRRK2 in the clinic. GlaxoSmithKline and Biogen each announced their intention to move their LRRK2 candidate into the clinic, but Denali's therapeutic already showed safety and tolerability in Phase 1. "Denali has a substantial leg up in the race and can potentially advance quickly into pivotal trials," the analyst added.
Also underappreciated is Denali's DNL747, a receptor-interacting serine/threonine kinase 1 (RIPK1). Fein noted the company's RIPK1 program has potential for application across central nervous system and peripheral indications, and that is its "most compelling value proposition."Further, Denali's partnership with Sanofi on DLN747 should eliminate development and commercial risks. "The RIPK1 program is a high-risk, high-reward play," wrote Fein.
A third Denali therapeutic, DNL301, enabled by the company's enzyme transport vehicle technology, for the treatment of Hunter syndrome, could "drive considerable near-term upside due to its validation for Denali's blood brain barrier platform broadly," Fein pointed out. Initial patient data are expected on DNL301 in mid-2020.
The investment rationale for Denali, Fein wrote, also includes the company's approaches to problem solving and drug development, both of which mitigate risks along the way and result in better targets, better drug development and better delivery. "Founded by ex-Genentechers, we believe Denali has assembled a world-class team for this mission" and is "building a network of partnerships to expand its research and development and manufacturing capabilities," the analyst added.
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Disclosures from H.C. Wainwright & Co., Denali Therapeutics Inc., First Take, June 26, 2019
Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its affiliates or subsidiaries within the past 12 months.
I, Andrew S. Fein, Li Wang Watsek, Alicia Yin, Ph.D. and Matthew Caufield, certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst's household has a financial interest in the securities of Denali Therapeutics, Inc., AC Immune SA and Biogen, Inc. (including, without limitation, any option, right, warrant, future, long or short position).
As of May 31, 2019 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Denali Therapeutics, Inc., AC Immune SA and Biogen, Inc.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The Firm or its affiliates did not receive compensation from Denali Therapeutics, Inc. and Biogen, Inc. for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
The Firm or its affiliates did receive compensation from AC Immune SA for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
H.C. Wainwright & Co., LLC managed or co-managed a public offering of securities for AC Immune SA during the past 12 months.
The Firm does not make a market in Denali Therapeutics, Inc., AC Immune SA and Biogen, Inc as of the date of this research report.
H.C. Wainwright & Co., LLC and its affiliates, officers, directors, and employees, excluding its analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research report.
