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Item 1. Business

2021-02-26 compared with 2020-02-27 · 358 added, 181 removed, 557 unchanged (49% of the section changed)

Overview and Strategy

Our goal is to discover and develop therapeutics to defeat degeneration.

Our goal is to discover, develop and deliver therapeutics to defeat degeneration.

Neurodegeneration represents one of the most significant unmet medical needs of our time, with few effective therapeutic options available for patients with neurodegenerative diseases.

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By executing this strategy with a team of experienced and passionately dedicated scientists and drug developers, we believe we can succeed in a field that has seen limited progress over the past several decades.

We have a focused yet diversified portfolio with fifteen programs.

We have a focused yet diversified portfolio with five clinical programs and more than fifteen programs in the preclinical development stage.

To further increase the probability of success of our programs, we make parallel investments in lead and back-up development candidates, and plan to advance only those candidates to the later stages of clinical development that show strong preclinical and early clinical data.

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We have arrangements with biopharmaceutical companies, technology companies, academic institutions, foundations, and patient-focused data companies.

Notable active arrangements we have include those with Takeda Pharmaceutical Company Limited ("Takeda"), Genzyme Corporation, a wholly owned subsidiary of Sanofi S.A.

Notable active arrangements include those with Biogen Inc.’s subsidiaries, Biogen MA Inc.

(“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”), Takeda Pharmaceutical Company Limited ("Takeda"), Genzyme Corporation, a wholly owned subsidiary of Sanofi S.A.

("Sanofi"), Genentech, Inc., F-star, Sirion, Harvard University, the Michael J.

Fox Foundation, and Centogene, amongst others.

Through these arrangements, we are able to gain access to new product candidates, deepen our scientific understanding of certain areas of biology, identify potential patients for our clinical trials and thereby accelerate and increase the probability of success of the development of our programs.

Fox Foundation, Centogene and Secarna, amongst others.

Through these arrangements, we are able to gain access to additional resources and complementary expertise, new product candidates, deepen our scientific understanding of certain areas of biology, identify potential patients for our clinical trials and thereby accelerate and increase the probability of success of the development of our programs.

We believe that being an active participant in the scientific community and accessing external innovation is important to our success and we plan to remain active in business development activities.

Our goal is to be the most attractive partner for academic groups and companies in the field of neurodegeneration based on our singular focus, deep scientific expertise in neurodegeneration and BBB biology, established research and development capabilities and ability to execute development programs with speed and scientific rigor.

We have retained significant development and commercialization rights to all of our programs, including the programs partnered with Takeda, as well as with Sanofi for central nervous system ("CNS") indications, where we share responsibility for clinical development and share commercialization rights in the US and China.

Our goal is to be the most attractive partner for academic groups and companies in the field of neurodegeneration based on our singular focus, deep scientific expertise in neurodegeneration and BBB biology, established research and development capabilities, growing manufacturing and commercial capabilities and the ability to execute development programs with speed and scientific rigor.

We hold significant development and commercialization rights to all of our programs, including the programs which are subject to our collaboration agreements with Biogen and Takeda, as well as with Sanofi for central nervous system ("CNS") indications, where we share responsibility for clinical development and share commercialization rights in the United States and China.

We envision our future as a fully integrated global organization serving patients.

As we build and grow our capabilities, we maintain a deep focus on science at the core of our efforts to discover, develop and deliver medicines.

We plan to further grow our discovery and early clinical development capabilities and intend to expand global late-stage clinical development capabilities, internal manufacturing capabilities and commercial infrastructure in a staged manner that is aligned with the development timelines of our portfolio.

We intend to commercialize our product candidates globally, if approved, with a tailored strategic approach for each therapeutic area.

We believe that our investigational therapy for Hunter syndrome (DNL310) has the potential to be our first approved medicine and that we can leverage certain efficiencies of scale to support the commercialization of additional lysosomal storage disease ("LSD") therapeutics.

More than 30,000 patients suffer from LSDs world-wide, with approximately two-thirds having CNS manifestations that are not addressed by currently available enzyme replacement therapies.

We are actively working toward building clinical manufacturing capabilities and continuing to expand our commercial capabilities in LSDs and intend to serve patients directly in several countries.

Subsequently, we intend to expand into rare CNS diseases, such as amyotrophic lateral sclerosis ("ALS") and Frontotemporal Dementia ("FTD"), which afflict more than 200,000 patients world-wide.

We may commercialize these product candidates, if approved, independently or seek partners to ensure optimal access for patients.

For the common neurodegenerative diseases, such as Alzheimer's disease and Parkinson's disease, which afflict more than 50 million patients world-wide, we plan to initially leverage strategic collaborations that contribute existing global commercial infrastructure.

Our Approach to Defeating Neurodegeneration

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The two most common neurodegenerative diseases are Alzheimer’s disease, representing an estimated 60% to 70% of all dementias according to the World Health Organization, and Parkinson’s disease.

In the United States, 5.8 million people suffer from Alzheimer’s disease, as many as one million people suffer from Parkinson’s disease, and more than 16,000 patients suffer from ALS, according to estimates from the Alzheimer’s Association, the Parkinson’s Disease Foundation, and the ALS Association, respectively.

In the United States, 5.8 million people suffer from Alzheimer’s disease, as many as one million people suffer from Parkinson’s disease, and more than 16,000 people suffer from ALS, according to estimates from the Alzheimer’s Association, the Parkinson’s Disease Foundation, and the ALS Association, respectively.

The cost to society from neurodegenerative disease is enormous.

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In the United States, the total cost of care to patients suffering from Alzheimer’s disease and other dementias far exceeds that of many other diseases, including cancer.

Our target indications include diseases with large patient populations, such as Alzheimer’s disease and Parkinson’s disease, as well as orphan indications, such as mucopolysaccharidosis type II ("MPS II", or "Hunter syndrome"), and amyotrophic lateral sclerosis ("ALS").

Our target indications include diseases with large patient populations, such as Alzheimer’s disease and Parkinson’s disease, as well as orphan indications, such as Hunter syndrome, FTD and ALS.

Degenogene Biology

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Lysosomal Function:

Dysfunction of the lysosomal system is associated with several neurodegenerative diseases, including Parkinson’s disease and neurodegeneration in the context of lysosomal storage diseases ("LSDs").

Dysfunction of the lysosomal system is associated with several neurodegenerative diseases, including Parkinson’s disease and neurodegeneration in the context of LSDs.

Degenogenes linked to lysosomal function include leucine-rich repeat kinase 2 ("LRRK2"), progranulin ("PGRN"), alpha-synuclein ("aSyn"), and lysosomal enzymes, including iduronate 2-sulfatase ("IDS"), Sulfamidase ("SGSH"), and glucocerebrosidase ("GBA").

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Degenogenes implicate immune dysfunction in the brains of patients with Alzheimer’s disease and other neurodegenerative diseases.

These degenogenes include TREM2 and numerous other genes that are highly expressed in inflamed microglia, the resident immune cells of the brain.

These degenogenes include triggering receptor expressed on myeloid cells 2 ("TREM2") and numerous other genes that are highly expressed in inflamed microglia, the resident immune cells of the brain.

We believe the impact of immune modulation in neurodegeneration is a promising approach to treating disease.

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The brain is particularly susceptible to defects in lipid, protein or RNA homeostasis.

Mutations in several ALS / Frontotemporal Dementia ("FTD") degenogenes alter RNA homeostasis and increase cellular stress.

EIF2B is an essential regulator of cellular stress, and modulators of EIF2B activity have been shown to be beneficial in numerous in vitro and in vivo models of neurodegenerative disease.

Mutations in several ALS and FTD degenogenes alter RNA homeostasis and increase cellular stress.

Eukaryotic initiation factor 2 B ("EIF2B") is an essential regulator of cellular stress, and modulators of EIF2B activity have been shown to be beneficial in numerous in vitro and in vivo models of neurodegenerative disease.

Other degenogenes linked to cellular homeostasis include amyloid precursor protein ("APP"), Tau and Apolipoprotein E.

BBB Platform Technology

Our Transport Vehicle ("TV") technology enables several classes of biotherapeutics to more effectively cross the BBB, including enzymes, antibodies, proteins and oligonucleotides.

Our TV technology enables several classes of biotherapeutics to more effectively cross the BBB, including enzymes, antibodies, proteins and oligonucleotides.

This technology is designed to engage specific BBB transport receptors, which are ubiquitously expressed in brain capillaries and facilitate transport of proteins into the brain (Figure 1).

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The improvement in brain exposure may enable TV-enabled product candidates to achieve therapeutically relevant concentrations in the brain after systemic administration, making them potentially superior to traditional antibody and enzyme therapeutics in targeting neurodegenerative diseases.

Our TV technology is differentiated from other BBB technologies through its engineering approach, which may provide superior stability, safety, and higher exposure of drug candidates in the brain.

Our TV technology is differentiated from other BBB technologies through its engineering approach, which may provide superior stability, safety, and higher exposure of drug candidates in the brain (Figure 2).

Our pipeline currently includes 15 programs that are based on our TV technology, including the most advanced program ETV:IDS (DNL310).

In November 2020, we announced first human clinical biomarker proof of concept for our TV technology from an ongoing Phase 1/2 trial of DNL310 in patients with Hunter syndrome.

Delivering high concentrations of protein therapeutics to the brain has potential benefits for a large range of therapeutic applications.

We believe that we can expand our portfolio leveraging the modularity of the TV technology.

In addition to our current focus on neurodegenerative and LSDs, we are exploring programs in oncology (ATV:HER2) and infectious diseases as well as other neurological and neuromuscular indications (Figure 3).

We may develop these additional programs ourselves in the future or seek partnerships.

Transport Vehicle technology is highly differentiated

Our pipeline includes nine programs that are based on our TV technology, including the most advanced program ETV:IDS (DNL310) for which we expect to initiate a Phase 1/2 study in patients with Hunter syndrome in the first half of 2020 and obtain human proof of concept data by the end of 2020.

Leveraging the modularity of the TV technology, we believe we can expand our portfolio with several new programs in the future.

Transport Vehicle technology provides opportunities for platform expansion

As part of our strategy, we identify and validate biomarkers which are relevant for both animal models and human trials, are critical for patient selection, predicting and measuring target engagement, supporting dose selection and enabling decisions on progression of product candidates to the next phase of development.

TV technology provides opportunities for platform expansion

As part of our strategy, we identify and validate biomarkers which are relevant for both animal models and human trials, are critical for selecting patients, predicting and measuring target engagement, supporting dose selection and enabling decisions on progression of product candidates to the next phase of development.

When practicable, we are developing patient selection biomarkers for our programs to enable identification of patients with the relevant disease biology and stage of disease likely to benefit from targeted therapy in order to increase the likelihood of success of clinical trials.

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LRRK2 Inhibitor Program

DNL201 and DNL151 are the two most advanced LRRK2 product candidates in our portfolio, and are potent, selective and brain-penetrant small molecule inhibitors of LRRK2 under investigation for treatment of Parkinson’s disease.

We recently completed a Phase 1b clinical trial for DNL201 in Parkinson’s disease patients both with and without a genetic LRRK2 mutation.

DNL151 is currently in a Phase 1 clinical trial in healthy volunteers and a Phase 1b study in Parkinson’s disease patients.

LRRK2 is a protein involved in regulating lysosomal function by modifying Rab proteins, which control intracellular lysosomal trafficking.

Mutations in the LRRK2 gene that cause Parkinson’s disease increase LRRK2 kinase activity leading to excessive phosphorylation of Rab proteins, thereby disrupting normal lysosomal movement and maturation.

Inhibition of LRRK2 kinase activity with a LRRK2 kinase inhibitor reduces Rab phosphorylation and restores normal lysosomal function.

Parkinson's disease is one of the most common brain diseases, affecting approximately 6 million people world-wide.

It is commonly thought of as a movement disorder because patients can experience tremors, slowness of movement, stiffness and difficulty with walking and balance.

In addition, Parkinson's patients can have other non-motor type problems such as constipation, depression and memory loss.

The disease results from the loss of dopamine-producing cells in the brain and is likely caused by a combination of genetic and environmental risk factors.

LRRK2 is the most common genetic risk factor for Parkinson's disease, and is involved in maintaining a healthy cellular environment by regulating lysosomal function through modification of Rab proteins.

Increased levels of LRRK2 lead to lysosomal dysfunction, which contributes to neurodegeneration and the formation of Lewy bodies, a central pathology of Parkinson's disease.

Inhibition of LRRK2 activity may slow the progression of Parkinson’s disease in patients with and without known genetic risks based on restoration of lysosomal function.

We have advanced two chemically distinct CNS-penetrant small molecules that inhibit LRRK2 into clinical development, DNL201 and DNL151.

Based on the totality of preclinical and clinical data to date, both DNL201 and DNL151 have met our requirements to proceed into further late-stage clinical studies.

In August 2020, we, in collaboration with Biogen, announced the selection of DNL151 to advance into two late-stage studies in Parkinson’s disease:

one in Parkinson's patients who carry LRRK2 mutations and the other in Parkinson's patients independent of mutation status.

DNL151 was selected for its pharmacokinetic properties that provide additional dosing regimen flexibility.

DNL201 remains a backup molecule for this program.

As described in more detail in “Business - Licenses and Collaborations” below, we are collaborating with Biogen on the LRRK2 program and intend to initiate late-stage development in the second half of 2021.

Biomarker-Driven Development

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BMP di22:6 is a lysosomal lipid biomarker that indicates changes in lysosome function associated with LRRK2 inhibition and is elevated in individuals that carry LRRK2 disease-associated mutations.

Results of DNL201 phase 1 clinical study in healthy volunteers

Preliminary Results of DNL151 (BIIB122) Phase 1 Clinical Trial

DNL151 (BIIB122) has completed dosing of 162 healthy volunteers in an ongoing Phase 1 trial in healthy volunteer subjects and met safety, target engagement and biomarker goals.

In January 2020, we announced that preliminary results from the ongoing Phase 1 trial for DNL151 (BIIB122) in healthy volunteers demonstrated an encouraging safety and pharmacokinetic/pharmacodynamic profile (Figure 5A).

DNL151 (BIIB122) was generally well tolerated at all doses tested, and the majority of subjects experienced either no or mild AEs.

Target and pathway engagement of greater than 50 percent and a dose-dependent reduction of BMP in urine of up to 50 percent were observed at clinically relevant doses.

We are currently completing further dose escalation cohorts in the Phase 1 trial to define the full therapeutic window of DNL151 (BIIB122).

DNL151 (BIIB122) demonstrated:

pS935 LRRK2 inhibition, a biomarker of LRRK2 kinase activity and target engagement.

pRab10 inhibition, a biomarker of LRRK2 kinase pathway engagement linked to lysosomal regulation.

reduction in urinary BMP.

DNL151 (BIIB122) Phase 1b trial in Parkinson’s disease patients

The DNL151 (BIIB122) Phase 1b trial (NCT04056689) in Parkinson's disease patients was a 28-day, multicenter, randomized, placebo controlled, double-blind clinical trial in patients with mild-to-moderate Parkinson’s disease conducted in the United States and Europe.

Its purpose was to evaluate safety, tolerability, pharmacokinetics, pharmacodynamics, including target and pathway engagement biomarkers as well as certain exploratory clinical endpoints, after multiple oral doses of DNL151 (BIIB122).

A total of 36 Parkinson's patients were enrolled.

In January 2021, we announced completion of the Phase 1b trial and that target engagement and pathway engagement goals (the same as for DNL201) were met.

We plan to present data from the Phase 1b trial at upcoming medical congresses.

DNL151 (BIIB122) Future Development Plan

We and Biogen expect to initiate late-stage clinical development of DNL151 (BIIB122) in Parkinson's patients by year-end 2021.

Two clinical trials are planned:

one in Parkinson's patients who carry LRRK2 mutations and the other in Parkinson's patients independent of mutation status.

Results of DNL201 Phase 1 Clinical Trial

The DNL201 Phase 1 clinical trial in healthy volunteers was completed in July 2018.

This was a randomized, double-blind, placebo-controlled, single-center clinical trial in 105 healthy young and 17 healthy elderly subjects to investigate the safety and tolerability of single and multiple oral doses of DNL201 and characterize the PK and PD of DNL201 in plasma and CSF.

In this trial, DNL201 met all objectives including CSF exposure levels and LRRK2 inhibition, as well as evidence of pathway engagement, at doses that were well tolerated.

The data from this clinical trial supported our decision to initiate the Phase 1b clinical study in Parkinson’s disease patients.

Results of DNL201 phase 1b clinical study in Parkinson’s disease patients

The DNL201 Phase 1b clinical trial in Parkinson’s disease patients was completed in December 2019, and safety and biomarker data from this study, including biomarkers of lysosomal function, support advancement to the next stage of clinical development (figure 5A below).

This study (NCT03710707) was a 28-day, randomized, placebo controlled Phase 1b clinical trial in patients with mild to moderate Parkinson’s disease, with and without genetic LRRK2 mutations.

In this trial, DNL201 met all objectives including cerebrospinal fluid ("CSF") exposure levels and LRRK2 inhibition, as well as evidence of pathway engagement, at doses that were well tolerated.

The data from this clinical trial supported our decision to initiate the Phase 1b clinical trial in Parkinson’s disease patients.

Results of DNL201 Phase 1b Clinical Trial

The DNL201 Phase 1b clinical trial in Parkinson’s disease patients was completed in December 2019, and safety and biomarker data from this trial, including biomarkers of lysosomal function, support advancement to the next stage of clinical development (Figure 5B below).

This trial (NCT03710707) was a 28-day, randomized, placebo-controlled Phase 1b clinical trial in patients with mild to moderate Parkinson’s disease, with and without genetic LRRK2 mutations.

Its purpose was to evaluate safety, tolerability, pharmacokinetics, pharmacodynamics, and target and pathway engagement biomarkers in multiple oral doses of DNL201.

Exploratory endpoints included certain clinical endpoints.

The 28 patients dosed in the study were randomized to receive either a low dose of DNL201, a high dose of DNL201, or placebo.

The 28 patients dosed in the trial were randomized to receive either a low dose of DNL201, a high dose of DNL201, or placebo.

DNL201 was generally well tolerated at the low dose and the majority of subjects experienced either no or mild adverse events (“AEs”).

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Target and Pathway Engagement

The Phase 1b results with DNL201 in patients with Parkinson’s disease met all biomarker goals by demonstrating greater than 50 percent inhibition of pS935 LRRK2 and pRAB10 in blood for both doses tested and improvement of the lysosomal biomarker BMP (22:6-bis-monoacylglycero-phosphate) by 20 percent and 60 percent in urine at the low and high dose, respectively.

DNL201 demonstrates:

The Phase 1b results with DNL201 in patients with Parkinson’s disease met all biomarker goals by demonstrating greater than 50 percent inhibition of pS935 LRRK2 and pRAB10 in blood for both doses tested and improvement of the lysosomal biomarker BMP by 20 percent and 60 percent in urine at the low and high dose, respectively.

DNL201 demonstrated:

pS935 LRRK2 inhibition, a biomarker of LRRK2 kinase activity and target engagement.

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reduction in urinary BMP, an established biomarker of lysosomal dysfunction in biofluids that is elevated in LRRK2 mutation carriers.

Preliminary Results of DNL151 phase 1 clinical study in healthy volunteers

Preliminary results from the ongoing Phase 1 study for DNL151 in healthy volunteers demonstrated an encouraging safety and pharmacokinetic/pharmacodynamic profile (Figure 5B).

DNL151 was generally well tolerated at all doses tested, and the majority of subjects experienced either no or mild AEs.

Target and pathway engagement of greater than 50 percent and a dose-dependent reduction of BMP in urine of up to 50 percent were observed at clinically relevant doses.

Given these positive data, both of the ongoing DNL151 Phase 1 and Phase 1b clinical trials have been expanded to study higher doses.

DNL151 demonstrates:

Left-pS935 LRRK2 inhibition, a biomarker of LRRK2 kinase activity and target engagement.

pRab10 inhibition, a biomarker of LRRK2 kinase pathway engagement linked to lysosomal regulation.

reduction in urinary BMP.

Status of DNL151 phase 1b clinical study in Parkinson’s disease patients

This study is a 28-day, multicenter, randomized, placebo controlled, double-blind Phase 1b clinical trial in patients with mild-to-moderate Parkinson’s disease.

Its purpose is to evaluate safety, tolerability, pharmacokinetics, pharmacodynamics, including target and pathway engagement biomarkers as well as certain exploratory clinical endpoints, after multiple oral doses of DNL151.

To date, 25 patients have been enrolled in the study, and the protocol has been amended to expand the study with up to 10 additional patients.

Final data readout from this trial is expected to be presented in mid-2020.

Future Development Plan

DNL151 is currently in a Phase 1 clinical trial in healthy volunteers and a Phase 1b biomarker study in Parkinson’s disease patients.

After completion of the ongoing Phase 1 and Phase 1b studies for DNL151 in mid-2020, we will have dosed more than 300 subjects with one of our LRRK2 inhibitors.

Upon completion of the ongoing clinical studies, as well as ongoing chronic toxicology studies, we plan to select either DNL201 or DNL151 for advancement into a Phase 2/3 clinical trial.

Other LRRK2 Compounds

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Excessive LRRK2 activity leads to a reduction in lysosomal function, which contributes to the inflammation and intestinal dyshomeostasis that are characteristic of this disorder.

We have discovered potent and selective small molecule inhibitors of LRRK2 and have selected a lead clinical candidate for treatment of Crohn's disease.

RIPK1 Inhibitor Program

DNL747 is the most advanced product candidate in our receptor interacting serine/threonine protein kinase 1, or RIPK1, inhibitor program, and is a potent, selective and brain-penetrant small molecule RIPK1 inhibitor.

As described in more detail in “Business - Licenses and Collaborations” below, we are collaborating with Sanofi on the RIPK1 inhibitor program in neurological diseases, including Alzheimer’s disease, ALS and multiple sclerosis ("MS").

RIPK1 is a critical signaling protein in the tumor necrosis factor receptor pathway and is a regulator of inflammation and cell death.

Increased RIPK1 activity in the brain drives neuroinflammation and cell necroptosis and contributes to neurodegeneration.

RIPK1 inhibition has been shown to have beneficial effects in preclinical models of Alzheimer’s disease, ALS and other diseases.

Biomarker-Driven Development

Target engagement has been characterized using a marker of RIPK1 activity, autophosphorylation of RIPK1 at Serine166 (pS166).

This biomarker has been characterized in in vitro assays in human and monkey PBMCs and has been demonstrated to be robustly reduced by RIPK1 inhibitors.

Results of phase 1 clinical study in healthy volunteers

The Phase 1 clinical trial of DNL747 in healthy volunteers was completed in November 2018.

This was a randomized, double-blind, placebo-controlled, single-center clinical trial in 56 healthy subjects to investigate the safety and tolerability of single and multiple oral doses of DNL747 and characterize the PK and PD of DNL747 in plasma and CSF.

In this trial, DNL747 met all endpoints, including CSF exposure levels, RIPK1 inhibition, and pathway engagement, at doses that were well tolerated.

The data from this clinical trial supported our decision to initiate the Phase 1b clinical studies in patients with ALS and Alzheimer’s disease.

Future Development Plan

Together with our partner Sanofi, we have completed enrollment in two Phase 1b patient biomarker studies in ALS and Alzheimer’s disease and have initiated an open-label extension, or OLE, study for patients with ALS.

Based on final safety and biomarker data for the Phase 1b patient biomarker studies and ongoing chronic toxicology studies, we plan to determine the next steps in the clinical development plan for DNL747 in collaboration with Sanofi.

Other RIPK1 Compounds

As part of our parallel development strategy, we have also developed a number of other structurally diverse CNS-penetrant and peripherally-restricted RIPK1 inhibitor molecules, which are included as part of the collaboration agreement with Sanofi.

After DNL747, the most advanced RIPK1 inhibitor molecule is DNL758, a Peripheral Product (as defined below) candidate which is in a Phase 1 clinical trial in healthy volunteers.

Sanofi leads all clinical development activities with DNL758 for systemic inflammatory diseases.

ETV:IDS Enzyme Replacement Therapy Program

The IDS enzyme is responsible for breaking down the glycosaminoglycans ("GAGs") in the lysosome thereby maintaining lysosomal homeostasis.

Genetic defects in IDS lead to a deficiency in IDS enzymatic activity in the lysosome and cause Hunter syndrome, which is characterized by abnormalities in the skeleton, heart, respiratory system, and the brain.

We have discovered potent and selective small molecule inhibitors of LRRK2 and have selected a lead clinical candidate (“DNL975”) for treatment of Crohn's disease.

As described in more detail in “Business - Licenses and Collaborations” below, we are collaborating with Biogen on the Peripheral LRRK2 program.

ETV:IDS Enzyme Replacement Therapy Program for Hunter Syndrome

Hunter syndrome is an X-linked, monogenic LSD, which affects approximately 2,000 boys world-wide.

Hunter syndrome is caused by a mutation in the gene that encodes for the enzyme iduronate-2-sulfatase (IDS).

IDS is an enzyme responsible for breaking down glycosaminoglycans ("GAGs") in the lysosome thereby maintaining lysosomal homeostasis.

In Hunter syndrome, the reduction or loss of IDS enzyme activity leads to accumulation of GAGs, which causes lysosomal dysfunction and neurodegeneration as well as progressive damage to multiple organs including bone, cartilage, heart, lung and brain.

Approximately two-thirds of Hunter syndrome patients suffer from central manifestations of the disease, which is characterized by intellectual disability and a progressive cognitive decline that emerges between three and five years of age.

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There is a demonstrated need for enzyme replacement therapies ("ERTs") that effectively cross the BBB so as to treat both central and peripheral manifestations of Hunter syndrome and other LSDs.

DNL310 ("ETV:IDS") is an intravenously, centrally administered ERT biotherapeutic enabled by our enzyme transport vehicle ("ETV"), designed to address both central and peripheral manifestations of the disease by restoring IDS and reducing GAGs, both peripherally and in the brain, in patients with Hunter syndrome.

We have completed proof of concept short-term dosing studies with administration of comparable activity matched high doses of Elaprase and ETV-IDS (Figure 6A).

In addition, we have completed studies with longer term dosing at lower dose levels to evaluate the lowest potential efficacious dose that demonstrates GAG reduction and reduction in NfL, a marker of neuroaxonal injury prevention (Figure 6B)

n=8 per IDS KO;

TfR mu/hu group or 5 per TfR mu/hu group, data shown as mean +/- s.e.m.;

*** p < 0.001, **** p < 0.0001, ns = not significant

Left and middle:

ETV:IDS reduces GAG levels in the liver in a mouse model of Hunter syndrome, comparable to the reduction seen with IDS, while ETV:IDS significantly reduces GAG levels in the brain as compared to IDS.

ETV:IDS significantly reverses BMP accumulation, a lipid biomarker, as compared to IDS.

n=10 per TfR mu/hu group, n= 9-10 per IDS KO;

TfR mu/hu group;

data shown as mean +/- s.e.m.;

* p < 0.05, *** p < 0.001, **** p < 0.0001;

13 week dose range study

13 weeks IV administration dose range study of therapeutically-relevant doses in a mouse model of Hunter syndrome.

Left and middle:

ETV:IDS reduces levels of GAGs, substrates of the IDS enzyme, in the liver and brain;

ETV:IDS reduces levels of neurofilament light ("NfL"), a marker of neuronal injury.

DNL310 ("ETV:IDS") is an intravenously, centrally administered ERT biotherapeutic enabled by our enzyme transport vehicle ("ETV"), designed to address both central and peripheral manifestations of the disease by delivering IDS and reducing GAGs, both peripherally and in the brain, in patients with Hunter syndrome.

DNL310 is currently being evaluated in a Phase 1/2 trial in patients with Hunter syndrome.

Biomarker-Driven Development

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These assays are designed to measure changes in primary substrate accumulation that is a result of enzyme deficiency in these patients.

In addition, we have identified pathway and disease biomarkers that are dysregulated in animal models of Hunter syndrome.

Future Development Plan

In patients with Hunter syndrome receiving standard ERT, a reduction in urine GAG levels is associated with improvements in peripheral manifestations of the disease whereas there is no effect on CSF GAG levels or neurocognitive manifestations.

Based on our preclinical models with ETV:IDS, we anticipate that reductions in both urine and CSF GAG levels may result in improvements in both peripheral and neurocognitive manifestations of the disease.

In addition, we have identified downstream pathway and disease biomarkers that are dysregulated in animal models of Hunter syndrome, and we are exploring these biomarkers in clinical studies.

Phase 1/2 Trial in Patients with Hunter Syndrome

The investigational new drug application ("IND") for DNL310 was accepted in January 2020.

We plan to initiate a Phase 1/2 study for DNL310 in Hunter syndrome patients in the first half of 2020.

DNL310 will be our first therapeutic enabled by our TV BBB platform technology to enter the clinic and we intend to demonstrate proof of concept patient biomarker data for DNL310 by the end of 2020.

We initiated a Phase 1/2 trial for DNL310 in Hunter syndrome patients in August 2020 as a multicenter, multiregional, open-label trial to assess the safety, pharmacokinetics, and pharmacodynamics of increasing dose levels of DNL310 administered once weekly by intravenous infusion.

The initial trial design included two staggered cohorts:

the first (Cohort A) enrolled a total of five neuronopathic patients aged five to ten years;

the second (Cohort B) is enrolling either neuronopathic or non-neuronopathic patients aged two to eighteen years.

A third cohort (Cohort C) is planned to enroll neuronopathic patients aged two to under four years.

In November 2020, we announced achieving first-in-human biomarker proof of concept for our TV technology based on safety and biomarker results after patients in Cohort A had received four weekly IV doses of DNL310.

In February 2021, we presented an interim analysis of additional safety and biomarker data from the five patients enrolled in Cohort A, who all received three months of weekly IV doses of DNL310 after switching from idursulfase ERT on Day 1 of the trial.

Key results included:

• Normal levels of heparan sulfate, a GAG, in CSF that were seen after four weeks of dosing in four of the five patients were sustained after three months of dosing (mean 85% reduction;

heparan sulfate levels were further significantly reduced and approached normal levels in the fifth patient (from 25% to 73% reduction from one to three months, respectively).

• Reductions in downstream exploratory CSF biomarkers, GM3 and BMP (lysosomal lipids), of 39% and 15%, respectively, were observed after eight weeks of dosing with DNL310, consistent with improvement in lysosomal function.

• Reductions in urine heparan sulfate (Figure 6) and dermatan sulfate following a switch from idursulfase, of 76% and 82%, respectively, were observed after eight weeks of dosing of DNL310, supporting potential for improved peripheral effects relative to standard of care.

• DNL310 was generally well tolerated with no dose reductions and all five patients continue in the trial.

The most frequently observed adverse events were mild or moderate infusion-related reactions in three of the five patients, which is consistent with other ERTs.

• Based on three-month clinical data, doses of DNL310 from 3 mg/kg to 30 mg/kg are generally well tolerated and provide flexibility for dose selection in clinical trials.

We believe the Phase 1/2 data to date continue to support the overall safety profile and biomarker effects of DNL310 as an investigational treatment in Hunter syndrome.

Importantly, at dose levels resulting in robust and durable biomarker response, DN310 appears generally well tolerated with a safety profile consistent with standard of care ERT.

In addition, early biomarker effects initially seen after four weeks of treatment with DNL310 were sustained after three months of dosing, and the reductions observed in CSF lipid biomarkers indicate, for the first time, an improvement in lysosomal function.

The urine GAG results also support the potential for systemic administration of TV-enabled therapeutics to address peripheral disease.

Overall, the magnitude and durability of biomarker response and tolerability seen with DNL310 in this Phase 1/2 trial provide strong support for the potential application of our TV technology to deliver enzymes and other therapeutic modalities to the brain.

Heparan sulfate levels as measured in the CSF (left) and urine (right) from patients with Hunter syndrome enrolled into Cohort A of the ongoing Phase 1/2 trial of DNL310.

Normal range of CSF heparan sulfate (black circle on left).

Preclinical Studies in a Mouse Model of Hunter Syndrome

In a mouse model of Hunter syndrome, we have shown that ETV:IDS treatment reduced CSF GAGs and that these reductions were correlated with GAG reductions in the brain (Figure 7).

Furthermore, reduction in CSF GAG levels was associated with subsequent improvements in lysosomal function, neurodegeneration biomarkers, neurobehavioral outcomes and correction of skeletal disease manifestations in the mouse model.

ETV:IDS reduced peripheral and CNS GAGs in an MPS II mouse model.

Future Development Plan

In January 2021, based on strong proof-of-concept data, we announced the expansion of our DNL310 development program with the addition of a third cohort (Cohort C, approximately 12 patients) to the ongoing Phase 1/2 trial.

Cohort C will enable further exploration of clinical endpoints related to neuronopathic manifestations in patients at early disease stages.

We plan to initiate a pivotal Phase 2/3 trial with DNL310 in the first half of 2022.

EIF2B Program

Mutations in several ALS / FTD degenogenes alter RNA homeostasis and drive chronic cellular stress in these diseases.

Activators of EIF2B have demonstrated benefits in resolving cellular integrated stress response ("ISR") and restoring protein translation and RNA metabolism in numerous in vitro and in vivo models of neurodegenerative disease.

DNL343 is the most advanced product candidate in our EIF2B program, and is a brain penetrant small molecule designed to activate EIF2B function in ALS / FTD.

ALS and FTD are rare neurodegenerative diseases collectively affecting over 200,000 people world-wide.

ALS, often called Lou Gehrig's disease, refers to a group of progressive neurodegenerative diseases that affect nerve cells in the brain and spinal cord, leading to loss of voluntary muscle control and movement.

FTD refers to a rare group of brain disorders that are characterized by atrophy of the frontal and temporal lobes of the brain and are associated with changes to personality and behavior as well as difficulties with language.

Mutations in genes associated with ALS and FTD alter RNA homeostasis, which contributes to the aggregation of TDP-43 or other RNA binding proteins.

TDP-43 inclusions are found in over 95% of ALS patients and approximately 50% of FTD patients.

Activators of EIF2B have demonstrated benefits in resolving TDP-43 aggregation, restoring protein translation and attenuating neurodegeneration via inhibition of the cellular integrated stress response in numerous in vitro and in vivo models.

Our most advanced EIF2B activator, DNL343, is a brain-penetrant small molecule designed to rescue EIF2B function and restore normal RNA metabolism.

Biomarker-Driven Development

We have developed assays to measure ATF4 protein and ISR gene expression as proximal pathway markers of EIF2B activity in humans.

We have developed assays to measure ATF4 protein and other ISR-dependent changes in gene expression as proximal pathway markers of EIF2B activity in humans.

ATF4 is a transcription factor that modulates ISR gene expression and is upregulated when cellular stress modifies EIF2B activity.

These biomarkers have been characterized in in vitro assays and in human PBMCs.

Development Plan

These biomarkers have been characterized in in vitro assays and in human peripheral blood mononuclear cells ("PBMCs").

Clinical Development Plan

We initiated a Phase 1 clinical trial of DNL343 in healthy volunteers in February 2020.

The Phase 1 study is a randomized, double-blind, placebo-controlled, single-center clinical trial in 88 healthy subjects to investigate the safety and tolerability of single and multiple ascending oral doses of DNL343 and characterize the PK and PD of DNL343 in plasma and CSF .

I nitial safety and biomarker results from this study are expected by late 2020.

PTV:PGRN Program

The Phase 1 trial is a randomized, double-blind, placebo-controlled, single-center clinical trial in 88 healthy subjects to investigate the safety and tolerability of single and multiple ascending oral doses of DNL343 and characterize the PK and PD of DNL343 in plasma and CSF.

Initial safety and biomarker results from this trial are expected in the first half of 2021.

We plan to initiate a Phase 1b trial in ALS patients in the second half of 2021.

DNL343 treatment dissolved existing TDP-43 aggregates in a cell based model and was associated with decreased stress response gene expression.

DNL343 treatment resulted in a dose dependent reduction in the expression of the ISR-dependent gene Chac1 and other ISR-dependent genes in the brain of a mouse neurodegeneration model.

A similar reduction in CHAC1 expression is observed in ex vivo DNL343 studies using PBMCs from healthy volunteers;

overlay of single ascending dose (SAD) pharmacokinetics data from healthy volunteers in Phase 1 treated with DNL343 demonstrated clinical exposures achieved in SAD cohorts.

A dose-dependent reduction in gene expression of CHAC1 and ATF4 protein levels consistent with ex vivo studies was observed (data not shown).

RIPK1 Inhibitor Program

RIPK1 is a critical signaling protein in the tumor necrosis factor receptor pathway and is a regulator of inflammation and cell death.

Increased RIPK1 activity in the brain drives neuroinflammation and cell necroptosis and contributes to neurodegeneration.

RIPK1 inhibition has been shown to have beneficial effects in preclinical models of Alzheimer’s disease, ALS and other diseases.

In June 2020, we announced the joint decision with Sanofi to pause clinical studies with DNL747, previously the program's lead brain-penetrant RIPK1 inhibitor molecule, and focus our efforts on accelerating development of DNL788 (SAR443820), which we believe has superior drug properties and a more rapid path toward proof-of-concept clinical studies.

Biomarker-Driven Development

Target engagement has been characterized using a marker of RIPK1 activity, autophosphorylation of RIPK1 at Serine166 ("pS166").

This biomarker has been characterized in in vitro assays in human and monkey PBMCs and has been demonstrated to be robustly reduced by RIPK1 inhibitors.

DNL747 Phase 1b Results and Decision to Advance DNL788 (SAR443820)

In June 2020, we announced data from 31 patients in two 29-day Phase 1b trials in Alzheimer’s disease and ALS, and additional data from 6 ALS patients in an open label extension trial, showing that DNL747 was safe and well tolerated at the dose tested with no significant treatment related adverse events.

Target engagement of approximately 80% median inhibition of pRIPK1 in blood at trough drug concentration was achieved.

In parallel to the clinical trials, chronic toxicity studies with DNL747 in cynomolgus monkeys showed dose- and duration-dependent adverse nonclinical findings at exposures higher than those tested in the clinic.

These findings, which are considered off-target and molecule-specific, impact the ability to increase the dose of DNL747 and achieve higher levels of target inhibition without time consuming additional clinical safety studies in patients to evaluate the long-term safety and tolerability.

Due to the emerging evidence that higher levels of target inhibition may be required for maximizing efficacy, and challenges to achieving higher doses imposed by molecule-specific toxicity findings with DNL747, we made the decision with Sanofi to pause additional studies with DNL747.

We are encouraged by the emerging pathway biomarker data in Alzheimer’s disease and ALS patients, and our experience and learnings with DNL747 should allow us to progress quickly with clinical studies for DNL788 (SAR443820).

DNL788 (SAR443820) appears to have a superior preclinical therapeutic window compared to DNL747, facilitating development in multiple indications, including Alzheimer’s disease, ALS and MS.

Future Development Plan

Sanofi submitted an IND application for DNL788 (SAR443820) in October 2020.

First-in-human dosing in a Phase 1 healthy volunteer trial commenced in December 2020;

data are expected to be available in the second half of 2021.

Other RIPK1 Compounds

In July 2020, we announced that Sanofi commenced a Phase 1b trial of DNL758 (SAR443122), a Peripheral Product (as defined below), in hospitalized adult patients with severe COVID-19 lung disease.

The Phase 1b trial was completed and DNL758 (SAR443122) was found to be generally well tolerated and resulted in changes in disease relevant biomarkers and clinical outcome trends consistent with the proof of mechanism.

Based on the rapidly evolving landscape of treatment and prevention options for COVID-19, Sanofi has made a sponsor decision to hold further development in COVID-19 at this time.

Sanofi continues to develop DNL758 (SAR443122) as a potential treatment for cutaneous lupus erythematosus ("CLE").

CLE is a type of interface dermatitis characterized by immune cell infiltration.

Biopsy-derived T-cells from CLE patients are dominated by IFN-γ and TNF-α positive cells.

Furthermore, primary pro-inflammatory cytokines i nvolved in the pathophysiology of CLE are strongly linked to RIPK1 activation and downstream signaling.

Therefore, inhibition of RIPK1 activity downstream of TNF and IFN receptor signaling is considered an important target to modulate the pathophysiology of CLE .

Sanofi plans to initiate a Phase 2 clinical trial of DNL758 (SAR443122) in CLE patients in the first half of 2021.

Sanofi leads all clinical development activities with DNL758 (SAR443122) for systemic inflammatory diseases.

PTV:PGRN Program for FTD

PGRN is a soluble lysosomal protein that has critical functions in lysosomes and an innate immunity in the brain.

Loss of function genetic mutations in the gene coding for PRGN, GRN , cause FTD by decreasing PGRN levels in the brain.

PGRN is a soluble lysosomal protein required to maintain normal lysosomal function.

DNL593 is an intravenously, centrally administered recombinant PGRN biotherapeutic enabled by our protein transport vehicle ("PTV") designed to restore normal levels of PGRN in multiple cell types in the brain without interfering with normal PGRN processing.

DNL593 has demonstrated the ability to improve lysosomal function both peripherally and in the brain.

DNL593 is currently in IND-enabling studies, and we plan to file an IND or a clinical trial application ("CTA") in 2021.

The GRN gene encodes for the PGRN protein.

Loss of function genetic mutations in the GRN gene causes FTD by decreasing PGRN levels in the brain.

DNL593 (“PTV:PGRN”) is an intravenously, centrally administered recombinant PGRN biotherapeutic enabled by our protein transport vehicle ("PTV").

DNL593 is designed to restore normal levels of PGRN in multiple cell types in the brain without interfering with normal PGRN processing.

DNL593 restored lysosomal function and reduced microglial activation in the brain of granulin knock-out mice.

BMP has been identified as a translatable biomarker for FTD in humans that reflects lysosomal function.

DNL593 has demonstrated the ability to rescue BMP levels both peripherally and in the brain and rescue brain BMP levels in granulin knock-out mice (Figure 9).

PTV:PGRN but not Fc:PGRN rescues brain BMP levels (left) and both rescue Liver BMP levels (right) in granulin knock-out mice.

In December 2020, we initiated IND-enabling studies for DNL593 and we plan to file an IND application or a clinical trial application ("CTA") in late 2021.

As described in more detail in “Business - Licenses and Collaborations” below, Takeda has the right to opt in to our PTV:PGRN program.

ATV:TREM2 Program

ATV:TREM2 is a therapeutic candidate designed to rescue microglial function in Alzheimer’s disease through modulating the activity of TREM2.

Genetic studies suggest that immune dysregulation strongly contributes to the development and progression of Alzheimer’s disease.

Microglia, the resident immune cells of the brain, show signs of activation and release of toxic cytokines in patients with Alzheimer’s disease.

We have developed TV-enabled anti-TREM2 antibodies that have demonstrated significantly higher brain uptake compared to standard TREM2 antibodies as well as modulation of microglial gene expression in mouse models.

We have developed high affinity antibodies for TREM2 and are currently characterizing lead ATV:TREM2 therapeutic candidates.

We plan to file an IND or CTA for this program in 2022.

As described in more detail in “Business - Licenses and Collaborations” below, Takeda has the right to opt in to our ATV:TREM2 program.

Our portfolio includes additional preclinical programs, including programs targeting alpha-Synuclein ("ATV:aSyn"), Tau ("ATV:Tau") and SGSH ("ETV:SGSH"), which are enabled by our TV BBB platform technology.

In addition to ATV:TREM2 and PTV:PGRN, our ATV:Tau program is partnered with Takeda as described in more detail in “Business - Licenses and Collaborations” below.

The initiation of IND-enabling studies triggered a milestone payment of $8.0 million from Takeda which we received in January 2021.

ATV:TREM2 Program for Alzheimer's disease

Dementias affect approximately 50 million people world-wide.

Alzheimer's disease is the most common cause of dementia accounting for 60-70% of cases.

TREM2 is a protein expressed in microglia, the resident immune cells of the brain.

Mutations in the TREM2 gene are strongly associated with an increased risk for Alzheimer's disease.

DNL919 (“ATV:TREM2”) is a TV-enabled antibody designed to modulate TREM2 signaling and thereby normalize microglial function.

We have demonstrated significantly higher brain uptake of ATV:TREM2 compared to standard TREM2 antibodies as well as modulation of microglial gene expression in mouse models (Figure 10).

Single dose 10 mg/kg ATV:TREM2 induces robust pharmacodynamic response in brain.

Similar brain concentrations achieved with 10 mg/kg ATV:TREM2 and 100 mg/kg standard TREM2 antibody.

ATV:TREM2 has greater impact on microglia than standard TREM2 antibody using similar doses and exposure in mice.

In January 2021, we initiated IND-enabling studies for DNL919, and we plan to file an IND application or a CTA in late 2021 or early 2022.

As described in more detail in “Business - Licenses and Collaborations” below, Takeda has the right to opt into our ATV:TREM2 program.

The initiation of IND-enabling studies triggered a milestone payment of $8.0 million from Takeda which we expect to receive in early 2021.

Our portfolio includes additional preclinical programs, including programs targeting alpha-Synuclein ("ATV:aSyn"), Tau ("ATV:Tau"), Abeta (“ATV:Abeta”), SGSH ("ETV:SGSH"), GBA (“ETV:GBA”), GAA (“ETV:GAA”), IDUA (“ETV:IDUA”), NAGLU (“ETV:NAGLU”), and ARSA (“ETV:ARSA”) and oligonucleotide delivery (“OTV”) which are enabled by our TV platform technology.

In addition to ATV:TREM2 and PTV:PGRN, our ATV:Tau program is subject to our collaboration agreement with Takeda and our ATV:Abeta program is subject to our collaboration agreement with Biogen, as described in more detail in “Business - Licenses and Collaborations” below.

Licenses and Collaborations

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In January 2018, we entered into the Collaboration Agreement with Takeda ("Takeda Collaboration Agreement"), pursuant to which we granted Takeda an option with respect to our ATV:BACE1/Tau, ATV:TREM2 and PTV:PGRN programs.

The Takeda Collaboration Agreement provided that Takeda pay a $40.0 million upfront payment, which was received in February 2018.

The Takeda Collaboration Agreement provided that Takeda pay a $40.0 million upfront payment related to the collaboration, as well as $110.0 million under a share purchase agreement , both of which were received in February 2018.

The Takeda Collaboration Agreement became effective in February 2018 when the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 were satisfied.

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Research Phase and Takeda’s Option

Under the Takeda Collaboration Agreement and unless we otherwise agree jointly with Takeda, we will be responsible, at our cost, for conducting activities relating to pre-IND development of biologic products directed to the three identified targets and enabled by our BBB delivery technology targeting transferrin receptor during the applicable option period.

Under the Takeda Collaboration Agreement and unless we otherwise agreed jointly with Takeda, we will be responsible, at our cost, for conducting activities relating to pre-IND development of biologic products directed to the three identified targets and enabled by our BBB delivery technology targeting transferrin receptor during the applicable option period.

The option period continues for each target until the first biologic product candidate directed to the relevant target is IND-ready or about five years after selection of the target, whichever is earlier.

Takeda is obligated to pay us up to an aggregate of $25.0 million with respect to each of the three programs under the Takeda Collaboration Agreement directed to a target and based upon the achievement of certain preclinical milestone events, up to $75.0 million in total, of which $5.0 million was received when the Takeda Collaboration Agreement became effective.

Additional payments totaling $10.0 million became due based on the achievement of certain preclinical milestone events in 2018, of which $5.0 million was received in November 2018 and $5.0 million was received in February 2019.

Additional payments totaling $26.0 million have become due based on the achievement of certain preclinical milestone events, of which $10.0 million was received by December 31, 2020, and an additional $8.0 million was received in January 2021.

Collaboration Activities Following Takeda’s Option Exercise

If Takeda exercises its option with respect to a particular target and collaboration program (i.e., the biologic products directed to the target for which Takeda has exercised its option), then Takeda will have the right to develop and commercialize, jointly with us, a specified number of biologic products enabled by our blood-brain barrier delivery technology that were developed during the option period and which are directed to the relevant target, and we will grant to Takeda a co-exclusive license under the intellectual property we control related to those biologic products.

If Takeda exercises its option with respect to a particular target and collaboration program (i.e., the biologic products directed to the target for which Takeda has exercised its option), then Takeda will have the right to develop and commercialize, jointly with us, a specified number of biologic products enabled by our BBB technology that were developed during the option period and which are directed to the relevant target, and we will grant to Takeda a co-exclusive license under the intellectual property we control related to those biologic products.

Takeda is obligated to pay us a $5.0 million option fee for each target for which Takeda exercises its option, up to $15.0 million in total.

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Further, Takeda may also be obligated to pay us up to $75.0 million per biologic product upon achievement of a certain sales-based milestone, or an aggregate of $225.0 million if one biologic product from each program achieves the milestone.

After Takeda exercises its option for a particular target, we and Takeda will share equally the development and commercialization costs, and, if applicable, the profits, for each collaboration program.

Once Takeda has exercised its option for a particular target, we and Takeda will share equally the development and commercialization costs, and, if applicable, the profits, for each collaboration program.

However, for each collaboration program, we may elect not to continue sharing development and commercialization costs, or Takeda may elect to terminate our cost-profit sharing rights and obligations if, following notice from Takeda and a cure period, we fail to satisfy our cost sharing obligations with respect to the relevant collaboration program.

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Takeda will pay these royalties to us for each biologic product included in the relevant collaboration program, on a country-by-country basis, until the latest of (i) the expiration of certain patents covering the relevant biologic product, (ii) the expiration of all regulatory exclusivity for that biologic product, and (iii) an agreed period of time after the first commercial sale of that biologic product in the applicable country, unless biosimilar competition in excess of a significant level specified in the Takeda Collaboration Agreement occurs earlier, in which case Takeda’s royalty obligations in the applicable country would terminate.

For each collaboration program for which we are sharing costs and profits with Takeda, we will lead the conduct of clinical activities for each indication up to the first Phase 2 trial with a clinical outcomes-based efficacy endpoints, and Takeda will lead the conduct of all subsequent clinical activities for that indication.

For each collaboration program for which we are sharing costs and profits with Takeda, we will lead the conduct of clinical activities for each indication up to the first trial with a clinical outcomes-based efficacy endpoint, and Takeda will lead the conduct of all subsequent clinical activities for that indication.

For each collaboration program for which we are sharing costs and profits with Takeda, we and Takeda will jointly commercialize biologic products included in the relevant collaboration program in the United States and China.

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In October 2018, we entered into the Collaboration Agreement with Genzyme Corporation, a wholly owned subsidiary of Sanofi S.A.

("Sanofi") pursuant to which certain small molecule compounds that bind to and inhibit RIPK1 (“RIPK1 Inhibitors”) contributed by Sanofi and by Denali will be developed and commercialized.

("Sanofi") pursuant to which certain small molecule compounds that bind to and inhibit RIPK1 (“RIPK1 Inhibitors”) contributed by Sanofi and by us will be developed and commercialized.

The Sanofi Collaboration Agreement became effective in November 2018 when the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 were satisfied.

Denali and Sanofi plan to jointly develop products containing RIPK1 Inhibitors for neurological indications, such as Alzheimer’s disease, ALS and MS, and Sanofi plans to develop and commercialize products containing RIPK1 Inhibitors for systemic inflammatory indications, such as rheumatoid arthritis and psoriasis.

The Sanofi Collaboration Agreement includes Denali’s and Sanofi’s RIPK1 Inhibitors that measurably penetrate the blood-brain barrier ("CNS Products"), and Denali’s and Sanofi’s RIPK1 Inhibitors that do not measurably penetrate the blood-brain barrier ("Peripheral Products").

The two most advanced RIPK1 Inhibitors in the collaboration are DNL747, a CNS Product that was discovered by Denali and is currently in two Phase 1b studies in patients with ALS and Alzheimer’s disease, and DNL758, a Peripheral Product discovered by Denali which is currently in a Phase 1 clinical trial in healthy volunteers.

We and Sanofi plan to jointly develop products containing RIPK1 Inhibitors for neurological indications, such as Alzheimer’s disease, ALS and MS, and Sanofi plans to develop and commercialize products containing RIPK1 Inhibitors for systemic inflammatory indications, such as cutaneous lupus, rheumatoid arthritis and psoriasis.

The Sanofi Collaboration Agreement includes our and Sanofi’s RIPK1 Inhibitors that measurably penetrate the BBB ("CNS Products"), and our and Sanofi’s RIPK1 Inhibitors that do not measurably penetrate the BBB ("Peripheral Products").

The two most advanced RIPK1 Inhibitors in the collaboration are DNL788 (SAR443820), a CNS Product that was discovered by us and is currently in a Phase 1 trial in healthy volunteers, and DNL758 (SAR443122), a Peripheral Product discovered by us, which has completed a Phase 1b trial in COVID-19 patients and in which Sanofi plans to initiate a Phase 2 clinical trial in patients with cutaneous lupus in the first half of 2021.

In June 2020, together with Sanofi we decided to pause clinical studies with DNL747 and focus our efforts on accelerating development of DNL788 (SAR443820), which we believe has superior drug properties and a more rapid path toward proof-of-concept clinical studies in patients in multiple neurological indications.

License Grant

Under the Sanofi Collaboration Agreement, we granted Sanofi an exclusive, worldwide license under intellectual property that we control related to Denali’s RIPK1 Inhibitors, including certain intellectual property licensed to us by an academic institution.

When the Sanofi Collaboration Agreement became effective in November 2018, Sanofi paid us $125.0 million upfront, and in August 2019, Sanofi paid us $10.0 million for the milestone triggered by the commencement of a DNL758 Phase 1 clinical trial in healthy volunteers.

Under the Sanofi Collaboration Agreement, we granted Sanofi an exclusive, worldwide license under intellectual property that we control related to our RIPK1 Inhibitors, including certain intellectual property licensed to us by an academic institution.

Under the Sanofi Collaboration Agreement, Sanofi is required to make milestone payments up to approximately $1.1 billion upon achievement of certain clinical, regulatory and sales milestone events.

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These milestones also include $120.0 million in clinical milestone payments, $175.0 million in regulatory milestone payments and $200.0 million in commercial milestone payments for Peripheral Products, as defined, that are developed and approved in the United States, by the EMA and in Japan for three indications.

Denali will share profits and losses equally with Sanofi for CNS Products sold in the United States and China, and receive royalties on net sales for CNS Products sold outside of the United States and China and for Peripheral Products sold worldwide, each as further described below.

We will share profits and losses equally with Sanofi for CNS Products sold in the United States and China, and receive royalties on net sales for CNS Products sold outside of the United States and China and for Peripheral Products sold worldwide, each as further described below.

RIPK1 Inhibitors contributed by Sanofi and developed and commercialized under the Sanofi Collaboration Agreement will be subject to lower milestone and royalty payments to us compared to RIPK1 Inhibitors contributed by us.

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Program for Development and Commercialization of CNS Products

Denali and Sanofi will jointly develop CNS Products pursuant to a global development plan ("CNS Development Plan").

We and Sanofi will jointly develop CNS Products pursuant to a global development plan ("CNS Development Plan").

We will be responsible, at our cost, for conducting Phase 1 and Phase 2 trials for CNS Products for Alzheimer’s disease and any activities required to support such clinical trials and specific for Alzheimer’s disease.

We are conducting and will complete, at Sanofi’s cost, a Phase 1b trial of DNL747 for ALS.

Sanofi will be responsible, at its cost, for all other Phase 1 and Phase 2 trials for CNS Products, including for multiple sclerosis.

Sanofi will lead the conduct of all Phase 3 and later stage development trials for CNS Products, with Sanofi and Denali funding 70% and 30% of such costs, respectively.

Sanofi will be responsible, at its cost, for all other Phase 1 and Phase 2 trials for CNS Products, including for ALS and multiple sclerosis.

Sanofi will lead the conduct of all Phase 3 and later stage development trials for CNS Products, with Sanofi and us funding 70% and 30% of such costs, respectively.

The Sanofi Collaboration Agreement contains certain protections for us with respect to Phase 3 development costs not included in the initial budget for the CNS Development Plan agreed by the parties, including a deferral mechanism for costs incurred above the budgeted amounts for such trials and for costs incurred in respect of Phase 3 and other clinical trials not contemplated in the initial CNS Development Plan.

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Program for Development and Commercialization of Peripheral Products

Sanofi will be responsible, at its cost, for conducting activities relating to the development and commercialization of all Peripheral Products.

Sanofi is responsible, at its cost, for conducting activities relating to the development and commercialization of all Peripheral Products.

Sanofi will lead commercialization activities globally for Peripheral Products.

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Manufacturing

Sanofi will be responsible for delivering all supplies for clinical trials and commercial production for CNS Products and Peripheral Products, except that we will deliver such supplies for the currently in-progress Phase 1b trials for DNL747 and the Phase 1 trial for DNL758.

Sanofi will be responsible for delivering all supplies for current and future clinical trials and commercial production for CNS Products and Peripheral Products.

However, we retain manufacturing rights for certain independent clinical activities.

For any CNS Product with respect to any country for which Sanofi is required to pay royalties on net sales and for each Peripheral Product, Sanofi will pay royalties to us on a country-by-country basis until the latest of (i) the expiration of certain patents covering the relevant product, (ii) the expiration of all regulatory exclusivity for that product in the applicable country, and (iii) an agreed period of time after the first commercial sale of that product in the applicable country.

If, in a particular country, a CNS Product for which Sanofi is required to pay royalties or a Peripheral Product is not covered by specified patent rights in that country or net sales in that country decrease below specified thresholds as a result of generic competition, Sanofi’s royalty obligations in the applicable country would be reduced or would terminate as specified in the Sanofi Collaboration Agreement.

During the term of the Sanofi Collaboration Agreement, neither Denali nor Sanofi may conduct IND-enabling, clinical or commercial activities involving any RIPK1 Inhibitor, anywhere in the world, unless the RIPK1 Inhibitor is included by Denali or Sanofi, as the case may be, under the collaboration and only to the extent such activity is permitted under the Sanofi Collaboration Agreement.

During the term of the Sanofi Collaboration Agreement, neither we nor Sanofi may conduct IND-enabling, clinical or commercial activities involving any RIPK1 Inhibitor, anywhere in the world, unless the RIPK1 Inhibitor is included by us or Sanofi, as the case may be, under the collaboration and only to the extent such activity is permitted under the Sanofi Collaboration Agreement.

Each party may terminate the Sanofi Collaboration Agreement in its entirety, or with respect to a particular program (i.e., the CNS Products program or Peripheral Products program), as applicable, if the other party remains in material breach of the Sanofi Collaboration Agreement following a cure period to remedy the material breach.

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Sanofi may also terminate the Sanofi Collaboration Agreement with respect to any program or a particular RIPK1 Inhibitor if a material safety event has occurred and cessation of all development and commercialization of all RIPK1 Inhibitors in the affected program or the affected RIPK1 Inhibitor is recommended.

Denali and Sanofi may each terminate the Sanofi Collaboration Agreement in its entirety if the other party is declared insolvent or in similar financial distress or if, subject to a specified cure period, the other party challenges any patents licensed to it under the Sanofi Collaboration Agreement.

We and Sanofi may each terminate the Sanofi Collaboration Agreement in its entirety if the other party is declared insolvent or in similar financial distress or if, subject to a specified cure period, the other party challenges any patents licensed to it under the Sanofi Collaboration Agreement.

Following any termination of the Sanofi Collaboration Agreement with respect to a particular program or a particular region (or regions) of the world or termination of the Sanofi Collaboration Agreement in its entirety, our rights to each of our RIPK1 Inhibitors that were licensed to Sanofi will revert to us.

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If the Sanofi Collaboration Agreement is terminated for any reason other than by Sanofi for our material uncured breach, our insolvency or our challenge to any of the patents licensed to us by Sanofi, Sanofi will grant us an exclusive license to certain intellectual property controlled by Sanofi with respect to such RIPK1 Inhibitors (which could be subject to low single digit royalties payable to Sanofi).

Biogen License and Collaboration Agreement and Right of First Negotiation, Option and License Agreement

In August 2020, we entered into a binding Provisional Collaboration and License Agreement (“Provisional Biogen Collaboration Agreement”) with Biogen Inc.’s subsidiaries, Biogen MA Inc.

(“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”) pursuant to which we granted Biogen a license to co-develop and co-commercialize our small molecule LRRK2 inhibitor program (the “LRRK2 Program”), an option to our amyloid beta program utilizing our TV technology platform to cross the BBB as well as one other unnamed program also utilizing our TV technology platform (the “Option Programs”), and a right of first negotiation with respect to two additional unnamed programs for indications within Alzheimer’s disease, Parkinson’s disease, ALS and multiple sclerosis utilizing our TV technology platform (the “ROFN Programs”) should we decide to seek a collaboration with a third party for such programs.

In October 2020, we entered into a Definitive LRRK2 Collaboration and License Agreement (“LRRK2 Agreement”) and a Right of First Negotiation, Option and License Agreement (the “ROFN and Option Agreement”) with Biogen (collectively the "Biogen Collaboration Agreement").

The material terms of the LRRK2 Agreement and the ROFN and Option Agreement were consistent with, and superseded, the Provisional Biogen Collaboration Agreement.

LRRK2 Agreement

The LRRK2 Agreement includes our small molecule LRRK2 inhibitors (“LRRK2 Products”) that penetrate the BBB, including DNL201 and DNL151 (BIIB122), as well as those that do not penetrate the BBB.

Based on the totality of preclinical and clinical data to date, both DNL201 and DNL151 (BIIB122) (two chemically distinct LRRK2 inhibitors) have met our requirements to proceed into further late-stage clinical testing, however, DNL151 (BIIB122) has been selected to proceed due to pharmacokinetic properties that provide additional dosing regimen flexibility.

Under the terms of the LRRK2 Agreement, Biogen paid us a $400.0 million upfront payment in October 2020.

With respect to the LRRK2 Program, Biogen is required to make milestone payments up to approximately $1.125 billion upon achievement of certain development and sales milestone events .

Such milestone payments include $375.0 million in development, $375.0 million upon first commercial sale, and $375.0 million in net sales-based milestones.

We will share profits and losses equally with Biogen for LRRK2 Products in the United States and will share profits and losses in China with Biogen sharing 60% of such profits and losses and us sharing 40% of such profits and losses.

We will be entitled to receive royalties in the high teens to low twenties percentages on net sales for LRRK2 Products outside of the United States and China.

License Grant to LRRK2 Program

Under the LRRK2 Agreement, we granted Biogen a co-exclusive, worldwide license under intellectual property that we control related to our LRRK2 inhibitors, including certain intellectual property licensed to us by a third party.

Development and Commercialization of LRRK2 Program

We and Biogen will jointly develop LRRK2 Products pursuant to a clinical development plan set forth in the LRRK2 Agreement.

We and Biogen will share responsibility and costs for global development of LRRK2 Products, with Biogen funding 60% of such costs and us funding 40% of such costs.

We have the ability to opt out of the development cost sharing arrangement, as further described below.

Biogen will lead commercialization activities globally for LRRK2 Products.

We will co-commercialize the LRRK2 Products with Biogen in the United States and China, provided that the profit-sharing arrangement for the LRRK2 Products is still in effect, as further described below.

We may opt out of development cost sharing worldwide and upon such election, of all further profit sharing from the LRRK2 Program.

We also have the right to opt out of the profit-sharing arrangement for the LRRK2 Program or for only those LRRK2 Products that do not penetrate the BBB (“Peripheral LRRK2 Products”), in each of the United States and China.

After such an opt out, we will no longer be obligated to share in the development and commercialization costs for, and we will not share in the applicable revenues from, such LRRK2 Program (or from the Peripheral LRRK2 Products), in such country, as applicable.

In such cases, we will be entitled to receive tiered royalties on net sales of the applicable LRRK2 Program in the relevant country (or countries).

The royalty rates for the applicable LRRK2 Program will be a percentage in the high teens to low twenties, but may increase to the low twenties to mid-twenties, if we have met certain co-funding thresholds or there has been a first commercial sale at the time of our election.

LRRK2 Program Manufacturing

Biogen will be responsible for delivering all supplies for clinical trials and commercial production for LRRK2 Products, except that we will deliver such supplies until the point of transition which will be mutually agreed by us and Biogen, but in no event later than commencement of activities to support commercial launch, and in any event we retain manufacturing rights for certain independent clinical activities.

LRRK2 Program Royalty Term

For any LRRK2 Product for which Biogen is required to pay royalties, Biogen will pay us royalties on a country-by-country basis and product-by-product basis until the latest of (i) the expiration of certain patents covering the relevant product, (ii) the expiration of all regulatory exclusivity for that product in the applicable country, and (iii) an agreed period of time after the first commercial sale of that product in the applicable country.

If, in a particular country, a LRRK2 Product for which Biogen is required to pay royalties is not covered by specified patent rights in that country or where generic competition exists, Biogen’s royalty obligations in the applicable country would be reduced.

Exclusivity of LRRK2 Program

During the term of the LRRK2 Agreement, neither we nor Biogen may conduct preclinical, clinical or commercial activities involving any small molecule that targets LRRK2 as its primary mechanism of action anywhere in the world, unless such molecule is included under the collaboration and only to the extent such activity is permitted under the LRRK2 Agreement or, with respect to Biogen, the molecule is an antisense oligonucleotide product that is the subject of a collaboration between Biogen and a particular third party.

Each party may terminate the LRRK2 Agreement in its entirety, if the other party remains in material breach of the LRRK2 Agreement following a cure period to remedy the material breach.

After giving a specified amount of prior notice to us, Biogen may terminate the LRRK2 Agreement for convenience in its entirety, or with respect to one or more specified regions of the world, but Biogen may not do so for a certain period of time after the effective date of the LRRK2 Agreement.

We may terminate the LRRK2 Agreement if Biogen fails to conduct meaningful activities to advance the development or commercialization of any LRRK2 Products for a specified period of time, unless Biogen cures such failure within a certain period of time or if Biogen challenges any patents licensed to it under the LRRK2 Agreement.

We and Biogen may each terminate the LRRK2 Agreement in its entirety if the other party is declared insolvent or in similar financial distress.

Following any termination of the LRRK2 Agreement with respect to a particular region (or regions) of the world or termination of the LRRK2 Agreement in its entirety, our rights to each of our LRRK2 inhibitors that were licensed to Biogen will revert to us.

Biogen will conduct certain development, manufacturing and commercialization activities on a transitional basis following termination of the LRRK2 Agreement, as outlined in the LRRK2 Agreement.

If the LRRK2 Agreement is terminated, Biogen will grant us an exclusive license to certain intellectual property controlled by Biogen with respect to such LRRK2 inhibitors.

ROFN and Option Agreement

Option Programs

In addition to the LRRK2 Program, Biogen also received an exclusive option to license two preclinical programs that utilize our TV technology platform, including our ATV:Abeta program and a second program for an unnamed target, excluding small molecules, AAVs and oligonucleotides (each, an "Option Program").

Biogen’s option may be triggered up to initiation of IND-enabling studies for each program and continues for each program until a specified period of time after delivery of an option data package or 30 business days after the 5th anniversary of the effective date of the Provisional Biogen Collaboration Agreement, whichever is earlier.

ROFN Programs

Further, Biogen will have the right of first negotiation on two additional TV-enabled therapeutics in the fields of Alzheimer’s disease, Parkinson’s disease, ALS or multiple sclerosis should we decide to seek a collaboration with a third party for such programs, but this does not include any of our small molecule, AAVs and oligonucleotide programs.

The ROFN period continues until seven years after the effective date of the Provisional Biogen Collaboration Agreement or the date on which we have offered Biogen two ROFN Programs and for which Biogen has agreed to trigger a ROFN for such program, whichever is earlier.

However, if we do not execute an agreement with a third party with respect to a particular ROFN Program offered to Biogen within a specified amount of time, then Biogen will have one additional right to exercise the ROFN again with respect to such ROFN Program.

Under the ROFN and Option Agreement, Biogen paid us a $160.0 million upfront payment in October 2020.

With respect to the options granted by us to Biogen, Biogen is obligated to pay to us an aggregate of up to $270.0 million in option exercise and development milestone payments and an aggregate of up to $615.0 million in commercial milestone payments, following the achievement of certain prespecified milestone events and if Biogen exercises both of its options.

Furthermore, Biogen is obligated to pay us royalties in the mid-single digit to mid-teens percentages, depending on the program for which Biogen exercises its option and upon the achievement of certain sales thresholds.

In addition, if Biogen exercises its ROFN with respect to an eligible Denali program, the parties are obligated to negotiate in good faith for a specified period of time regarding the financial and other terms of an agreement pursuant to which Biogen would obtain rights to such program.

License Grant to Option Programs

If Biogen exercises its option with respect to an Option Program, then we will grant Biogen an exclusive, worldwide license under certain intellectual property that we control that is specific to that Option Program, and a non-exclusive license under certain intellectual property that we control that pertains to our TV platform, in each case to develop, manufacture and commercialize products that are the subject of such Option Program.

Exclusivity of ROFN and Option Agreement

If the applicable option is exercised by Biogen, then until termination or expiration of the ROFN and Option Agreement, neither party may conduct preclinical, clinical or commercial activities involving certain therapeutic products directed to the same target, unless the therapeutic is included under the collaboration and only to the extent such activity is permitted under the ROFN and Option Agreement or the therapeutic is a product that includes AAVs, oligonucleotides or small molecules.

Each party may terminate the ROFN and Option Agreement in its entirety, if the other party remains in material breach of the ROFN and Option Agreement following a cure period to remedy the material breach.

After giving a specified amount of prior notice to us, Biogen may terminate the ROFN and Option Agreement for convenience in its entirety or with respect to any Option Program for one or more specified regions or in its entirety.

We may terminate the ROFN and Option Agreement if Biogen challenges any patents licensed to it under the ROFN and Option Agreement.

We and Biogen may each terminate the ROFN and Option Agreement in its entirety if the other party is declared insolvent or in similar financial distress.

Following any termination of the ROFN and Option Agreement in its entirety or with respect to an Option Program (including with respect to a region), the licenses that we granted to Biogen with respect to each such terminated Option Program will be terminated.

Biogen will conduct certain development, manufacturing and commercialization activities for certain of such products on a transitional basis following termination of the ROFN and Option Agreement, as outlined in the ROFN and Option Agreement.

If the ROFN and Option Agreement is terminated following exercise of the applicable option with respect to an Option Program, Biogen will grant us an exclusive license to certain intellectual property controlled by Biogen with respect to certain of such products that were the subject of such Option Program.

Common Stock Purchase Agreement

In August 2020, in connection with the Provisional Biogen Collaboration Agreement, we entered into a common stock purchase agreement (the “Stock Purchase Agreement”) with BIMA, pursuant to which we agreed to issue and sell, and BIMA agreed to purchase, 13,310,243 shares of our common stock (the “Shares”) for an aggregate purchase price of $465.0 million pursuant to the terms and conditions thereof.

The sale of the Shares closed, and payment was received, in September 2020.

Pursuant to the terms of a standstill and stock restriction agreement (the “Standstill Agreement”) entered into between Biogen and us at the closing of the sale of the Shares, Biogen has agreed to certain transfer and standstill restrictions, including a restriction on acquiring more than 10% of our capital stock, and to vote the Shares in the same manner and proportion as the votes cast by the other holders of our common stock on certain matters, in each case for a period of eighteen months following the closing of the sale of the Shares, or earlier upon a change of control of us.

In addition, Biogen will be entitled to certain demand registration rights with respect to the Shares following termination of the transfer restrictions.

F-star License and Collaboration Agreement

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In May 2018, we exercised our right to nominate two additional Fcab Targets and identified a second Accepted Fcab Target.

We made a one-time payment for the two additional Accepted Fcab Targets of, in the aggregate, $6.0 million and have extended the time period for our selection of the third Accepted Fcab Target until approximately the fourth anniversary of the date of the original F-star Collaboration Agreement.

We made a one-time payment for the two additional Accepted Fcab Targets of, in the aggregate, $6.0 million and extended the time period for our selection of the third Accepted Fcab Target until approximately the fourth anniversary of the date of the original F-star Collaboration Agreement.

We have not identified a third Fcab Target.

We are also responsible for certain research costs incurred by F-star Ltd in conducting activities under an agreed development plan for each Fcab, for up to 24 months after the target Fcab is accepted.

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If one of our licensed products incorporates a compound provided to us by Genentech, has orphan drug exclusivity, and is not covered by a valid claim of a licensed patent, we must pay royalties on net sales of such licensed products on a country-by-country and licensed product-by-licensed product basis until such orphan drug exclusivity in such country expires, but our obligation to pay these royalties may be eliminated or reduced if there is a clinically superior product marketed in such country.

Under the terms of our LRRK2 Agreement with Biogen, Biogen is responsible for 50% of any payment obligation to Genentech under this agreement accruing after October 2020.

Unless earlier terminated, our agreement with Genentech will continue in effect until all of our royalty and milestone payment obligations to Genentech expire.

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We do not currently own or operate facilities for product manufacturing, storage, distribution or testing.

We rely on third-party contract development and manufacturing organizations ("CDMOs"), to manufacture and supply our preclinical and clinical materials used during the development of our product candidates.

We are actively working towards building our preclinical and clinical manufacturing capabilities as part of our goal to become a fully integrated global organization.

We currently rely on third-party contract development and manufacturing organizations ("CDMOs"), to manufacture and supply our preclinical and clinical materials used during the development of our product candidates.

We have established relationships with several CDMOs, including Lonza Sales AG ("Lonza"), WuXi Biologics Limited and Thermo Fisher Scientific.

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We do not currently have any approved drugs and we do not expect to have any approved drugs in the near term.

Therefore, we have no sales, marketing or commercial product distribution capabilities and have no experience as a company in marketing drugs.

When and if any of our product candidates are approved for commercialization, we intend to develop a commercialization infrastructure for those products in the United States and potentially in certain other key markets, including China.

For commercial activities in the rest of the world, we expect to rely on partnerships, including those with Takeda and Sanofi, to provide commercialization infrastructure, including sales and marketing and commercial distribution.

Therefore, we have no sales, marketing or commercial product distribution capabilities at the current time.

Our vision is to become a fully integrated, independent global leader in neurodegeneration with capabilities spanning discovery, development, manufacturing and commercial in order to optimize speed, quality and level of patient access to our medicines.

We look to grow strategically both in terms of therapeutic areas of high unmet need, starting with lysosomal storage diseases with CNS pathology and expanding into large neurodegenerative disorders, as well as from a geographic perspective, with an initial focus on establishing a commercial presence in the United States, with a subsequent expansion worldwide (including the European Union ("EU") and China).

For programs covered by collaboration agreements (including those with Takeda, Sanofi and Biogen), we expect to commercialize only in certain geographies, as defined by the terms of the agreements with the counterpart, and rely on our partners to provide commercialization infrastructure for the rest of the world.

The biotechnology and pharmaceutical industries, including in the neurodegenerative disease field, are characterized by rapidly advancing technologies, strong competition and an emphasis on intellectual property.

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• Parkinson’s Disease:

Potentially disease modifying therapeutics are being developed by several large and specialty pharmaceutical and biotechnology companies, including Prothena, Roche, Voyager Therapeutics, Sage Therapeutics, Sanofi, Biogen, AstraZeneca, Lundbeck, Takeda and AbbVie in various stages of clinical trials.

Potentially disease modifying therapeutics are being developed by several large and specialty pharmaceutical and biotechnology companies and academic institutions, including Biogen, Genentech, AL-S Pharma and Novartis in various stages of clinical trials.

Potentially disease modifying therapeutics are being developed by several large and specialty pharmaceutical and biotechnology companies, including Prothena, Roche (including Genentech, its wholly owned subsidiary), Sanofi, Biogen/Ionis, Prevail/Eli Lilly, AstraZeneca, and Takeda in various stages of clinical trials.

Potentially disease modifying therapeutics are being developed by several large and specialty pharmaceutical and biotechnology companies and academic institutions, including Biogen/Ionis, Amylyx, AB Science, and Novartis in various stages of clinical trials.

• Lysosomal Storage Diseases:

The currently approved treatments for LSDs are enzyme-based therapies.

Potentially disease modifying therapeutics are being developed by several large and specialty pharmaceutical and biotechnology companies, including ArmaGen, BioMarin, JCR Pharmaceuticals, RegenxBio, Sangamo, Sanofi, Takeda and Ultragenyx in various stages of clinical trials.

Potentially disease modifying therapeutics are being developed by several large and specialty pharmaceutical and biotechnology companies, including BioMarin, JCR Pharmaceuticals, RegenxBio, Sangamo, Orchard Therapeutics, Takeda and Ultragenyx in various stages of clinical trials.

In addition, there are companies that are developing technologies that would compete directly with our technologies, including:

• Blood-Brain Barrier Technology:

There are several large and specialty pharmaceutical and biotechnology companies developing BBB delivery technologies that utilize RMT, including AbbVie, biOasis Technologies, ArmaGen, JCR Pharmaceuticals and Roche (including Genentech, its wholly owned subsidiary), among others.

There are several large and specialty pharmaceutical and biotechnology companies developing BBB delivery technologies that utilize RMT, including AbbVie, biOasis Technologies, ABL Bio, BioArtic, JCR Pharmaceuticals and Roche (including Genentech, its wholly owned subsidiary), among others.

Intellectual Property

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For our BBB platform technology we own pending patent applications directed to the composition and sequences of our TfR-binding TVs and two issued U.S.

patents, as well as pending patent applications, to other BBB platform technology.

patents, which are expected to expire in 2038, not including any patent term adjustments and any patent term extensions, as well as pending patent applications, to other BBB platform technology.

Furthermore, we own patent applications directed to our ETV:IDS, ATV:TREM2, and PTV:PGRN programs.

In addition, we license multiple patent families from F-star, the earliest issued patents of which are expected to expire in 2026, not including any patent term adjustments and any patent term extensions.

For our LRRK2 program, we license multiple patent families from Genentech directed to, among other things, DNL201, DNL151 and other related compounds, which are expected to expire in 2031, not including any patent term adjustments and any patent term extensions.

In particular, we own an issued U.S.

patent, which is expected to expire in 2038, not including any patent term adjustments and any patent term extensions, directed to the composition of matter of our ETV:IDS molecules, including DNL310.

addition, we license multiple patent families from F-star, the earliest issued patents of which are expected to expire in 2026, not including any patent term adjustments and any patent term extensions.

For our LRRK2 program, which is subject to our collaboration agreement with Biogen, we license multiple patent families from Genentech directed to, among other things, DNL201, DNL151 (BIIB122) and other related compounds, which are expected to expire in 2031, not including any patent term adjustments and any patent term extensions.

Furthermore, we own patent families that have projected expiration dates in 2038 or later, not accounting for any patent term adjustments and any patent term extensions.

We also own an issued U.S.

patent, which is expected to expire in 2037, not including any patent term adjustments and any patent term extensions, and pending patent applications in jurisdictions outside the U.S.

directed to the composition of matter of DNL151.

For our RIPK1 program, we own three issued U.S.

patents, which are expected to expire in 2037, not including any patent term adjustments and any patent term extensions and pending patent applications, which are directed to the composition of matter of DNL747 as well as other RIPK1 inhibitor compounds.

We also own two issued U.S.

patents, which are expected to expire in 2037, not including any patent term adjustments and any patent term extensions, directed to the composition of matter of DNL151 (BIIB122) and methods of treatment using DNL151 (BIIB122), respectively, as well as pending patent applications in jurisdictions outside the U.S.

For our RIPK1 program, we own four issued U.S.

We additionally have pending applications both in and outside the U.S.

directed to the composition of matter of our current RIPK1 lead, DNL788 (SAR443820), as well as other RIPK1 inhibitor compounds, which, if issued, would expire in 2038, not including any patent term adjustments and any patent term extensions.

We cannot guarantee that our owned and licensed pending patent applications, or any patent applications that we may in the future file or license from third parties, will result in the issuance of patents.

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• Completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with good laboratory practice ("GLP"), requirements;

• Submission of an IND to the FDA, or a CTA to the EMA, one of which must become effective before human clinical trials may begin;

• Approval by an independent institutional review board ("IRB"), or ethics committee at each clinical trial site before each trial may be initiated;

• Submission of an IND to the FDA, or a CTA to the EMA or to an appropriate National Competent Authority, one of which must become effective before human interventional clinical trials may begin;

• Approval by an independent institutional review board ("IRB"), or ECs at each clinical trial site before each trial may be initiated;

• Performance of adequate and well-controlled human clinical trials in accordance with applicable IND or CTA regulations, good clinical practice ("GCP"), requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for each proposed indication;

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If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of an NDA or BLA.

The FDA will accept a well-designed and well-conducted foreign clinical study not conducted under an IND if the study was conducted in accordance with GCP requirements and the FDA is able to validate the data through an onsite inspection if deemed necessary.

The FDA will accept a well-designed and well-conducted foreign clinical trial not conducted under an IND if the trial was conducted in accordance with GCP requirements and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials in the United States generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, and may overlap.

• Phase I clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate.

The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the drug.

The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, and initial side effect tolerability and safety of the drug.

• Phase II clinical trials involve studies in disease-affected patients to determine the dose required to produce the desired benefits.

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Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA.

Written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug, findings from animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate or severity of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Expedited written IND safety reports must be submitted to the FDA, IRBs, ECs and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug, findings from animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate or severity of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Further, as a result of the COVID-19 pandemic, we may be required to develop and implement additional clinical trial policies and procedures designed to help protect subjects from the COVID-19 virus.

For example, the FDA has issued guidance on conducting clinical trials during the pandemic, which describes a number of considerations for sponsors of clinical trials impacted by the pandemic, including certain reporting requirements, and additional guidance on the good manufacturing practice considerations for responding to COVID-19 infection and other topics.

We may be required to make further adjustments to our clinical trials or business operations based on current or future guidance and regulatory requirements as a result of the COVID-19 pandemic.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all.

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The application may include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings.

Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use and/or from a number of alternative sources, including studies initiated by investigators.

To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of FDA.

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FDA adjusts the PDUFA user fees on an annual basis.

According to the FDA’s fee schedule, effective through September 30, 2019, the user fee for an application requiring clinical data, such as an NDA or BLA, is $2,588,478.

According to the FDA’s FY 2021 user fee schedule, effective through September 31, 2021, the user fee for an application requiring clinical data, such as an NDA or BLA, is $2,875,842.

PDUFA also imposes an annual program fee for each marketed human drug or biologic of $336,432.

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If one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity.

Orphan drug status in the European Union has similar, but not identical, requirements and benefits.

Orphan drug status in the EU has similar, but not identical, requirements and benefits.

Expedited Development and Review Programs

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Any product is eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies.

Priority review reduces the review time for an initial or supplemental marketing application by four months.

A product may be eligible for accelerated approval, if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies based on an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality ("IMM"), that is reasonably likely to predict an effect on IMM or other clinical benefit.

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If the FDA concludes that a drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it may require such post-marketing restrictions, as it deems necessary to assure safe use of the product.

Fast track designation, breakthrough therapy designation, priority review, and accelerated approval and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process.

Fast track designation, breakthrough therapy designation, priority review, and accelerated approval do not change the standards for approval, but may expedite the development or approval process.

Abbreviated Licensure Pathway of Biological Products as Biosimilar or Interchangeable

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• animal studies (including the assessment of toxicity);

• a clinical study or studies (including the assessment of immunogenicity and PK or PD) sufficient to demonstrate safety, purity and potency in one or more conditions for which the reference product is licensed and intended to be used.

• a clinical trial or trials (including the assessment of immunogenicity and PK or PD) sufficient to demonstrate safety, purity and potency in one or more conditions for which the reference product is licensed and intended to be used.

In addition, an application must include information demonstrating that:

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Post-Approval Requirements

Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping requirements, requirements to report adverse experiences, and comply with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific and educational activities.

Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping requirements, requirements to report adverse experiences, and complying with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific and educational activities.

Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such uses.

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Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent.

PTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA or BLA.

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As in the United States, medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has been obtained.

Similar to the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls.

Similar to the United States, the various phases of preclinical and clinical research in the EU are subject to significant regulatory controls.

Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the EU clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the EU, the EU Member States have transposed and applied the provisions of the Directive differently.

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European Union Drug Review and Approval

In the European Economic Area ("EEA"), which is comprised of the 27 Member States of the European Union, plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization ("MA").

In the European Economic Area ("EEA"), which is comprised of the 27 Member States of the EU, plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization ("MA").

There are two types of marketing authorizations.

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If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the Member States Concerned).

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA assess the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Under the procedures described above, before granting the MA, the EMA or the competent authorities of the Member States of the EEA assess the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Starting in January 2021, the Medicines and Healthcare products Regulatory Agency (MHRA) will take on additional regulatory responsibilities for medical products marketed in the UK, as pan-EU regulatory procedures before the EMA will no longer apply in the UK.

MHRA and the National Institute for Biological Standards and Control (NIBSC) recently issued new guidance documents to the industry regarding regulation under the UK system.

Proposals set forth in the new MHRA guidance will take effect through legislative changes that are subject to parliamentary approval, which may increase the amount of resources and time needed for obtaining regulatory approval in the UK and delay our clinical development and commercialization.

The full impact of Brexit on our business remains unclear.

Coverage and Reimbursement

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The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer.

There have been several recent U.S.

Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

At the federal level, in 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration's proposals.

The FDA also released a final rule in September 2020 providing guidance for states to build and submit importation plans for drugs from Canada.

Further, in November 2020, the U.S.

Secretary of the Department of Health and Human Services ("HHS") finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

The CMS also issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.

On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

In December 2020, CMS issued a final rule implementing significant manufacturer price reporting changes under the Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price reporting related to certain value-based purchasing arrangements.

It is unclear to what extent these new regulations and any future regulations and legislation by the Biden administration will have on our business, including our ability to generate revenue and achieve profitability.

At the state level, legislatures have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare.

These and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.

As noted above, the marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement.

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The requirements governing drug pricing and reimbursement vary widely from country to country.

For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.

There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products.

Historically, products launched in the European Union do not follow price structures of the United States and generally prices tend to be significantly lower.

Historically, products launched in the EU do not follow price structures of the United States and generally prices tend to be significantly lower.

Financial Information about Segments

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See "Note 1 - Significant Accounting Policies" in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Employees and Human Capital Resources

As of December 31, 2020, we had 291 employees, all of whom were full-time, and approximately two-thirds of which hold Ph.D.

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We consider our relations with our employees to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Corporate Information

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Our website address is www.denalitherapeutics.com.

We also use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

We also use our website as a channel of distribution of important company information.

Important information, including news or announcements regarding our financial performance, investor events and press releases, is posted on and accessible from our website.

We intend to use Denali’s website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

We file electronically with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

5 unchanged sentences

The information in or accessible through the SEC and our website or social media sites does not constitute part of this Annual Report on Form 10-K or any other report or document we file with the SEC, and any references to our website and social media sites are intended to be inactive textual references only.

We use Denali Therapeutics®, the Denali Therapeutics logo, and other marks as trademarks in the United States and other countries.

We use Denali®, the Denali Therapeutics logo, and other marks as trademarks in the United States and other countries.

This Annual Report on Form 10-K contains references to our trademarks and service marks and to those belonging to other entities.

2 unchanged sentences

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-K

Item 1. Business