Denali Therapeutics' ALS Miss: A Setback, But Not a Death Knell

Denali Therapeutics' (DNLI) experimental drug for amyotrophic lateral sclerosis (ALS), DNL343, failed to meet its primary and secondary endpoints in a Phase II/III trial, causing the company's share price to dip by 7% in after-hours trading. The drug, an eIF2B agonist, was unable to significantly slow disease progression or improve muscle strength and respiratory function compared to placebo in the HEALEY ALS Platform trial. However, analysts remain largely optimistic about Denali's long-term prospects.

The trial's design may have contributed to the disappointing data, with the 6-month endpoint considered too short to see separation between drug and placebo (Yee, 2025). Additionally, the high risk and high reward nature of the trial may have led to unrealistic expectations, with analysts noting that street expectations were fairly low (Matteis, 2025). The challenging nature of developing disease-modifying therapies for ALS also played a role in the trial's outcome (Yee, 2025).

Despite the setback, analysts appear to be unworried about Denali's prospects. Stifel's Paul Matteis noted that HEALEY ALS was a very high-risk/high-reward option, and Street expectations were fairly low. Jefferies' Michael Yee agreed, stating that it has historically been challenging to develop disease-modifying therapies for ALS. Yee also suggested that the stock could be a buying opportunity for a better set up for the rest of the year.

Denali's disappointing readout on Monday continues the industry's losing streak in ALS. In February 2024, Denali reported that its Sanofi-partnered candidate DNL788 failed to significantly ease disease severity and boost functional performance in patients. In November 2024, PTC Therapeutics announced that it would no longer invest in its ALS hopeful utreloxastat after it failed the Phase II CardinALS trial. Perhaps the most high-profile ALS miss came in March 2024 when Amylyx's Relyvrio failed its confirmatory Phase III PHOENIX trial, leading to the drug's withdrawal from the market.

Denali remains committed to fully understanding the effects of DNL343 in ALS and will further evaluate the data before determining next steps. The company anticipates more comprehensive analyses later in 2025, including subgroup and biomarker results, which could potentially reveal valuable insights for future ALS research.

In conclusion, while Denali Therapeutics' ALS trial miss is a setback, it is not a death knell for the company. Analysts remain optimistic about Denali's long-term prospects, and the company is committed to understanding the data and determining the next steps for DNL343. The challenging nature of developing disease-modifying therapies for ALS, along with the high risk and high reward nature of the trial, contributed to the disappointing outcome. However, the company's broader pipeline and long-term potential remain promising.