The groundbreaking deal pushed the stock of South San Francisco-based Denali (NASDAQ: DNLI) 36% higher Thursday to $31.66 per share, while Cambridge, Massachusetts-based Biogen (NASDAQ: BIIB) climbed half of a percentage point higher.
Biogen will take a $465 million equity stake in Denali by buying 13.3 million newly issued shares at $34.94 per share — 50% above Denali's closing price on Wednesday — and make a $560 million upfront payment.
Denali also could pull down an additional $1.125 billion in milestone payments to license a program built around a kinase — a type of enzyme called LRRK2 — that is the greatest known contributor to Parkinson's. Denali has one drug, DNL-151, that is designed to block LRRK2 in an ongoing early-phase clinical trial involving 162 healthy volunteers and 25 Parkinson's patients and is giving higher doses of the drug in an expanded Phase I trial.
Denali will cover 40% of the costs of the LRRK2 program.
Biogen also will get an exclusive option to license two preclinical programs using Denali's "transport vehicle" technology platform, which aims to improve brain uptake of drugs across the blood-brain barrier, and the right of first negotiation on two — and possibly three — additional transport vehicle-enabled drugs in Alzheimer's, Parkinson's, amyotrophic lateral sclerosis and multiple sclerosis.
Denali, which has 261 employees, was launched in fall 2013 by Genentech Inc. veterans Ryan Watts (the company's CEO), Alexander Schuth (its COO) and Marc Tessier-Lavigne (now the president of Stanford University). It has been one of the Bay Area companies leading a resurgence in the neurodegenerative space of biotech after years of failures of experimental Alzheimer's drugs.