Denali Therapeutics made progress in its commercial operations and updated its wide clinical pipeline in the third quarter ended September 30, 2026. Denali reported $17.8 million in net product revenue for its product AVLAYAH, which treats Hunter syndrome, during the second quarter of its commercialization efforts. The drug was approved by the U.S. Food and Drug Administration in March 2026 and offers systemic delivery of enzyme replacement therapy, including to the brain.
According to Denali, the launch growth was due to demand from families, physicians, and payer coverage. The level of coverage is above 70% of U.S. commercial lives, as compared to 50% at the end of the prior quarter. The Medicaid programs in 20 states have covered AVLAYAH. A permanent billing code came into effect on October 1.
The guidance for the fourth quarter of 2026 is net product revenue of $30 million to $32 million for AVLAYAH. Denali completed enrollment for Cohort B in its global Phase 2/3 COMPASS study with 65 subjects enrolled. The study will provide confirmatory evidence, enable an adult label expansion, and support global submission. It will provide results in the first half of 2028.
The next product candidate of Denali in development, zafinofusp alfa, will target Sanfilippo syndrome type A or MPS IIIA. It uses Denali's Enzyme TransportVehicle technology platform to deliver SGSH through the blood-brain barrier. Its Phase 1/2 trial has completed its primary-endpoint treatment period with 20 children enrolled.
The biologics license application submission by 2027 is still on track, with Denali seeking an accelerated approval. Previous dose-finding results have shown that the week-49 average reduction was 80% in cerebrospinal fluid heparan sulfate and 83% in urine levels. In some patients, the level of cerebrospinal fluid was normalized, while in all subjects, the liver volume was normalized. Further results are expected at a medical congress in early 2027, and preparations for the global Phase 3 confirmatory study have started.
Several TransportVehicle programs can present results in 2027. DNL593, which is a progranulin for frontotemporal dementia, has completed the enrollment of 40 people and received the FDA Orphan Drug Designation in August. Data are expected in the first half of 2027. DNL952, an enzyme for late-onset Pompe disease, is still recruiting subjects. The initial results are expected next year.
Among candidates for Alzheimer's are DNL628, which works to lower tau by the MAPT gene, and DNL921, which is an antibody aimed at amyloid plaques. DNL628 biomarker data are expected in the first half of 2027, while DNL921 safety and proof-of-concept data will come in 2027.
For Parkinson's, the DNL151 LRRK2 inhibitor candidate is being tested within the Phase 2a BEACON trial among patients with LRRK2-positive disease. The results are expected in the first half of 2027. There are early-stage candidates for Parkinson's, Gaucher disease, and MPS I.
Denali earned net income of $70.1 million for the third quarter, up from a net loss of $126.9 million for the third quarter of 2025. This figure includes a one-time gain of $194 million on the sale of a Priority Review Voucher, and hence does not account only for the proceeds from the product. Denali's cash, cash equivalents, and marketable securities stood at about $1 billion.
R&D costs increased to $106.1 million from $102 million primarily due to TransportVehicle. SG&A costs were $37.5 million from $35.5 million owing to AVLAYAH that necessitated commercial, medical, personnel and site activities. Cost of Goods Sold was $0.2 million, where some costs associated with manufacturing pre-approval had been accounted for as research costs.
Denali's findings have demonstrated how the development of blood-brain barrier crossing drugs could be beneficial for neurological diseases as well as orphan conditions. This barrier hinders the entry of most drugs into the brain tissue. The company uses receptor-mediated transport to allow the passage of bigger drug compounds. Animal testing has revealed a 10- to 30-fold increase in brain penetration for engineered antibodies and enzymes and over 1,000-fold for oligonucleotides in primates. This doesn't necessarily mean that these drugs would be useful clinically.
The approval of AVLAYAH has shown that simply having an approved drug isn't enough for it to be used. Issues such as coverage, billing codes, acceptance among physicians, and readiness of the treating centers are necessary factors to consider. If the pipeline succeeds, providers would have more choices when treatment options are limited, and developers could gain insight into the delivery system. Denali's money is being used for research purposes, but the voucher win is not continuous business revenue.
Data expected in 2027 and AVLAYA H confirmatory results in 2028 will test whether the platform can expand treatment options.
The platform technology is based on engineered transport vehicles that interact with the blood-brain barrier receptors and transfer the cargo through the barrier. According to Denali, the technology will be able to deliver enzymes, antibodies, and oligonucleotides. The firm is testing its compounds across diseases and not by using one program. However, most of the pipeline products have not yet been approved, and their safety and efficacy have yet to be confirmed.
Denali Therapeutics is a clinical-stage biotechnology company dedicated to defeating neurodegenerative and lysosomal storage disorders. Founded in 2015, the firm utilizes its proprietary TransportVehicle™ platform to engineer biotherapeutics that successfully cross the blood-brain barrier. Their advancing pipeline targets complex diseases like Alzheimer's, Parkinson's, and ALS, and the company recently secured its first major drug approval, Avlayah.
