Neurodegeneration star Denali nabs a cash-rich, $1B-plus Alzheimer’s partnership with Takeda

Takeda is on a roll this morning.

Right alongside its $630 million acquisition deal for TiGenix, Takeda is announcing that it has set out to build up its portfolio of experimental Alzheimer’s drugs with a high-profile team at Denali Therapeutics that’s working on some new approaches to neurodegeneration.

Denali, fresh off its big $280 million biotech IPO $DNLI from last December, will put its tech to work in an unusually rich preclinical deal for three programs that Takeda can option for shared clinical development and marketing rights. And Takeda will pay $155 million in cash — part upfront and part equity buy — to get Denali started while committing up to $85 million for near term preclinical milestones.

In an exclusive preview to today’s news, Denali execs told me that they can disclose that the deal with Takeda covers their two listed Alzheimer’s projects in the preclinical pipeline, which uses new antibody transport vehicles — or ATVs — for a BACE1 approach to tau and another on TREM2. The third program, and the disease it involves, hasn’t surfaced yet and isn’t being disclosed now.

“Delivering sufficient concentration of drug to the brain has been a major challenge” in Alzheimer’s research, says Denali CEO Ryan Watts. And it’s been “one of the key reasons for failure in the past.” The ATVs they’ve built can do just that, he adds, slipping through the blood brain barrier and giving Denali’s targeted drugs a leg up over a host of rivals.

With an aggressive team out of nearby Genentech, Denali has been building a pipeline of neurodegeneration drugs that are looking to treat genetically defined patient populations, looking to construct new therapies on the rubble of more than a decade’s worth of repeat failures.

This is their first big licensing pact with a major pharma player with a global marketing reach. And it’s not likely to be their last.

Here’s the full breakdown on the numbers:

Takeda is paying $40 million upfront, with an added $5 million milestone sweetener and $110 million for a chunk of stock at $26.10 a share.

If Takeda takes all three options, which costs $5 million in an option fee on each, there’s up to $707.5 million in regulatory and clinical milestones and $225 million in sales milestones.

Anything going forward into Phase I will be jointly paid for and jointly rewarded by any products that reach the marketplace.

Dan Curran

Reaching the marketplace, though, has proved to be a near impossible task in Alzheimer’s over the past 15 years. Alzheimer’s has defeated a multibillion-dollar effort by a mix of the world’s biggest and smallest companies, building hopes that have come crashing down after each new round of Phase III data.

So why is Takeda willing to bet large sums at the beginning like this?

“We’ve been looking at targets we think are highly amenable if you have the right set of tools,” says Dan Curran, who heads Takeda’s Center for External Innovation. And that led them to a deep appreciation of the Denali team. “We talked for some time. This tech platform looks like it has legs, and that led us to make the leap.”

The answer, in part, also lies in Denali’s successful IPO (though the stock price has since waned), with ample backing for an outing for a biotech that still has a long way to go to prove that its genetic approach in defining specific groups of patients can pave the way to success after so much failure.

Alex Schuth

So why Takeda?

They earned it, says the Denali team, with plenty of direct involvement from R&D chief Andy Plump down to underscore their willingness to pitch in.

“We have set a high bar on structure and the terms, with respect to the partner with whom we team up,” says COO Alex Schuth. “This is our first deal with a major pharma company,” and if it all works out, they’ll also be commercializing these drugs together.

“We aim to build a fully integrated company,” says CFO Steve Krognes, and this deal was built with that in mind. It is a “true partnership,” sharing costs, development work and a sales force — if it comes to that.

Takeda chief scientist “Andy Plump is very involved and has been from day 1,” adds Watts. “He is the champion of this deal and that’s what we are looking for.”

The Japanese company under Christophe Weber has been ripping up its global R&D structure and putting a new one in its place under Boston-based Plump.

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