What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-07 · 80 added, 86 removed, 263 unchanged (39% of the section changed)

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• the impact of preclinical findings on our ability to achieve exposures of our product candidates that allow us to explore a robust pharmacodynamic range of these candidates in humans;

• expectations regarding the proposed transaction with Biogen, including all financial aspects of the collaboration and equity investment, the potential benefits and results of the proposed transaction, and the anticipated completion of the transaction;

• expectations regarding the transaction with Biogen, including all financial aspects of the collaboration and equity investment, the potential benefits and results of the transaction;

• the expected potential benefits and potential revenue resulting from strategic collaborations with third parties and our ability to attract collaborators with development, regulatory and commercialization expertise;

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We are developing a broad portfolio of targeted therapeutic candidates for neurodegenerative diseases.

Our programs are at different stages of clinical and preclinical development, including five programs in clinical studies.

Our programs are at different stages of clinical and preclinical development, including four programs in clinical studies.

We have also developed a proprietary BBB platform technology, our transport vehicle ("TV"), which enables multiple modality-based platforms to deliver a wide range of large-molecule therapeutics across the BBB, including enzymes, antibodies, proteins and oligonucleotides.

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• our ETV:IDS program, our most advanced program enabled by our enzyme transport vehicle ("ETV") technology, which is designed to restore iduronate 2-sulfatase ("IDS"), and reduce glycosaminoglycans, both peripherally and in the brain, in patients with mucopolysaccharidosis II ("MPS II", or "Hunter syndrome");

• our receptor interacting serine/threonine protein kinase 1 ("RIPK1") inhibitor program, partnered with Sanofi, to address peripheral inflammatory diseases such as rheumatoid arthritis.

• our receptor interacting serine/threonine protein kinase 1 ("RIPK1") inhibitor program, partnered with Sanofi, to address peripheral inflammatory diseases such as cutaneous lupus and COVID-19.

Program Product Candidate(s) Clinical Phase Indication(s) Operational Control

LRRK2 DNL151 Ph 1 and Ph 1b Parkinson's disease Joint (1)

LRRK2 DNL151 Ph 1 and Ph 1b Parkinson's disease Joint with Biogen

EIF2B DNL343 Ph 1 ALS and FTD Denali

ETV:IDS DNL310 Ph 1/2 Hunter syndrome (MPS II) Denali

RIPK1 (Peripheral) DNL758 Ph 1b Systemic inflammatory diseases, Coronavirus (COVID-19) Sanofi

__________________________________________________

(1) In August 2020 we entered into a binding agreement with Biogen to co-develop and co-commercialize our small molecule inhibitors of LRRK2 for Parkinson’s disease.

Operational control of development activities will be finalized upon execution of a definitive collaboration agreement.

RIPK1 (Peripheral) DNL758 Ph 1b Systemic inflammatory diseases

To complement our internal capabilities, we have entered into arrangements with biopharmaceutical companies, patient-focused data companies, numerous leading academic institutions and foundations to gain access to new product candidates, enable and accelerate the development of our existing programs and deepen our scientific understanding of certain areas of biology.

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Safety endpoints were met in the Phase 1b patient studies with DNL747 in ALS and Alzheimer’s disease, however further dose escalation to achieve higher levels of target inhibition may be limited by preclinical chronic safety data.

As such, we announced, together with our partner Sanofi, that we have decided to pause clinical studies with DNL747 and focus our efforts on accelerating development of DNL788, which we believe has superior drug properties and a more rapid path toward proof-of-concept clinical studies in patients in multiple neurological indications;

• In July 2020, we announced that our partner Sanofi has commenced dosing of DNL758, a peripherally-restricted small molecule inhibitor of RIPK1, in a Phase 1b clinical study in hospitalized adult patients with severe COVID-19 lung disease.

In June 2020, data from the completed Phase 1 study with DNL758 in healthy volunteer subjects displayed an encouraging profile, as the molecule appears well tolerated at doses tested;

• In August 2020, we dosed the first patient in our Phase 1/2 clinical study of DNL310 (ETV:IDS) in Hunter syndrome (MPS II) patients following the acceptance of the IND in January 2020.

We continue to collect data from patients enrolled in our ongoing observational biomarker study;

• In August 2020, we entered into a binding agreement with Biogen to co-develop and co-commercialize our small molecule inhibitors of LRRK2 for Parkinson’s disease.

Biogen will also receive rights to opt into two programs and a right of first negotiation for two additional programs, in each case for neurodegenerative diseases leveraging our TV technology platform to cross the BBB.

Under the terms of the agreement, Biogen will make an upfront payment to us of $560 million and make a $465 million equity investment from the purchase of 13.3 million newly issued shares of our common stock at approximately $34.94 per share, representing 11.2 percent of our pro-forma outstanding stock.

Should the LRRK2 program achieve certain development and commercial milestones, we will be eligible to receive up to $1.125 billion in potential milestone payments.

In the LRRK2 collaboration, we will share responsibility and costs for global development (60 percent Biogen;

40 percent Denali), and will share responsibility and costs as well as profits and losses for commercialization in the U.S.

(50 percent Biogen;

50 percent Denali) and China (60 percent Biogen;

40 percent Denali).

Outside the U.S.

and China, Biogen will be responsible for commercialization and pay us tiered royalties.

The transaction is expected to close in the coming months after satisfaction of requirements under applicable antitrust laws and other customary closing conditions, and with respect to the collaboration, execution of a definitive collaboration agreement;

• In August 2020, we announced that we have selected DNL151 to progress into late stage clinical studies in Parkinson’s disease patients with a kinase activating mutation in LRRK2 and in sporadic Parkinson’s disease patients.

Patient enrollment is expected to commence in 2021;

As such, we announced, together with our collaboration partner Sanofi, that we have decided to pause clinical studies with DNL747 and focus our efforts on accelerating development of DNL788, which we believe has superior drug properties and a more rapid path toward proof-of-concept clinical studies in patients in multiple neurological indications;

• In July 2020, we announced that our collaboration partner Sanofi has commenced dosing of DNL758, a peripherally-restricted small molecule inhibitor of RIPK1, in a Phase 1b clinical study in hospitalized adult patients with severe COVID-19 lung disease.

In October, we provided an update that enrollment in the Phase 1b COVID-19 study is complete.

Separately, Sanofi plans to initiate a Phase 2 clinical study of DNL758 in cutaneous lupus first half of 2021;

• In August 2020, we commenced dosing in a Phase 1/2 clinical study of DNL310 in Hunter syndrome patients.

We plan to announce early biomarker data from the study by year end 2020;

• In August 2020, we entered into a binding Provisional Collaboration and License Agreement with Biogen to co-develop and co-commercialize our small molecule inhibitors of LRRK2 for Parkinson’s disease.

Under the Provisional Collaboration and License Agreement, Biogen also received rights to opt into two programs and a right of first negotiation for two additional programs, in each case for neurodegenerative diseases leveraging our TV technology platform to cross the BBB.

In October 2020, the Provisional Collaboration and License Agreement expired upon the execution of the Definitive LRRK2 Collaboration and License Agreement and Right of First Negotiation, Option and License Agreement with Biogen (collectively the "The Biogen Collaboration Agreement").

In connection with the Biogen Collaboration Agreement, we received an equity investment of $465.0 million in September 2020 and an aggregate of $560.0 million in upfront payments in October 2020.

We may be eligible to receive up to $1.1 billion in potential milestone payments plus profit sharing and royalties for the LRRK2 program;

• In August 2020, we announced the selection of DNL151 to progress into late stage clinical studies in Parkinson’s disease patients with a kinase-activating mutation in LRRK2 and in sporadic Parkinson’s disease patients.

Patient enrollment is planned to commence in 2021 in collaboration with Biogen;

• In October 2020, our collaboration partner Sanofi submitted an IND application for DNL788 (SAR443820), a potent, selective brain-penetrant small molecule inhibitor of RIPK1.

First-in-human dosing is planned to begin in late 2020 or early 2021;

• To address risks posed by the COVID-19 pandemic, we have implemented policies that enable some of our employees to work remotely.

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We do not have any products approved for sale and have not generated any product revenue since our inception.

We have funded our operations primarily from the issuance and sale of convertible preferred stock, and the proceeds from our initial public offering ("IPO"), follow-on offering, and payments received from our collaboration agreements with Takeda and Sanofi.

We have incurred significant operating losses to date and expect to continue to incur operating losses for the foreseeable future.

Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates.

Our net losses wer e $58.8 million and $115.5 million for the three and six months ended June 30, 2020 , respectively, and $58.3 million and $97.3 million for the three and six months ended June 30, 2019, respectively .

As of June 30, 2020, we had an accumulated deficit o f $541.1 million.

Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candida tes.

Our net losses wer e $58.2 million and $173.7 million for the three and nine months ended September 30, 2020 , respectively, and $46.3 million and $143.6 million for the three and nine months ended September 30, 2019, respectively .

As of September 30, 2020, we had an accumulated deficit o f $599.3 million.

We e xpect to continue to incur significant expenses and operating losses as we advance our current clinical stage programs through healthy volunteer and patient trials;

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All revenue recognized to date has been collaboration revenue from our collaboration agreements with Takeda and Sanofi.

In the future, we will continue to recognize revenue from the Takeda Collaboration Agreement and Sanofi Collaboration Agreement and may generate revenue from product sales or milestones, royalties and cost reimbursement from other collaboration agreements, such as the collaboration agreement with Biogen, strategic alliances and licensing arrangements.

In the future, we will continue to recognize revenue from the Takeda Collaboration Agreement and Sanofi Collaboration Agreement, and commence revenue recognition from the Biogen Collaboration Agreement, and may generate revenue from product sales or milestones, royalties and cost reimbursement from other collaboration agreements, strategic alliances and licensing arrangements.

We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing and amount of license fees, milestones, reimbursement of costs incurred and other payments and product sales, to the extent any are successfully commercialized.

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We also track external expenses associated with our TV platform.

These expenses include those incurred by us relating to our Takeda Collaboration Agreement and Sanofi Collaboration Agreement.

All external costs associated with earlier stage programs, or that benefit the entire portfolio, are tracked as a group.

These expenses include those incurred by us relating to our Takeda Collaboration Agreement, Sanofi Collaboration Agreement a nd Biogen Collaboration Agreement.

Al l external costs associated with earlier stage programs, or that benefit the entire portfolio, are tracked as a group.

We do not track personnel or other operating expenses incurred for our research and development programs on a program-specific basis.

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Results of Operations

Comparison of the three and six months ended June 30, 2020 and 2019

Comparison of the three and nine months ended September 30, 2020 and 2019

The following table sets forth the significant components of our results of operations (in thousands):

Three Months Ended June 30, Change

Three Months Ended September 30, Change

2020 2019 $ %

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Loss from operations (60,116) (50,155) (9,961) 20

(61,277) (62,763) 1,486 (2)

Interest and other income, net

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Income tax benefit (provision) (56) 113 (169) (150)

$ (58,758) $ (58,337) $ (421) 1 %

Six Months Ended June 30, Change

Net loss $ (58,228) $ (46,260) $ (11,968) 26 %

Nine Months Ended September 30, Change

2020 2019 $ %

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Loss from operations (181,360) (155,426) (25,934) 17

(121,244) (105,271) (15,973) 15

Interest and other income, net

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Income tax benefit — 426 (426) (100)

$ (115,521) $ (97,329) $ (18,192) 19 %

Net loss $ (173,749) $ (143,589) $ (30,160) 21 %

Collaboration revenue

Collaboration revenue was $5.8 million and $9.5 million for the three and six months ended June 30, 2020, respectively, and $4.2 million and $8.4 million for the three and six months ended June 30, 2019, respectively.

The increases in collaboration revenue of $1.6 million and $1.1 million for the three and six months ended June 30, 2020, respectively, compared to the comparative period in the prior year were due to increases in revenue from our collaboration with Takeda, driven by increased costs incurred in the programs partnered with Takeda, partially offset by decreases in revenue from our collaboration with Sanofi driven by the fact that revenue for retained activities under the Sanofi Collaboration Agreement are winding down as activities are transferred to Sanofi.

Collaboration revenue was $9.4 million and $18.8 million for the three and nine months ended September 30, 2020, respectively, and $13.6 million and $22.0 million for the three and nine months ended September 30, 2019, respectively.

The decreases in collaboration revenue of $4.2 million and $3.2 million for the three and nine months ended September 30, 2020, respectively, compared to the comparative period in the prior year were due to a decrease in revenue from our collaboration with Sanofi driven by a $10.0 million milestone recognized in the three and nine months ended September 30, 2019 related to the Peripheral program, and the winding down of revenue for retained activities as activities are transferred to Sanofi.

These decreases are partially offset by an increase in revenue from our collaboration with Takeda, driven by increased costs incurred in the programs partnered with Takeda.

Research and development expen ses

Research and development expenses were $53.2 million and $104.2 million for the three and six months ended June 30, 2020, compared to $51.9 million and $89.3 million for the three and six months ended June 30, 2019.

Research and development expenses were $53.7 million and $157.9 million for the three and nine months ended September 30, 2020, compared to $52.5 million and $141.8 million for the three and nine months ended September 30, 2019.

The following table summarizes our research and development expenses by program and category (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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__________________________________________________

(1) Personnel-related expenses include stock-based compensation expense of $7.1 million and $13.2 million for the three and six months ended June 30, 2020, respectively, and $5.3 million and $9.3 million for the three and six months ended June 30, 2019 , respectively, reflecting an increase of $1.8 million and $3.9 million, respectively.

There was an increase in total research and development expenses of $1.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

(1) Personnel-related expenses include stock-based compensation expense of $7.8 million and $21.0 million for the three and nine months ended September 30, 2020, respectively, and $4.9 million and $14.2 million for the three and nine months ended September 30, 2019 , respectively, reflecting an increase of $2.9 million and $6.8 million, respectively.

There was an increase in total research and development expenses of $1.2 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

This increase was a result of a $4.8 million increase in personnel-related expenses, consisting of a $1.9 million increase in salaries and related expenses attributable to an increase in our research and development headcount, and a $2.9 million increase in stock-based compensation expense primarily attributable to new equity award grants.

Additionally, there were increases in external expenses related to progression of our portfolio, including an increase of $0.5 million in ETV:IDS program external expenses and an increase of $0.1 million in EIF2B program external expenses due to the progress of these programs in the clinic.

These increases were partially offset by a $2.3 million decrease in LRRK2 program expenses, reflecting completion of DNL201 clinical activities and slowdown of DNL151 clinical activities in the three months ended June 30, 2020 as a result of COVID-19, a $0.7 million decrease in TV platform and other program external expenses driven by the $1.5 million contingent consideration payment to F-star in 2019, a $0.5 million decrease in other external research and development expenses, primarily attributable to a decrease in DNL747 costs after completion of the Phase 1b trials, and a decrease in other unallocated research and development expenses of $0.1 million.

There was an increase in total research and development expenses of $14.9 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Additionally, there were increases in external expenses related to progression of our portfolio, including an increase of $1.9 million in EIF2B program external expenses reflecting the cost of the Phase 1 clinical trial, and an increase of $2.0 million in TV platform and other program external expenses.

These increases were partially offset by a $3.2 million decrease in other external research and development expenses, primarily attributable to a decrease in DNL747 costs after completion of the Phase 1b trials, a $2.4 million decrease in LRRK2 program expenses, reflecting completion of DNL201 clinical activities, a $1.3 million decrease in ETV:IDS program external expenses primarily due to significant CMC activity in 2019, and a decrease in other unallocated research and development expenses of $0.6 million primarily attributable to decreased lab consumables costs and reductions in associated expenses related to COVID-19.

There was an increase in total research and development expenses of $16.0 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

This increase was a result of a $14.9 million increase in personnel-related expenses, consisting of a $8.1 million increase in salaries and related expenses attributable to an increase in our research and development headcount, and a $6.8 million increase in stock-based compensation expense primarily attributable to new equity award grants.

Additionally, there were increases in external expenses related to progression of our portfolio, including an increase of $3.2 million in the LRRK2 program, an increase of $1.1 million in EIF2B program external expenses, and an increase of $0.3 million in ETV:IDS program external expenses, all driven by the progress of these programs in the clinic, partially offset by a decrease of $1.1 million in TV platform and other program external expenses driven by the $1.5 million contingent consideration payment to F-star in 2019.

There was also a $0.6 million increase in other external research and development expenses to support our growing pipeline, and an increase in other unallocated research and development expenses of $0.7 million, which was primarily due to an increase in facilities-related expenses resulting from increased rent expense associated with the new headquarters lease.

Additionally, there were increases in external expenses related to progression of our portfolio, including an increase of $3.0 million in EIF2B program external expenses reflecting the cost of the Phase 1 clinical trial, an increase of $0.9 million in TV platform and other program external expenses, an increase of $0.7 million in LRRK2 program external expenses driven by DNL151 progress in the clinic, and an increase in other unallocated research and development expenses of $0.1 million.

These increases were partially offset by a decrease of $0.9 million in ETV:IDS program external expenses due to the $1.5 million contingent consideration payment to F-star and significant CMC activity, both in 2019, and a $2.7 million decrease in other external research and development expenses, primarily attributable to a decrease in DNL747 costs after completion of the Phase 1b trials.

General and administrative expenses

General and administrative expenses were $14.0 million for the three months ended June 30, 2020 compared to $15.1 million for the three months ended June 30, 2019.

The decrease of approximately $1.1 million was primarily attributable to a $2.0 million decrease in personnel-related expenses, primarily driven by higher stock-based compensation expense in the three months ended June 30, 2019 related to certain performance and market-based awards, partially offset by increases of $0.9 million in professional services costs and $0.1 million in facilities-related expenses.

Additionally, there was a decrease of $0.1 million in other general and administrative costs related to other miscellaneous costs such as insurance and taxes.

General and administrative expenses were $26.5 million for the six months ended June 30, 2020 compared to $24.4 million for the six months ended June 30, 2019.

The increase of approximately $2.1 million was primarily attributable to increases of $1.1 million in personnel-related expenses primarily driven by higher headcount, $0.8 million in professional services costs, $0.1 million in facilities-related expenses and $0.1 million in other general and administrative costs related to other miscellaneous costs such as insurance and taxes.

General and administrative expenses were $15.8 million for the three months ended September 30, 2020 compared to $11.2 million for the three months ended September 30, 2019.

The increase of approximately $4.6 million was primarily attributable to a $2.0 million increase in personnel-related expenses, primarily driven by higher stock-based compensation expense in the three months ended September 30, 2019 primarily attributable to new equity award grants.

Additionally, there was an increase of $2.0 million in professional services costs, primarily due to costs associated with the execution of the Biogen Collaboration Agreement, an increase of $0.5 million in other general and administrative costs related to other miscellaneous costs such as insurance and taxes, and a $0.1 million increase in facilities-related expenses.

General and administrative expenses were $42.3 million for the nine months ended September 30, 2020 compared to $35.6 million for the nine months ended September 30, 2019.

The increase of approximately $6.7 million was primarily attributable to increases of $3.0 million in personnel-related expenses primarily driven by higher headcount, $2.8 million in professional services costs, primarily due to costs associated with the execution of the Biogen Collaboration Agreement, $0.6 million in other general and administrative costs related to other miscellaneous costs such as insurance and taxes, and $0.3 million in facilities-related expenses.

Interest and other income, net

Interest and other income, net was $2.6 million for the three months ended June 30, 2020 compared to $4.1 million for the three months ended June 30, 2019.

The decrease of $1.5 million was primarily due to a $1.8 million decrease in interest income earned on our investments due to declining interest rates, partially offset by an increase of $0.3 million in sublease income received in the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Interest and other income, net was $5.7 million for the six months ended June 30, 2020 compared to $7.6 million for the six months ended June 30, 2019.

The decrease of $1.9 million was primarily due to a $3.0 million decrease in interest income earned on our investments due to declining interest rates, partially offset by an increase of $1.1 million in sublease income received in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Interest and other income, net was $1.9 million for the three months ended September 30, 2020 compared to $3.8 million for the three months ended September 30, 2019.

The decrease of $1.9 million was primarily due to decreased interest income earned on our investments due to declining interest rates.

Interest and other income, net was $7.6 million for the nine months ended September 30, 2020 compared to $11.4 million for the nine months ended September 30, 2019.

The decrease of $3.8 million was primarily due to a $5.0 million decrease in interest income earned on our investments due to declining interest rates, partially offset by an increase of $1.2 million in sublease income and reimbursements received in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Income tax benefit (provision)

Income tax provision associated with a decrease in unrealized gains on marketable securities in other comprehensive income was $0.1 million for the three months ended June 30, 2020 compared to an income tax benefit of $0.3 million for the three months ended June 30, 2019 associated with unrealized gains on marketable securities in other comprehensive income.

Income tax benefit associated with an unrealized gain on marketable securities in other comprehensive income was $0.1 million for the six months ended June 30, 2020 compared to $0.3 million for the six months ended June 30, 2019.

Comparison of the three and six months ended June 30, 2019 and 2018

Income tax provision associated with a decrease in unrealized gains on marketable securities in other comprehensive income was $0.1 million for the three months ended September 30, 2020 compared to an income tax benefit of $0.1 million for the three months ended September 30, 2019 associated with unrealized gains on marketable securities in other comprehensive income.

There was no income tax benefit associated with an unrealized gain on marketable securities in other comprehensive income for the nine months ended September 30, 2020 compared to $0.4 million for the nine months ended September 30, 2019.

Comparison of the three and nine months ended September 30, 2019 and 2018

Refer to “Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in our Form 10-Q for the three and six months ended June 30, 2019 for a discussion of the results of operations for the three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in our Form 10-Q for the three and nine months ended September 30, 2019 for a discussion of the results of operations for the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018.

Liquidity and Capital Resources

Sources of Liquidity

We fund our operations primarily with the proceeds from our IPO, our follow-on offering, and payments received from our collaboration agreements with Takeda and Sanofi.

We fund our operations primarily with the proceeds from our IPO, our follow-on offering, and payments received from our collaboration agreements with Takeda, Sanofi, and Biogen.

We received net proceeds of $264.3 million from our IPO in December 2017.

In January 2020, we sold 9.0 million shares of common stock (inclusive of shares sold pursuant to an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of $23.00 per share for aggregate net proceeds of $193.9 million.

Pursuant to the Takeda Collaboration Agreement, we have received $55.0 million related to upfront and milestone payments through June 30, 2020 .

Further, under the associated Purchase Agreement we received $110.0 million in February 2018 for the sale and issuance of 4,214,559 shares of our common stock.

Pursuant to the Sanofi Collaboration Agreement, we have received $135.0 million related to upfront and milestone payments, and further payments of $13.2 million for performance of Retained Activities through June 30, 2020.

As of June 30, 2020, we had cash, cash equivalents and marketable securities in the amount of $556.8 million.

Pursuant to the Takeda Collaboration Agreement, we have received $55.0 million related to upfront and milestone payments through September 30, 2020 .

Further, under the associated Stock Purchase Agreement we received $110.0 million in February 2018 for the sale and issuance of 4,214,559 shares of our common stock.

Pursuant to the Sanofi Collaboration Agreement, we have received $135.0 million related to upfront and milestone payments, and further payments of $11.2 million for performance of Retained Activities through September 30, 2020.

Pursuant to the common stock purchase agreement between Denali and Biogen (the "Biogen Stock Purchase Agreement"), we received $465.0 million in September 2020 for the sale and issuance of 13,310,243 shares of our common stock.

In October 2020, we received $560.0 million from Biogen in upfront payments associated with the Biogen Collaboration Agreement.

As of September 30, 2020, we had cash, cash equivalents and marketable securities in the amount of $981.5 million.

Future Funding Requirements

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Since our inception, we have incurred significant losses and negative cash flows from operations.

We have an accumulated deficit of $541.1 million through June 30, 2020.

We have an accumulated deficit of $599.3 million through September 30, 2020.

We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities.

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The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities $ (97,763) $ (103,933)

1 unchanged sentence

Net cash provided by financing activities 625,227 4,156

Net increase (decrease) in cash, cash equivalents and restricted cash $ 57,735 $ (14,187)

Net increase in cash, cash equivalents and restricted cash $ 271,598 $ 5,550

Net Cash Used In Operating Activities

During the six months ended June 30, 2020, cash used in operating activities was $97.8 million, which consisted of a net loss of $115.5 million, adjusted by non-cash items primarily related to stock-based compensation, depreciation, and non-cash rent expenses, partially offset by net amortization of discounts on marketable securities.

Cash used in operating activities was also driven by changes in our operating assets and liabilities.

During the nine months ended September 30, 2020, cash used in operating activities was $97.8 million, which consisted of a net loss of $173.7 million, adjusted by non-cash items primarily related to stock-based compensation and depreciation, partially offset by net amortization of discounts on marketable securities and non-cash rent expenses.

Cash used in operating activities was also driven by changes in our operating assets and liabilities, including an increase in related party contract liability associated with the Biogen Collaboration Agreement.

Net Cash Provided By (Used In) Investing Activities

During the six months ended June 30, 2020, cash used in investing activities was $43.7 million, which consisted of $323.6 million of purchases of marketable securities and $1.2 million of capital expenditures to purchase property and equipment, partially offset by $281.1 million in proceeds from the maturity of marketable securities.

During the nine months ended September 30, 2020, cash used in investing activities was $255.9 million, which consisted of $687.5 million of purchases of marketable securities and $1.9 million of capital expenditures to purchase property and equipment, partially offset by $433.6 million in proceeds from the maturity of marketable securities.

Net Cash Provided By Financing Activities

During the six months ended June 30, 2020, cash provided by financing activities was $199.3 million, which consisted of $193.9 million in net cash proceeds from our follow-on offering completed in January 2020 and $5.4 million in proceeds from the exercise of options to purchase common stock and issuance of ESPP shares.

Discussion of the six months ended June 30, 2019

During the nine months ended September 30, 2020, cash provided by financing activities was $625.2 million, which consisted of $420.1 million associated with the issuance of 13,310,243 shares of our common stock to Biogen in September 2020 under the Biogen Stock Purchase Agreement, $193.9 million in net cash proceeds from our follow-on offering completed in January 2020, and $11.1 million in proceeds from the exercise of options to purchase common stock and issuance of ESPP shares.

Discussion of the nine months ended September 30, 2019

Refer to “Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our Form 10-Q for six months ended June 30, 2019 for a discussion of the cash flows for that period.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our Form 10-Q for the nine months ended September 30, 2019 for a discussion of the cash flows for that period.

Off-Balance Sheet Arrangements

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In addition, the Headquarters Lease Amendment provided a tenant improvement allowance ("TIA") of up to $25.9 million, which was fully utilized, of which $4.4 million will be repaid to the landlord in the form of additional monthly rent.

This is recorded as leasehold improvement assets and an offset to the lease ROU asset on the Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019.

This is recorded as leasehold improvement assets and an offset to the lease ROU asset on the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019.

We are also required to pay the operating expenses for the New Premises, such as taxes and insurance, which are treated as variable lease payments.

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Unless earlier terminated, the DMSA will expire on September 6, 2022.

As of June 30, 2020 and December 31, 2019, we had open non-cancellable purchase orders for biological product development and manufacturing costs totaling $18.0 million and $21.2 million, respectively.

As of September 30, 2020 and December 31, 2019, we had open non-cancellable purchase orders for biological product development and manufacturing costs totaling $17.6 million and $21.2 million, respectively.

The activities under these purchase orders are expected to be completed by May 2027.

As of June 30, 2020 and December 31, 2019, we had total non-cancellable purchase commitments, under the DMSA of $12.1 million and $11.2 million, respectively.

During the three months ended June 30, 2020 and 2019, we incurred costs of $3.8 million and $3.1 million, respectively, and made payments of $2.0 million and $3.9 million, respectively, for the development and manufacturing services rendered under the DMSA.

During the six months ended June 30, 2020 and 2019, we incurred costs of $4.8 million and $6.7 million, respectively, and made payments of $5.2 million and $6.5 million, respectively, for the development and manufacturing services rendered under the DMSA.

As of September 30, 2020 and December 31, 2019, we had total non-cancellable purchase commitments, under the DMSA of $12.0 million and $11.2 million, respectively.

During the three months ended September 30, 2020 and 2019, we incurred costs of $1.4 million and $3.0 million, respectively, and made payments of $0.8 million and $2.5 million, respectively, for the development and manufacturing services rendered under the DMSA.

During the nine months ended September 30, 2020 and 2019, we incurred costs of $6.2 million and $9.7 million, respectively, and made payments of $6.0 million and $9.0 million, respectively, for the development and manufacturing services rendered under the DMSA.

Other than those detailed above, there have been no other material changes from the contractual obligations and commitments previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 27, 2020.

4 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2020 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 27, 2020 .

There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2020 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 27, 2020 .

Recent Accounting Pronouncements

Except as described in Note 1 to the condensed consolidated financial statements under the headings "Recently Issued Accounting Pronouncement" and "Recently Adopted Accounting Pronouncement," there have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2020 , as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 27, 2020, that are of significance or potential significance to us.

Except as described in Note 1 to the condensed consolidated financial statements under the headings "Recently Issued Accounting Pronouncement" and "Recently Adopted Accounting Pronouncement," there have been no new accounting pronouncements or changes to accounting pronouncements during the nine months ended September 30, 2020 , as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 27, 2020, that are of significance or potential significance to us.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis