What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-08 · 97 added, 100 removed, 421 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

6 unchanged sentences

Property and equipment, net 41,692 38,865

Operating lease right-of-use asset 29,755 30,743

Operating lease right-of-use assets 31,271 30,743

Other non-current assets 16,117 11,871

3 unchanged sentences

Accounts payable $ 7,539 $ 4,779

Cost sharing payments due to related party 1,443 —

Accrued compensation 13,253 19,013

2 unchanged sentences

Other accrued costs and current liabilities 2,395 2,857

Operating lease liability, current 5,871 5,453

Operating lease liabilities, current 7,068 5,453

Related-party contract liability, current 290,516 292,386

3 unchanged sentences

Contract liabilities, less current portion — 3,398

Operating lease liability, less current portion 55,525 58,554

Operating lease liabilities, less current portion 54,978 58,554

Other non-current liabilities 379 379

3 unchanged sentences

Convertible preferred stock, $ 0.01 par value;

40,000,000 shares authorized as of June 30, 2022 and December 31, 2021;

0 shares issued and outstanding as of June 30, 2022 and December 31, 2021

40,000,000 shares authorized as of September 30, 2022 and December 31, 2021;

0 shares issued and outstanding as of September 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value;

400,000,000 shares authorized as of June 30, 2022 and December 31, 2021;

123,157,278 shares and 122,283,305 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

400,000,000 shares authorized as of September 30, 2022 and December 31, 2021;

123,796,438 shares and 122,283,305 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,693,901 1,608,238

7 unchanged sentences

(In thousands, except share and per share amounts)

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

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

2022 2021 2022 2021

14 unchanged sentences

Net loss ( 103,299 ) ( 84,588 ) ( 227,313 ) ( 215,320 )

Other comprehensive loss:

Net unrealized loss on marketable securities, net of tax ( 3,023 ) ( 136 ) ( 9,775 ) ( 123 )

Other comprehensive income (loss):

Net unrealized gain (loss) on marketable securities, net of tax 421 ( 153 ) ( 9,354 ) ( 276 )

Comprehensive loss $ ( 102,878 ) $ ( 84,741 ) $ ( 236,667 ) $ ( 215,596 )

2 unchanged sentences

__________________________________________________

(1) Includes related-party collaboration revenue from a customer of $ 0.5 million and $ 2.7 million for the three and six months ended June 30, 2022, respectively, and $ 0.8 million and $ 1.7 million for the three and six months ended June 30, 2021, respectively.

(2) Includes an offset to expense from related-party cost sharing reimbursements of $ 0.4 million and expense for cost sharing payments to a related party of $ 2.4 million for the three and six months ended June 30, 2022, respectively, and an offset to expense from related-party cost sharing reimbursements of $ 1.6 million and $ 4.1 million for the three and six months ended June 30, 2021, respectively.

(1) Includes related-party collaboration revenue from a customer of $ 0.2 million and $ 2.9 million for the three and nine months ended September 30, 2022, respectively, and $ 0.9 million and $ 2.5 million for the three and nine months ended September 30, 2021, respectively.

(2) Includes expense for cost sharing payments due to a related party of $ 1.4 million and $ 3.8 million for the three and nine months ended September 30, 2022, respectively, and an offset to expense from related-party cost sharing reimbursements of $ 1.2 million and $ 5.3 million for the three and nine months ended September 30, 2021, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

13 unchanged sentences

Other comprehensive loss — — — ( 9,354 ) — ( 9,354 )

Balance at September 30, 2022 123,796,438 $ 1,564 $ 1,693,901 $ ( 11,853 ) $ ( 872,309 ) $ 811,303

Balance at June 30, 2022 123,157,278 $ 1,558 $ 1,664,174 $ ( 12,274 ) $ ( 769,010 ) $ 884,448

Balance at March 31, 2022 122,857,908 $ 1,554 $ 1,635,840 $ ( 9,251 ) $ ( 710,216 ) $ 917,927

Issuances under equity incentive plans 331,643 3 5,151 — — 5,154

2 unchanged sentences

Net loss — — — — ( 103,299 ) ( 103,299 )

Other comprehensive loss — — — ( 3,023 ) — ( 3,023 )

Balance at June 30, 2022 123,157,278 $ 1,558 $ 1,664,174 $ ( 12,274 ) $ ( 769,010 ) $ 884,448

Other comprehensive income — — — 421 — 421

Balance at September 30, 2022 123,796,438 $ 1,564 $ 1,693,901 $ ( 11,853 ) $ ( 872,309 ) $ 811,303

Balance at December 31, 2020 120,531,333 $ 1,531 $ 1,503,660 $ ( 245 ) $ ( 354,415 ) $ 1,150,531

4 unchanged sentences

Other comprehensive loss — — — ( 276 ) — ( 276 )

Balance at September 30, 2021 122,011,151 $ 1,545 $ 1,580,988 $ ( 521 ) $ ( 569,735 ) $ 1,012,277

Balance at June 30, 2021 121,531,952 $ 1,541 $ 1,556,679 $ ( 368 ) $ ( 485,147 ) $ 1,072,705

Balance at March 31, 2021 121,147,432 $ 1,537 $ 1,528,504 $ ( 232 ) $ ( 424,456 ) $ 1,105,353

Issuances under equity incentive plans

5 unchanged sentences

Other comprehensive loss — — — ( 153 ) — ( 153 )

Balance at June 30, 2021 121,531,952 $ 1,541 $ 1,556,679 $ ( 368 ) $ ( 485,147 ) $ 1,072,705

Balance at September 30, 2021 122,011,151 $ 1,545 $ 1,580,988 $ ( 521 ) $ ( 569,735 ) $ 1,012,277

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

43 unchanged sentences

These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

During the six months ended June 30, 2022 there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2021 Annual Report on Form 10-K.

During the nine months ended September 30, 2022 there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2021 Annual Report on Form 10-K.

For further information with regard to the Company’s Significant Accounting Policies, please refer to Note 1, "Significant Accounting Policies," to the Company’s Consolidated Financial Statements included in the 2021 Annual Report on Form 10-K.

17 unchanged sentences

The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the Condensed Consolidated Balance Sheets.

As of June 30, 2022 and December 31, 2021, the Company had no off-balance sheet concentrations of credit risk.

The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under any license or collaboration agreements, and the need to secure and maintain adequate manufacturing arrangements with third parties.

As of September 30, 2022 and December 31, 2021, the Company had no off-balance sheet concentrations of credit risk.

The Company is subject to a number of risks similar to other clinical-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under any license or collaboration agreements, and the need to secure and maintain adequate manufacturing arrangements with third parties.

If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

10 unchanged sentences

The Company classifies investments in securities with remaining maturities of less than one year, or where its intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments.

The Company classifies investments in securities with remaining maturities of over one year as long-term investments.

The Company classifies investments in securities with remaining maturities of over one year as long-term investments, unless intended to fund current operations.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

8 unchanged sentences

A determination is made as to whether an arrangement is a lease at inception.

A right-of-use (“ROU”) asset and operating lease liability is recognized for identified operating leases in the Condensed Consolidated Balance Sheets.

Right-of-use (“ROU”) assets and operating lease liabilities are recognized for identified operating leases in the Condensed Consolidated Balance Sheets.

The changes in operating lease ROU assets and operating lease liabilities are presented net within non-cash adjustment to operating lease expense in the Condensed Consolidated Statements of Cash Flows.

56 unchanged sentences

Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands):

June 30, 2022

September 30, 2022

Level 1 Level 2 Level 3 Total

1 unchanged sentence

Money market funds $ 99,279 $ — $ — $ 99,279

Commercial paper — 7,949 — 7,949

Short-term marketable securities:

2 unchanged sentences

Commercial paper — 26,307 — 26,307

Long-term marketable securities:

government treasuries 92,279 — — 92,279

Corporate debt securities — 1,941 — 1,941

Total $ 1,018,037 $ 76,631 $ — $ 1,094,668

13 unchanged sentences

Total $ — $ 111 $ — $ 111

The carrying amounts of cost sharing reimbursements due from related party, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate their fair values due to their short-term maturities.

The carrying amounts of cost sharing reimbursements due from and payments due to related party, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate their fair values due to their short-term maturities.

The Company’s Level 2 securities are valued using third-party pricing sources.

2 unchanged sentences

Marketable Securities

All marketable securities were considered available-for-sale at June 30, 2022 and December 31, 2021.

All marketable securities were considered available-for-sale at September 30, 2022 and December 31, 2021.

On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs as disclosed in Note 2, "Fair Value Measurements".

The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):

June 30, 2022

September 30, 2022

Amortized Cost Unrealized Holding Gains Unrealized Holding Losses Aggregate Fair Value

8 unchanged sentences

998,942 — ( 11,502 ) 987,440

Long-term marketable securities:

government treasuries (3)

$ 998,942 $ — $ ( 11,502 ) $ 987,440

Corporate debt securities (4)

__________________________________________________

Total long-term marketable securities

97,103 — ( 2,883 ) 94,220

$ 1,019,723 $ 1 $ ( 11,924 ) $ 1,007,800

__________________________________________________

(1) Unrealized holding losses on 63 securities with an aggregate fair value of $ 918.8 million.

(2) Unrealized holding losses on 11 securities with an aggregate fair value of $ 42.4 million.

(3) Unrealized holding losses on 6 securities with an aggregate fair value of $ 92.3 million.

(4) Unrealized holding losses on 1 security with an aggregate fair value of $ 1.9 million.

December 31, 2021

22 unchanged sentences

(4) Unrealized holding losses on 6 securities with an aggregate fair value of $ 15.3 million.

As of June 30, 2022 and December 31, 2021, a majority of the Company's marketable securities were in an unrealized loss position.

The Company has no t recognized an allowance for credit losses as of June 30, 2022 or December 31, 2021.

As of September 30, 2022 and December 31, 2021, a majority of the Company's marketable securities were in an unrealized loss position.

The Company has no t recognized an allowance for credit losses as of September 30, 2022 or December 31, 2021.

The Company determined that it had the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery.

1 unchanged sentence

All marketable securities with unrealized losses as of each balance sheet date have been in a loss position for less than 12 months or the loss is not material.

All of the Company’s marketable securities have an effective maturity of less than two years .

As of September 30, 2022 all of the Company’s marketable securities have an effective maturity of less than one year .

Collaboration Agreements

2 unchanged sentences

The details of the Provisional Biogen Collaboration Agreement and the Biogen Collaboration Agreement and the payments the Company has received, and is entitled to receive, are further described in Note 6, "Collaboration Agreements", to the consolidated financial statements in the 2021 Annual Report on Form 10-K.

During the second quarter of 2022, there were no changes to the terms of the Company’s collaboration agreement with Biogen, and no change in the transaction price for the Biogen Collaboration Agreement has been recorded during the three and six months ended June 30, 2022.

A related-party contract liability of $ 291.0 million and $ 293.7 million was recorded on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, respectively.

Approximately $ 288.9 million of the June 30, 2022 contract liability relates to the revenue allocated to the material right for an option under the ROFN and Option Agreement which is being deferred until resolution of the option, which is expected to be within one year of the balance sheet date, and $ 2.1 million of this contract liability relates to the portion of the Option Research Services performance obligation yet to be satisfied, with such amount to be recognized over the estimated period of the services, which is expected to be more than one year .

The Company recorded an offset to research and development expenses for LRRK2 Development Activities of $ 0.4 million, and incremental research and development expenses for LRRK2 Development Activities of $ 2.4 million for cost sharing reimbursement and payments, respectively, for the three and six months ended June 30, 2022, respectively.

The Company recorded $ 0.4 million of cost sharing reimbursements due from related party on the Condensed Consolidated Balance Sheet as of June 30, 2022.

The Company recorded $ 1.6 million and $ 4.1 million of cost sharing reimbursements for LRRK2 Development Activities as an offset to research and development expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss for the three and six months ended June 30, 2021, respectively, and $ 1.2 million was recorded as cost sharing reimbursements due from related party on the Condensed Consolidated Balance Sheets as of December 31, 2021.

As of June 30, 2022, the Company had no t achieved any milestones and had no t recorded any product sales under the Biogen Collaboration Agreement.

During the third quarter of 2022, there were no changes to the terms of the Company’s collaboration agreement with Biogen, and no change in the transaction price for the Biogen Collaboration Agreement has been recorded during the three and nine months ended September 30, 2022.

A related-party contract liability of $ 290.8 million and $ 293.7 million was recorded on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

Approximately $ 288.9 million of the September 30, 2022 contract liability relates to the revenue allocated to the material right for an option under the ROFN and Option Agreement which is being deferred until resolution of the option, which is expected to be within one year of the balance sheet date, and $ 1.9 million of this contract liability relates to the portion of the Option Research Services performance obligation yet to be satisfied, with such amount to be recognized over the estimated period of the services, which is expected to be more than one year .

The Company recorded incremental research and development expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss of $ 1.4 million and $ 3.8 million for the three and nine months ended September 30, 2022, respectively, representing cost sharing payments owed to Biogen for LRRK2 Development Activities.

The Company recorded $ 1.4 million of cost sharing payments due to related party on the Condensed Consolidated Balance Sheet as of September 30, 2022.

The Company recorded $ 1.2 million and $ 5.3 million of cost sharing reimbursements for LRRK2 Development Activities as an offset to research and development expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021, respectively, and $ 1.2 million was recorded as cost sharing reimbursements due from related party on the Condensed Consolidated Balance Sheets as of December 31, 2021.

As of September 30, 2022, the Company had no t achieved any milestones and had no t recorded any product sales under the Biogen Collaboration Agreement.

In October 2018, the Company entered into a Collaboration and License Agreement ("Sanofi Collaboration Agreement") with Genzyme Corporation, a wholly owned subsidiary of Sanofi S.A.

The details of the Sanofi Collaboration Agreement and the payments the Company has received, and is entitled to receive, are further described in Note 6, "Collaboration Agreements", to the consolidated financial statements in the Company's 2021 Annual Report on Form 10-K.

During the second quarter of 2022, there were no changes to the terms of the Company’s collaboration agreement with Sanofi.

The transaction price of the Sanofi Collaboration Agreement increased by $ 40.0 million during the three and six months ended June 30, 2022 related to a $ 40.0 million milestone triggered in April 2022 upon first patient in a Phase 2 study of SAR443820/DNL788 in individuals with amyotrophic lateral sclerosis (ALS) which was paid in May 2022 .

A contract liability of $ 3.4 million was recorded on the Condensed Consolidated Balance Sheets as of both June 30, 2022 and December 31, 2021.

This contract liability relates to the portion of the Alzheimer's Disease Services performance obligation yet to be satisfied, with such amounts to be recognized over the estimated period of the services, which is expected to be several years.

The Company recorded no receivable associated with the Sanofi Collaboration Agreement on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, the Company had earned milestone payments of $ 65.0 million and had no t recorded any product sales under the Sanofi Collaboration Agreement.

During the third quarter of 2022, there were no changes to the terms of the Company’s collaboration agreement with Sanofi, and no changes in the transaction price of the Sanofi Collaboration Agreement.

The transaction price of the Sanofi Collaboration Agreement increased by $ 40.0 million during the nine months ended September 30, 2022 related to a $ 40.0 million milestone triggered in April 2022 upon first patient in a Phase 2 study of SAR443820/DNL788 in individuals with amyotrophic lateral sclerosis (ALS) which was paid in May 2022 .

A contract liability of $ 23,352 and $ 3.4 million was recorded on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

This contract liability relates to the portion of the Alzheimer's Disease service performance obligation yet to be satisfied, with such amounts to be recognized over the estimated period of the services, which is expected to be less than a year as of September 30, 2022 .

The Company recorded no receivable associated with the Sanofi Collaboration Agreement on the Condensed Consolidated Balance Sheets as of both September 30, 2022 and December 31, 2021.

As of September 30, 2022, the Company had earned milestone payments of $ 65.0 million and had no t recorded any product sales under the Sanofi Collaboration Agreement.

Takeda Collaboration Agreement

1 unchanged sentence

The details of the Takeda Collaboration Agreement are further described in Note 6, "Collaboration Agreements", to the consolidated financial statements in the Company's 2021 Annual Report on Form 10-K.

Total preclinical milestone payments that Takeda may owe to the Company is $ 55.0 million, all of which were earned, and $ 43.0 million of which received as of June 30, 2022.

A contract liability of $ 27.9 million was recorded on the Condensed Consolidated Balance Sheets as of December 31, 2021 which was recognized in its entirety during the first quarter of 2022.

No contract liability remains on the Condensed Consolidated Balance Sheets as of June 30, 2022.

The transaction price of the Takeda Collaboration Agreement increased by $ 12.0 million and $ 24.0 million during the three and six months ended June 30, 2022, respectively, due to two $ 12.0 million preclinical milestones becoming unconstrained and recorded as collaboration revenue from customers in the six months ended June 30, 2022, The first milestone was earned in January 2022 upon approval of the TAK-594/DNL593 ("PTV:PGRN") clinical trial application (CTA), and the second milestone was earned in June 2022 upon approval of the TAK-920/DNL919 ("ATV:TREM2") CTA.

Payment for the PTV:PGRN milestone was received in February 2022, and the $ 12.0 million milestone payment for ATV:TREM2 was recorded as a receivable within prepaid expenses and other current assets on the condensed consolidated balance sheet as of June 30, 2022 and received in July 2022.

There was no receivable under the Takeda Collaboration Agreement as of December 31, 2021.

Total preclinical milestone payments that Takeda may owe to the Company under this agreement is $ 55.0 million, all of which were earned and received as of September 30, 2022.

A contract liability of $ 27.9 million was recorded on the Condensed Consolidated Balance Sheet as of December 31, 2021 which was recognized in its entirety during the first quarter of 2022.

No contract liability remains on the Condensed Consolidated Balance Sheet as of September 30, 2022.

There were no changes to the transaction price of the Takeda Collaboration Agreement during the third quarter of 2022.

The transaction price of the Takeda Collaboration Agreement increased by $ 24.0 million during the nine months ended September 30, 2022 due to two $ 12.0 million preclinical milestones becoming unconstrained and recorded as collaboration revenue from customers.

The first milestone was earned in January 2022 upon approval of the TAK-594/DNL593 ("PTV:PGRN") clinical trial application (CTA), and the second milestone was earned in June 2022 upon approval of the TAK-920/DNL919 ("ATV:TREM2") CTA.

Payment for the PTV:PGRN milestone was received in February 2022, and the payment for ATV:TREM2 was received in July 2022.

There was no receivable under the Takeda Collaboration Agreement as of either September 30, 2022 and December 31, 2021.

The Company has no remaining performance obligations under the Takeda Collaboration Agreement.

As of June 30, 2022, the Company had earned $ 55.0 million in preclinical milestone payments from Takeda, and had no t recorded any product sales under the Takeda Collaboration Agreement.

PTV:PGRN and ATV:TREM2 Collaboration Agreements

1 unchanged sentence

The details of the PTV:PGRN Collaboration Agreement and the ATV:TREM2 Collaboration Agreement are further described in Note 6, "Collaboration Agreements", to the consolidated financial statements in the Company's 2021 Annual Report on Form 10-K.

During the three and six months ended June 30, 2022, there were no changes to the terms of either the PTV:PGRN Collaboration Agreement or the ATV:TREM2 Collaboration Agreement and no changes to the transaction prices for either agreement.

During the three and nine months ended September 30, 2022, there were no changes to the terms of either the PTV:PGRN Collaboration Agreement or the ATV:TREM2 Collaboration Agreement and no changes to the transaction prices for either agreement.

Under the PTV:PGRN Collaboration Agreement and the ATV:TREM2 Collaboration Agreement, Takeda may be obligated to pay the Company up to an aggregate of $ 280.0 million upon achievement of certain clinical milestone events and up to an aggregate of $ 200.0 million in regulatory milestone events relating to receipt of regulatory approval in the United States, certain European countries and Japan.

Takeda may also be obligated to pay the Company up to $ 75.0 million per biologic product upon achievement of a certain sales-based milestone, or an aggregate of $ 150.0 million if one biologic product from each program achieves this milestone.

The Company recorded $ 2.8 million and $ 5.7 million of cost sharing reimbursements for PTV:PGRN Development Activities, and $ 1.5 million and $ 3.6 million of cost sharing reimbursements for ATV:TREM2 Development Activities, for the three and six months ended June 30, 2022, respectively, as offsets to research and development expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The cost sharing reimbursements for the three months ended June 30, 2022 are recorded as a receivable within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet as of June 30, 2022.

There were no cost sharing reimbursements for the three and six months ended June 30, 2021.

As of June 30, 2022, the Company has earned $ 10.0 million in option fee payments from Takeda, but has no t recorded any product sales under either the PTV:PGRN or the ATV:TREM2 Collaboration Agreements.

The Company recorded $ 2.3 million and $ 8.0 million of cost sharing reimbursements for PTV:PGRN Development Activities, and $ 1.6 million and $ 5.2 million of cost sharing reimbursements for ATV:TREM2 Development Activities, for the three and nine months ended September 30, 2022, respectively, as offsets to research and development expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The cost sharing reimbursements for the three months ended September 30, 2022 are recorded as a receivable within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet as of September 30, 2022.

There were no cost sharing reimbursements for the three and nine months ended September 30, 2021.

As of September 30, 2022, the Company had earned $ 10.0 million in option fee payments from Takeda under the PTV:PGRN and the ATV:TREM2 Collaboration Agreements, and had no t recorded any product sales under either agreement.

Collaboration Revenue

Revenue disaggregated by collaboration agreement and performance obligation is as follows (in thousands):

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

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

2022 2021 2022 2021

7 unchanged sentences

Alzheimer's Disease Services (2)

3,375 — 3,375 4

Total Sanofi Collaboration Revenue 3,375 — 43,375 15,004

5 unchanged sentences

_________________________________________________

(1) Revenue of $ 27.9 million and $ 11.8 million for the six months ended June 30, 2022 and 2021, respectively, were included in the contract liability balance at the beginning of the period.

No revenue for the three months ended June 30, 2022, and all revenue for the three months ended June 30, 2021, were included in the contract liability balance at the beginning of the respective period.

(2) Revenue for the three and six months ended June 30, 2022 and June 30, 2021 represent amounts that were included in the contract liability balance at the beginning of the respective period.

(1) Revenue of $ 27.9 million and $ 15.6 million for the nine months ended September 30, 2022 and 2021, respectively, were included in the contract liability balance at the beginning of the period.

All revenue for the three months ended September 30, 2021 was included in the contract liability balance at the beginning of the period.

(2) Revenue for the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021 all represent amounts that were included in the contract liability balance at the beginning of the respective period.

License Agreements

3 unchanged sentences

In June 2022, the Company paid Genentech a $ 7.5 million clinical milestone payment triggered upon the commencement of dosing in the global Phase 2b LUMA study to evaluate the efficacy and safety of BIIB122/DNL151 by the Company's collaboration partner Biogen.

Biogen is responsible for 50 % of any payment obligation to Genentech under the Biogen Collaboration Agreement, including this clinical milestone, and accordingly $ 3.8 million of research and development expense was recorded in the three and six months ended June 30, 2022 .

There were no expenses recorded under the Genentech License Agreement for three and six months ended June 30, 2021.

In September 2022, a further $ 5.0 million clinical milestone payment was triggered upon the commencement of dosing in the g lobal Phase 3 LIGHTHOUSE study to evaluate the efficacy and safety profile of BIIB122/DNL151 by the Company's collaboration partner Biogen.

This $ 5.0 million milestone payment is included w ithin accrued clinical and other research and development costs on the Condensed Consolidated Balance Sheet as of September 30, 2022.

Biogen is responsible for 50 % of any payment obligation to Genentech under the Biogen Collaboration Agreement, including these clinical milestones, and accordingly $ 2.5 million and $ 6.3 million of research and development expense under this agreement was recorded in th e three and nine months ended September 30, 2022, respectively .

There were no expenses recorded under the Genentech License Agreement for the three and nine months ended September 30, 2021.

To date, the Company has made payments to Genentech of $ 20.0 million in the aggregate, including an upfront fee, a technology transfer fee and two clinical milestone payments, with $ 16.3 million of this recorded as research and development expense as incurred, after cost sharing reimbursements from Biogen.

4 unchanged sentences

There was an amendment to the SLC Lease in July 2022, subsequent to which the rentable square feet is approximately 78,000 , the contractual term is approximately 9.3 years which will commence upon completion of certain improvements by the landlord and the Company, and future undiscounted lease payments total approximately $ 19.5 million.

For accounting purposes, the SLC lease, as amended, has not yet commenced as the landlord has not yet made the underlying asset available for use by Denali, and as such, no lease liability or ROU asset is recorded on the Condensed Consolidated Balance Sheets as of June 30, 2022, and no operating lease expense has been recorded for the three and six months ended June 30, 2022.

For accounting purposes, the SLC lease, as amended, has not yet commenced as the landlord has not yet made the underlying asset available for use by Denali, and as such, no lease liability or ROU asset is recorded on the Condensed Consolidated Balance Sheets as of September 30, 2022, and no operating lease expense has been recorded for the three and nine months ended September 30, 2022.

Management exercised judgment in applying the requirements of ASC 842, including the determination as to whether certain contracts contain a lease and for leases identified under the standard, the discount rate used to determine the measurement of the lease liability.

1 unchanged sentence

To estimate the incremental borrowing rates, management considers observable debt yields of comparable market instruments, as well as benchmarks within the lease agreement that may be indicative of the rate implicit in the lease.

There were no changes to the terms of the Company's operating leases recognized under ASC 842 during the three or six months ended June 30, 2022.

There were no changes to the terms of the Company's existing operating leases recognized under ASC 842 during the three or nine months ended September 30, 2022.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the periods presented (in thousands):

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

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

2022 2021 2022 2021

1 unchanged sentence

$ 3,306 $ 2,863 $ 8,857 $ 8,429

Cash paid for amounts included in measurement of lease liability $ 2,676 $ 2,563 $ 5,294 $ 5,099

As of June 30,

Cash paid for amounts included in measurement of lease liabilities $ 2,899 $ 2,618 $ 8,193 $ 7,717

As of September 30,

Weighted average remaining lease term 6.4 years 7.6 years

2 unchanged sentences

(1) Including variable and short-term lease costs

The following table reconciles the undiscounted cash flows for the next five years and total of the remaining years to the operating lease liability recorded in the Condensed Consolidated Balance Sheet as of June 30, 2022 (in thousands):

The following table reconciles the undiscounted cash flows for the next five years and total of the remaining years to the operating lease liabilities recorded in the Condensed Consolidated Balance Sheet as of September 30, 2022 (in thousands):

Year Ended December 31:

2022 (six months) 5,408

2022 (three months) 2,996

Thereafter 29,966

4 unchanged sentences

The details of the Sublease Agreement are further described in Note 9, "Commitments and Contingencies", to the consolidated financial statements in the Company's 2021 Annual Report on Form 10-K.

During the second quarter of 2022, there were no changes to the terms of the Sublease Agreement.

Total sublease income, including rent and variable sublease cost reimbursements, of $ 0.9 million and $ 1.0 million for the three months ended June 30, 2022 and 2021, respectively, and $ 1.9 million for both the six months ended June 30, 2022 and 2021, was recorded within Interest and other income, net in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The following table details the future undiscounted cash inflows relating to the Sublease Agreement as of June 30, 2022 (in thousands):

During the third quarter of 2022, there were no changes to the terms of the Sublease Agreement.

Total sublease income, including rent and variable sublease cost reimbursements, of $ 1.0 million for both of the three months ended September 30, 2022 and 2021, and $ 2.9 million for both of the nine months ended September 30, 2022 and 2021, was recorded within Interest and other income, net in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The following table details the future undiscounted cash inflows relating to the Sublease Agreement as of September 30, 2022 (in thousands):

Year Ended December 31:

2022 (six months) 1,516

2022 (three months) 758

2025 and thereafter —

6 unchanged sentences

Under the DMSA, the Company will execute purchase orders based on project plans authorizing Lonza to provide development and manufacturing services with respect to certain of the Company's antibody and enzyme products, and will pay for the services provided and batches delivered in accordance with the DMSA and project plan.

Unless earlier terminated, the DMSA will expire on the later of September 6, 2022 or when all development and manufacturing services are completed.

As of June 30, 2022 and December 31, 2021, the Company had open purchase orders for biological product development and manufacturing costs totaling $ 41.4 million and $ 35.8 million, respectively.

The activities under these purchase orders are expected to be completed by November 2026.

As of June 30, 2022 and December 31, 2021, the Company had total non-cancellable purchase commitments under the DMSA of $ 25.2 million and $ 28.3 million, respectively.

During the three months ended June 30, 2022 and 2021, the Company incurred costs of $ 9.5 million and $ 3.2 million, respectively, and made payments of $ 7.0 million and $ 5.7 million, respectively, for the development and manufacturing services rendered under the DMSA.

During the six months ended June 30, 2022 and 2021, the Company incurred costs of $ 19.5 million and $ 8.4 million, respectively, and made payments of $ 15.7 million and $ 6.4 million, respectively, for the development and manufacturing services rendered under the DMSA.

Unless earlier terminated, the DMSA will expire when all development and manufacturing services are completed.

As of September 30, 2022 and December 31, 2021, the Company had open purchase orders for biological product development and manufacturing costs totaling $ 37.9 million and $ 35.8 million, respectively.

The activities under these purchase orders are expected to be completed by October 2029.

As of September 30, 2022 and December 31, 2021, the Company had total non-cancellable purchase commitments under the DMSA of $ 36.0 million and $ 28.3 million, respectively.

During the three months ended September 30, 2022 and 2021, the Company incurred costs of $ 3.4 million and $ 5.8 million, respectively, and made payments of $ 3.9 million and $ 4.0 million, respectively, for the development and manufacturing services rendered under the DMSA.

During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $ 22.9 million and $ 14.2 million, respectively, and made payments of $ 19.6 million and $ 10.4 million, respectively, for the development and manufacturing services rendered under the DMSA.

Contingencies

4 unchanged sentences

Stock Option Activity

The following table summarizes stock option activity for the six months ended June 30, 2022:

The following table summarizes stock option activity for the nine months ended September 30, 2022:

Number of Options

5 unchanged sentences

( 495,030 ) 40.64

Balance at June 30, 2022 15,158,522 $ 26.96

Vested and expected to vest at June 30, 2022

Balance at September 30, 2022 14,748,630 $ 27.02

Vested and expected to vest at September 30, 2022

13,137,935 $ 30.25

Exercisable at June 30, 2022 9,431,675 $ 20.27

Exercisable at September 30, 2022 9,553,685 $ 21.08

The estimated fair value of stock options granted to employees were calculated using the Black-Scholes option-pricing model using the following assumptions:

Six Months Ended June 30,

Nine Months Ended September 30,

Expected term (in years)

6 unchanged sentences

Restricted Stock Activity

The following table summarizes restricted stock unit ("RSU") activity for the six months ended June 30, 2022:

The following table summarizes restricted stock unit ("RSU") activity for the nine months ended September 30, 2022:

Number of RSU shares Weighted-Average Fair Value at Date of Grant per Share

3 unchanged sentences

Forfeited ( 223,352 ) 45.53

Unvested and expected to vest at June 30, 2022 2,898,742 $ 43.96

Unvested and expected to vest at September 30, 2022 3,356,455 $ 41.55

Stock-Based Compensation Expense

The Company’s results of operations include expenses relating to stock-based compensation as follows (in thousands):

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

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

2022 2021 2022 2021

6 unchanged sentences

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive.

Potentially dilutive securities, including all options issued and outstanding, ESPP shares issuable, and restricted shares subject to future vesting, that were not included in the diluted per share calculations for all periods presented because they would be anti-dilutive totaled approximately 18.4 million and 16.7 million shares as of June 30, 2022 and June 30, 2021, respectively.

Potentially dilutive securities, including all options issued and outstanding, ESPP shares issuable, and restricted shares subject to future vesting, that were not included in the diluted per share calculations for all periods presented because they would be anti-dilutive totaled approximately 18.4 million and 16.5 million shares as of September 30, 2022 and September 30, 2021, respectively.

Subsequent Event

In October 2022, the Company sold 11.9 million shares of common stock (inclusive of shares sold pursuant to an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of $ 26.50 per share for aggregate net proceeds of approximately $ 296.2 million.

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

What changed 10-Q

Item 1. Financial Statements