Sanofi sees potential in two early-stage Denali Therapeutics drugs as a way to reduce inflammation in the brain and throughout the body, and the two companies are teaming up to develop the compounds for tough-to-treat diseases including Alzheimer’s.
Under the deal, Sanofi (NYSE: SNY) will pay Denali (NASDAQ: DNLI) $125 million up front. South San Francisco, CA-based Denali could earn an additional $1 billion or more in milestones, depending on the progress off the drugs. Shares of Denali rose more than 10 percent following the announcement of the deal Thursday morning.
The two lead compounds in the agreement, DNL747 and DNL758, target a signaling protein called receptor-interacting serine/threonine-protein kinase 1 (RIPK1), which is part of the TNF receptor pathway. This pathway regulates inflammation and cell death in tissues.
Denali has developed technology for delivering drugs into the brain. The company’s lead drug, which it is keeping in-house, is in early-stage testing in Parkinson’s disease. The Denali technology also yielded DNL747, a small molecule drug that Sanofi and Denali plan to study as a treatment for multiple sclerosis, Alzheimer’s disease, and amyotrophic lateral sclerosis (ALS). Denali has already tested it in Phase 1, and it expects Phase 1b tests in Alzheimer’s and ALS to start soon.
Sanofi will pay for Phase 1b and Phase 2 studies of DNL747 for multiple sclerosis and ALS, but the Alzheimer’s trials will be funded by Denali, according to the agreement. If the drug reaches Phase 3 testing in any of the neurological disorders that are part of the partnership, Sanofi will pick up 70 percent of the costs and Denali would cover 30 percent.
DNL758 is a small molecule drug that does not penetrate into the brain. The partnership will test the compound in inflammatory diseases, such as rheumatoid arthritis and psoriasis. Sanofi will finance clinical testing of the compound for all systemic inflammatory diseases. Those studies are expected to begin next year. The partnership also includes other preclinical compounds that target the RIPK1 pathway.
The Sanofi partnership is the second big pharmaceutical alliance that Denali has reached in the past year. In January, Denali entered into a pact with Takeda Pharmaceutical to develop up to three drugs for neurological disorders, including Alzheimer’s. Takeda agreed to pay Denali $155 million in cash and stock purchases, with the potential for $90 million more depending on the progress of the drugs.
According to the terms of the Sanofi partnership, both companies will share in U.S. and China profits if DNL747 reaches the market. Sanofi will pay Denali royalties from sales in other regions where the drug is commercialized. If DNL758 reaches the market, Sanofi will pay Denali royalties from worldwide sales of that drug. Sanofi and Denali expect to close the deal in coming months.