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Denali Therapeutics Inc. (DNLI) Up 5.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Denali Therapeutics Inc. (DNLI). Shares have added about 5.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Denali Therapeutics Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Denali's Q2 Earnings Miss Estimates, Revenues Up Y/Y

Denali reported a loss of 50 cents per share in the second quarter of 2021, wider than the Zacks Consensus Estimate of a loss of 37 cents per share but narrower than the year-ago quarter’s loss of 56 cents per share.

Collaboration revenues came in at $22.9 million in the reported quarter, missing the Zacks Consensus Estimate of $32 million but up from $5.8 million in the year-ago quarter. The year-over-year increase was primarily due to the achievement of a $15.0 million milestone revenues in June 2021 under the company’s collaboration with Sanofi related to the initiation of the phase II study of DNL758, as well as an increase in revenues of $2.4 million from its collaboration with Takeda and Biogen.

Research and development expenses were $65.7 million in the quarter under review compared with $53.2 million in the year-ago quarter. The upside was primarily driven by an increase in personnel-related expenses.

General and administrative expenses were $19 million, up from $14 million in the year-ago quarter due to an increase in personnel-related expenses, including stock-based compensation, primarily due to higher headcount and additional equity award grants.

Cash, cash equivalents, and marketable securities were approximately $1.4 billion as of Jun 30, 2021.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Denali Therapeutics Inc. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Denali Therapeutics Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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