On Wednesday, the U.S. Food and Drug Administration (FDA) granted accelerated approval to Denali Therapeutics Inc.’s (NASDAQ:DNLI) Avlayah (tividenofusp alfa-eknm).

Avlayah is the first FDA-approved biologic to cross the blood-brain barrier and reach the whole body, including the brain.

Accelerated Approval for Denali Therapeutics Lead Drug

Avlayah is an enzyme replacement therapy indicated for neurologic manifestations of Hunter syndrome (mucopolysaccharidosis type II, or MPS II) when initiated in presymptomatic or symptomatic pediatric patients weighing at least 5 kg before advanced neurologic impairment.

Hunter syndrome is a rare genetic disorder in which a patient’s body doesn’t properly break down (digest) certain sugar molecules.

The deficiency causes complex sugars (glycosaminoglycans) to build up in cells, damaging tissues and organs.

Continued approval for this indication may be contingent upon verification of clinical benefit in a confirmatory trial.

The FDA extended the decision date for tividenofusp alfa from January 5, 2026, to April 5, 2026.

“The FDA approval of Avlayah represents a breakthrough advance as the first therapeutic innovation for the Hunter syndrome community in nearly 20 years,” said Joseph Muenzer, lead investigator of the Avlayah Phase 1/2 clinical trial.

Biomarker Reduction Supports Denali Therapeutics Approval

The approval of Avlayah is based on the reduction of a key disease biomarker, cerebrospinal fluid heparan sulfate (CSF HS), as a surrogate endpoint reasonably likely to predict clinical benefit.

In a Phase 1/2 clinical trial, Avlayah demonstrated a 91% reduction in CSF HS levels from baseline by week 24 of treatment.

At week 24, 93% (41 of 44) of Avlayah-treated patients had CSF HS levels within the range of individuals without Hunter syndrome.

The ongoing Phase 2/3 COMPASS study aims to generate confirmatory evidence and support global regulatory submissions for Avlayah. The study includes young adults living with Hunter syndrome.

The FDA granted Denali Therapeutics a Rare Pediatric Disease Priority Review Voucher (PRV). The company can use this voucher to obtain priority review for a future marketing application or transfer it to another sponsor.

Competitive Landscape: REGENXBIO Faces Setback

In February, the FDA issued a Complete Response Letter (CRL) for REGENXBIO Inc.’s (NASDAQ:RGNX) Biologics License Application (BLA) for RGX-121, for MPS II.

The FDA issued a CRL for RGX-121, citing concerns about the study eligibility criteria and the appropriateness of a surrogate endpoint for predicting clinical benefit.

William Blair on Wednesday wrote that, “Denali is well-positioned and capitalized with line-of-sight to the underappreciated launch. The company also stands to benefit from strong commercial synergies with its follow-on product in DNL126 for Sanfilippo syndrome type A.”

Analyst Myles Minter further noted that Avlayah and DNL126 position the company to become a more-than-$1-billion sales franchise.

William Blair sees multiple paths to value accretion here and reiterates an Outperform rating on Denali shares.

DNLI Price Action: Denali Therapeutics shares were down 1.65% at $22.10 during premarket trading on Thursday, according to Benzinga Pro data.

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