5 things to know about biotech Denali Therapeutics and its $250 million IPO

Buzzed-about new biotech Denali Therapeutics is taking on diseases that pharmaceutical companies have long tried — and failed — to treat.

But because of the company’s new approach, including a focus on genetic drivers of the diseases and developing medications that can cross from the bloodstream into the brain, Denali says it believes it can succeed where others haven’t.

Denali DNLI, +0.00%  , which was founded in 2015, has plans for an initial public offering this week that could raise at least $250 million, based on the work it does developing therapies for neurodegenerative diseases like Alzheimer’s disease, Parkinson’s disease and amyotrophic lateral sclerosis (ALS).

The company is planning to list on Nasdaq under the ticker symbol “DNLI”.

If all goes as scheduled, Denali will be part of this year’s resurgence of biotech IPOs, and IPOs in general. There have been 34 biotech IPOs so far this year, versus 29 in 2016, a year of low overall IPO activity, according to Matt Kennedy, an analyst at Renaissance Capital, a manager of IPO-focused ETFs like the Renaissance IPO ETF IPO, +1.36%  .

When it comes to Denali, there’s not much to go on just yet— just one of its drugs is even in clinical trials — and especially given that the company focuses on diseases that have seen recent and high-profileclinical trial failures.

So what’s all the hype about? Here are five things to know:

Denali had the largest-ever first round of venture financing for a biotech company, at $217 million

Even so, the company’s market valuation and IPO aren’t expected to break any records.

Should Denali price in the middle of its expected $17 to $19 per share range, it would have a $1.6 billion market value, sizeable but not record-setting in the biotech world.

And at a projected $250 million, Denali’s IPO would be dwarfed by many others, including Axovant Sciences’ AXON, -0.80%  $315 million IPO in 2015, Galapagos’ GLPG, -0.85%  $275.4 million IPO, also in 2015, and Juno Therapeutics’ JUNO, +2.38%  $264.6 million IPO in 2014.

Denali expects to use IPO proceeds, along with existing resources, to fund several clinical trials and to improve its technologies.

The company reported a net loss of $86.7 million in 2016, wider than a loss of $16.8 million in 2015, and expects “that we will continue to incur net losses for the foreseeable future,” according to its IPO prospectus.

Read: IPO market heats up as stocks of first of 8 deals this week rocket in their debut

It was founded by several former Genentech executives

The co-founders all worked together for years at the biotech company, which is now a subsidiary of Roche RHHBY, -2.31%

The team includes former Genentech Chief Scientific Officer, Marc Tessier-Lavigne, who is now the president of Stanford University and remains a board member.

Related: Amazon wants to disrupt the neighborhood pharmacy—but its sketchy health products could get in the way

Denali’s drug trials already have risky signs

Any drug trial carries plenty of risks: That it won’t be successful, for example, or that it’ll reveal potential safety concerns.

With Denali, its DNL201, which is intended for Parkinson’s disease and recently entered a phase 1 trial, is on a partial clinical hold from the Food and Drug Administration because of toxicity concerns found in early research in rats.

The hold means there’s an exposure limit on the therapy, which the FDA can change based on data coming out of the trial. Denali responded to the FDA this month asking it to allow dose escalation in the study.

See: Acorda stock drops 40% on patient deaths related to its Parkinson’s drug

But if that doesn’t happen, the company “will not be able to evaluate doses and exposures that would potentially achieve higher degrees of LRRK2 kinase inhibition, which may negatively impact the development of DNL201,” according to the company’s prospectus. Results from the trial are expected in the first half of 2018.

And there’s more: A former product candidate’s phase 1 trial was discontinued in April after liver test abnormalities were found in some healthy research participants.

That discontinued drug, DNL104, targeted the enzyme RIPK1, which is also the case for another of Denali’s leading drug candidates, DNL747, intended for Alzheimer’s disease and ALS.

Related: Six promising stocks to buy for the biotech rebound ahead

The biotech believes the liver test abnormalities are specific to the abandoned drug, “and not a result of RIPk1 inhibition,” according to the prospectus. By contrast, DNL747 is a “structurally distinct molecule” and the company expects it to have low liver toxicity risk.

But Denali does acknowledge in its prospectus that, at high doses of DNL747, it saw toxicity in monkeys in a monthlong study.

The company is analyzing the study’s data, but said it’s possible negative findings could result in a similar exposure limit on DNL747, either from regulators or from the company itself.

The company says it is engineering drugs to best work on the brain

Denali says that approach differentiates it from competitors.

The company’s more typical “small molecule” drugs have been designed to cross the blood-brain barrier, which keeps many substances from entering the brain from the bloodstream, Denali says.

Meanwhile, for more complex “large molecule” drugs, the biotech has its own platform delivery technologies that it says can transfer the therapies across the blood-brain barrier.

Three studies in a mouse model have shown support for one of those platform delivery technologies, according to the company’s prospectus, with the platform allowing for, on average, 20-fold greater brain penetration than without the technology.

Of course, that should be taken with a hefty caveat: Such results don’t always translate to humans, and it’s difficult to predict if they will.

Denali was named after the tallest mountain in North America

The company says that’s because “defeating degeneration — to us — is akin to summiting the tallest mountains.”

Located in Alaska, the mountain has been referred to as Denali or “the high one” by native Alaskan tribes for many years.

But until recently, it was officially Mount McKinley, named after the former U.S. president after he was assassinated, according to The Wall Street Journal, though McKinley himself had no connection to the mountain.

In August 2015, under then-President Barack Obama, the mountain’s name was officially switched to Denali. Interestingly, Denali Therapeutics began operating a few months before, in May 2015.

President Donald Trump, meanwhile, asked Alaska senators about reversing that decision earlier this year. They told him no.

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