IPO to Fuel Denali’s Drugs for Alzheimer’s, Other Brain Diseases

Xconomy San Francisco — 

One of biotech’s richest private companies, Denali Therapeutics, has set its sights on an IPO to push ahead with treatments for Alzheimer’s and other confounding brain diseases.

The filing marks $100 million as its IPO target, but market conditions often shift a company’s sights in the run-up to a debut.

Denali’s disclosure comes on the same day Bill Gates, one of the world’s richest people, pledged a $50 million slice of his personal fortune to an investment fund dedicated to fighting Alzheimer’s. The fund receiving Gates’s largesse is different, however, than one run by two of Gates’s former top lieutenants, which has invested in Denali, as Xconomy reported earlier this year. It’s not immediately clear if Gates’s own money has made its way into Denali’s coffers.

Alzheimer’s is a deep medical and societal concern. The brain-wasting disease has no cure and could affect as many as 16 million people in the U.S. by the year 2050. The financial costs could be enormous, as well. Only a few drugs have been approved to check patients’ mental decline, often with limited effect, and in recent years, one expensive effort after another to develop a treatment has failed.

Fueled by nearly $350 million in privately raised cash, South San Francisco, CA-based Denali is combining internal research with work brought in from outside. Its ambitions range beyond Alzheimer’s into other neurological diseases. Its most advanced drug candidate is in Phase 1 studies for Parkinson’s disease. Behind that is an experimental drug that came with the acquisition of an under-the-radar San Diego biotech, Incro Pharmaceuticals. A Phase 1 study could begin next year in healthy volunteers and could point toward either Alzheimer’s or amyotrophic lateral sclerosis, also known as Lou Gehrig’s disease.

Denali has already spent prodigiously. According to its regulatory filing, it has $190 million in the bank.

Denali investor Biomatics Capital Partners of Seattle is run by two Gates associates. Boris Nikolic was Gates’s science advisor until 2015 and helped steer his money into gene-editing firm Editas Therapeutics (NASDAQ: EDIT). Julie Sunderland ran the Bill and Melinda Gates Foundation’s investment program until 2016. Biomatics does not have a large enough stake to be publicly listed among those with at least 5 percent ownership.

Denali’s largest owner (28.1 percent) is the state of Alaska’s Permanent Fund—its stake managed by Texas firm Crestline—which was also deeply involved in Juno Therapeutics (NASDAQ: JUNO). Like Denali, Juno was a well-funded foray into a cutting-edge biomedical field—in Juno’s case, CAR-T cell therapy that harness the immune system to attack cancer. And like Juno, investor Bob Nelsen of Arch Venture Partners was in the middle of the action with Denali. Arch is Denali’s second largest shareholder, with 15.3 percent. Next come Flagship Ventures (12.3 percent), F-Prime Capital Partners (6.8 percent), formerly known as Fidelity Biosciences, and FIL Limited (5.8 percent), once the international subsidiary of Fidelity.

Denali was founded by former Genentech executives. Marc Tessier-Lavigne is the chairman and Ryan Watts is CEO. Tessier-Lavigne, now president of Stanford University, was once the chief scientific officer of Genentech. Watts was the drug maker’s director of neuroscience. Alex Schuth, who was Genentech’s top neuroscience dealmaker, is the third co-founder. Since the founding, Denali has added more so-called GenenExers: Carole Ho joined as chief medical officer and Steve Krognes as chief financial officer.