What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-28 · 192 added, 240 removed, 729 unchanged (37% of the section changed)

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition for license, option and collaboration arrangements

Description of the Matter The Company recognized total collaboration revenue of $48.7 million for the year ended December 31, 2021.

As discussed in Note 1 to the consolidated financial statements, the terms of license, option and collaboration arrangements typically include payments for up-front license fees, option exercise fees, milestones, manufacturing supply and research development services, as well as royalties on net sales of licensed products.

The license, option and collaboration agreements often contain multiple elements delivered to the counterparty, including but not limited to i) licenses to IP;

ii) research and / or development services;

iii) options to license IP in the future;

and iv) participation in joint collaborative activities to develop and commercialize the partnered IP.

Auditing the Company's accounting for license, option and collaboration arrangements, such as the accounting resulting from Takeda’s exercise of its option rights to collaborate on DNL593 (PTV:PGRN) and DNL919 (ATV:TREM2) under the Takeda Option and Collaboration Agreement during 2021, is complex and requires significant auditor judgment.

Significant judgment and technical complexity is required to apply the authoritative accounting literature at the outset of the arrangement, including i) determining whether the arrangement is a new contract or a modification to an existing contract;

ii) identifying the underlying promised goods and / or services iii) evaluating whether the underlying promised goods and / or services are elements within the scope of Accounting Standards Codification (ASC) 808 Collaborative Arrangements or distinct performance obligations within the scope of ASC 606, Revenue from Contracts with Customers ;

and iv) determining and allocating transaction price to identified performance obligations.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s process for accounting for new license, option and collaboration arrangements or modifications to existing arrangements.

For example, we tested management’s controls over the i) assessment of contracts as either new contracts or modifications to existing contracts;

ii) identification of promised goods and / or services within the arrangement;

and iii) determination of the accounting treatment for such promised goods and / or services.

Our audit procedures included, among others, i) evaluating the Company’s assessment of the authoritative guidance applied to the arrangements;

ii) inspecting the executed contracts to verify the completeness and accuracy of management’s assessment;

iii) evaluating management’s interpretation of certain contract provisions when determining which promises represent distinct performance obligations;

and iv) testing the allocation and recognition of transaction price to such identified performance obligations.

Accrued research and development expenses

Description of the Matter As more fully described in Note 1 to the consolidated financial statements, the Company records accrued liabilities for estimated costs of research and development (“R&D”) activities based upon the estimated cost of services provided but not yet invoiced.

As of December 31, 2022, accrued clinical costs and other R&D costs were $16.3 million.

The accrued costs included estimated clinical trial and other R&D costs incurred but not invoiced under service agreements with organizations that conduct R&D activities on behalf of the Company (“Accrued R&D Costs”).

The Company accrues for these costs based on several factors, such as information obtained from vendors and estimates of the work completed under the service agreements.

Auditing the Company's accounting for Accrued R&D Costs was complex because the Company’s analysis is dependent upon data obtained from external third-party service providers who often act as intermediaries to those performing the underlying services.

The determination of the accrual when the Company has either not been invoiced or has not received information regarding actual costs incurred requires evaluation of the stage of completion of the services.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s process for accounting for Accrued R&D Costs, including management’s controls over completeness and accuracy of data used in determining these costs as well as management’s process for estimating work completed under the service agreements.

To test the Accrued R&D Costs, our audit procedures included, among others, i) confirming the completeness of the terms and conditions of significant R&D service agreements directly with the vendor;

ii) testing the completeness and accuracy of the underlying inputs used in the Company’s accrual models through verification of significant inputs, such as costs incurred and invoices paid, to the terms and conditions of the underlying agreements and information from the Company’s internal personnel and vendors;

iii) testing significant assumptions used in estimating costs of services provided but not yet invoiced including meeting with personnel outside of the accounting department to discuss the basis for such assumptions;

and iv) performing a hindsight analysis of invoices received subsequent to the balance sheet date.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2015.

Redwood City, California

San Mateo, California

February 27, 2023

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Property and equipment, net 44,087 38,865

Operating lease right-of-use asset 30,743 32,618

Operating lease right-of-use assets 30,437 30,743

Other non-current assets 13,399 11,871

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Accounts payable $ 2,790 $ 4,779

Cost sharing payments due to related party 4,388 —

Accrued expenses and other current liabilities 66,691 53,165

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Contract liabilities, less current portion — 3,398

Operating lease liability, less current portion 58,554 64,175

Operating lease liabilities, less current portion 53,032 58,554

Other non-current liabilities 379 379

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Other comprehensive income (loss):

Net unrealized gain (loss) on marketable securities, net of tax ( 2,254 ) ( 595 ) 999

Net unrealized loss on marketable securities, net of tax ( 4,387 ) ( 2,254 ) ( 595 )

Comprehensive income (loss) $ ( 330,378 ) $ ( 292,835 ) $ 70,541

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__________________________________________________

(1) Includes related party collaboration revenue from customer of $ 3,736 and $ 307,437 for the years ended December 31, 2021 and 2020, respectively.

(2) Includes an offset to expense from related party cost reimbursement of $ 6,499 and $ 9,260 for the years ended December 31, 2021 and 2020, respectively.

(1) Includes related-party collaboration revenue from customers of $ 3.2 million, $ 3.7 million, and $ 307.4 million for the years ended December 31, 2022, 2021 and 2020 respectively.

(2) Includes expense for cost sharing payments to a related party of $ 8.2 million for the year ended December 31, 2022 and an offset to expense from related-party cost reimbursements of $ 6.5 million and $ 9.3 million for the years ended December 31, 2021 and 2020, respectively.

See accompanying notes to consolidated financial statements.

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(In thousands, except share amounts)

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity

Shares Amount

Balance at December 31, 2019 96,189,935 $ 1,288 $ 818,803 $ 350 $ ( 425,551 ) $ 394,890

Issuances under equity incentive plans

973,012 9 6,181 — — 6,190

Vesting of early exercised common stock

135,424 2 90 — — 92

Vesting of restricted stock awards and units 419,064 4 ( 4 ) — — —

Stock-based compensation

— — 38,378 — — 38,378

Net loss — — — — ( 197,614 ) ( 197,614 )

Other comprehensive income — — — 999 — 999

Balance at December 31, 2019 96,189,935 $ 1,288 $ 818,803 $ 350 $ ( 425,551 ) $ 394,890

Issuance of common stock in follow-on offering, net of issuance costs of $ 632

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Issuances under equity incentive plans 1,117,636 11 19,337 — — 19,348

Vesting of restricted stock awards 634,336 6 ( 6 ) — — —

Vesting of restricted stock units 634,336 6 ( 6 ) — — —

Stock-based compensation — — 85,247 — — 85,247

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Balance at December 31, 2021 122,283,305 $ 1,548 $ 1,608,238 $ ( 2,499 ) $ ( 644,996 ) $ 962,291

Issuance of common stock in follow-on offering, net of issuance costs of $ 1,060

11,933,962 120 296,095 — — 296,215

Issuances under equity incentive plans

911,555 10 14,445 — — 14,455

Vesting of restricted stock units 837,096 8 ( 8 ) — — —

Stock-based compensation — — 99,847 — — 99,847

Net loss — — — — ( 325,991 ) ( 325,991 )

Other comprehensive loss — — — ( 4,387 ) — ( 4,387 )

Balance at December 31, 2022 135,965,918 $ 1,686 $ 2,018,617 $ ( 6,886 ) $ ( 970,987 ) $ 1,042,430

See accompanying notes to consolidated financial statements.

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Maturities and sales of marketable securities 991,486 1,409,812 665,357

Net cash provided by (used in) investing activities ( 21,626 ) ( 623,206 ) 147,712

Net cash used in investing activities ( 141,387 ) ( 21,626 ) ( 623,206 )

Financing activities

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Supplemental disclosures of cash flow information

Tenant improvements provided by the landlord $ — $ — $ 11,343

Cash paid during the year for income taxes $ 47 $ 210 $ —

Issuance costs incurred but not yet paid $ 224 $ — $ —

Property and equipment purchases accrued but not yet paid $ 1,464 $ 593 $ 67

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Actual results could differ from those estimates, and such differences could be material to the Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Income (Loss).

Reclassifications

Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation.

Such reclassifications have not materially affected previously reported amounts.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and forward foreign currency exchange contracts.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and marketable securities.

Substantially all of the Company’s cash and cash equivalents are deposited in accounts with financial institutions that management believes are of high credit quality.

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The Company’s investment policy limits investments to certain types of securities issued by the U.S.

government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer.

government and its agencies, as well as institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer.

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 Consolidated Balance Sheets .

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

The Company is exposed to counterparty credit risk on all of its derivative financial instruments.

The Company has established and maintains strict counterparty credit guidelines and enters into hedges only with financial institutions that are investment grade or better to minimize the Company’s exposure to potential defaults.

The Company does not require collateral to be pledged under these agreements.

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.

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.

The COVID-19 pandemic has caused increased risk and uncertainty for the Company.

Credit risk associated with investments in securities may increase if any institution with which the Company has an investment is significantly impacted by the COVID-19 pandemic.

As of December 31, 2021, the Company has not realized any losses on its cash deposits or investments.

Further, COVID-19 may impact the timelines and progress of the Company's preclinical activities and clinical trials and may impact its ability to raise capital in the near term.

Further, the company is also subject to broad market risks and uncertainties resulting from recent events, such as the COVID-19 pandemic, the Russian invasion of Ukraine, inflation, rising interest rates, and recession risks as well as supply chain and labor shortages.

Convertible Preferred Stock

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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 Consolidated Statements of Operations and Comprehensive Income (Loss).

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Derivatives and Hedging Activities

The Company has used forward foreign currency exchange contracts to hedge certain operational exposures resulting from potential changes in foreign currency exchange rates.

Such exposures resulted from portions of the Company's forecasted cash flows being denominated in currencies other than the U.S.

dollar, primarily the Euro and British Pound.

The Company measures its derivative instruments at fair value, and accounts for them as either assets or liabilities included within Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, on the Consolidated Balance Sheets.

Derivatives are adjusted to fair value through interest and other income, net in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The fair values of forward foreign currency exchange contracts were estimated using current exchange rates and interest rates and took into consideration the current creditworthiness of the counterparties.

Derivatives are not designated as cash flow hedges, and as such are adjusted to fair value through interest and other income, net, in the Consolidated Statements of Operations and Comprehensive Income (Loss).

As of December 31, 2021, the Company had 7 Euro and 8 British Pound foreign exchange contracts at aggregate notional foreign currency amounts of € 0.8 million and £ 0.9 million, respectively, to be received upon maturity of the contract.

All of the outstanding contracts matured between January and June 2022, and the Company had no outstanding forward foreign currency exchange contracts as of December 31, 2022.

Property and Equipment, Net

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Leasehold improvements Shorter of life of asset or lease term

Manufacturing and laboratory equipment

Computer hardware and software

Office furniture and equipment

Manufacturing and laboratory equipment five years

Computer hardware and software three years

Office furniture and equipment five years

Impairment of Long-Lived Assets

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The fair value of the long-lived assets is determined based on the estimated discounted cash flows expected to be generated from the long-lived assets.

The Company has not recorded any such impairment charges during the years presented.

The Company has not recorded any material impairment charges during the years presented.

The Company leases real estate, and certain equipment for use in its operations.

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 Consolidated Balance Sheets.

Right-of-use (“ROU”) assets and operating lease liabilities are recognized for identified operating leases in the 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 Consolidated Statements of Cash Flows.

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Nonrefundable advance payments for goods and services that will be used or received in future research and development activities are deferred and recognized as expense in the period in which the related goods are delivered or services are performed.

There can be judgment involved in measuring the research and development expenses to be recognized in a particular period.

In some cases, expense is recorded using an underlying assumption of the progress to completion of specific activities.

For example, costs may be recognized based on the passage of time for activities that span reporting periods.

If the provision of services is not linear then this assumption could impact the amount of expense recognized.

The level of judgment varies based on the nature of the services being performed and the underlying support obtained.

For some activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations.

These estimates are inherently more judgmental since the quality and availability of the underlying data may vary.

We do not need to make significant estimates where costs incurred are supported by invoices or reports of costs incurred are obtained from a vendor that is directly performing the underlying services, such as a consultant or contract manufacturing organization.

The Company has acquired and may continue to acquire the rights to develop and commercialize new product candidates from third parties.

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The Company’s stock-based compensation programs grant awards that have included stock options, restricted stock units, restricted stock awards, and shares issued under its employee stock purchase plan.

Grants are awarded to employees, including directors, and non-employee service providers.

Grants are awarded to employees, directors, and non-employee service providers.

The Company measures compensation expense for all stock-based awards at the grant date based on the fair value measurement of the award.

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In this case, diluted net loss per share is equal to basic net loss per share.

Recently Adopted Accounting Pronouncement

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU No.

2019-12 , Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.

2019-12 modifies ASC 740 to simplify several aspects of accounting for income taxes, including eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation.

The guidance was effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted, and is required to be adopted prospectively, with the exception of certain specific amendments, which were not applicable to the Company.

The Company adopted this standard as of January 1, 2021 using a prospective approach.

Adoption of the standard did not have a material impact on the Company's Consolidated Financial Statements.

Fair Value Measurements

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Money market funds $ 105,340 $ — $ — $ 105,340

Short-term marketable securities:

government treasuries 43,781 — — 43,781

Corporate debt securities — 70,009 — 70,009

Commercial paper — 9,948 — 9,948

Long-term marketable securities:

Short-term marketable securities:

government treasuries 1,003,504 — — 1,003,504

government agency securities — 16,861 — 16,861

Corporate debt securities — 54,215 — 54,215

Total $ 1,125,877 $ 136,796 $ — $ 1,262,673

Foreign currency derivative contracts $ — $ 111 $ — $ 111

Commercial paper — 43,591 — 43,591

Total $ 1,152,625 $ 124,615 $ — $ 1,277,240

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Money market funds $ 265,294 $ — $ — $ 265,294

government treasuries 149,997 — — 149,997

Short-term marketable securities:

government treasuries 450,436 — — 450,436

government agency securities — 25,217 — 25,217

Corporate debt securities — 70,009 — 70,009

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Corporate debt securities — 15,302 — 15,302

Foreign currency derivative contracts — 185 — 185

Total $ 1,125,877 $ 136,796 $ — $ 1,262,673

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Total $ — $ 111 $ — $ 111

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

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

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

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$ 1,009,733 $ 58 $ ( 6,287 ) $ 1,003,504

government agency securities 16,823 38 — 16,861

Corporate debt securities (2)

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Total short-term marketable securities 1,124,718 96 ( 6,643 ) 1,118,171

Long-term marketable securities:

government treasuries (3)

411,904 — ( 1,757 ) 410,147

Corporate debt securities (4)

15,373 — ( 71 ) 15,302

Total long-term marketable securities 427,277 — ( 1,828 ) 425,449

Total $ 1,124,718 $ 96 $ ( 6,643 ) $ 1,118,171

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(2) Unrealized holding losses on 16 securities with an aggregate fair value of $ 54.2 million.

(3) Unrealized holding loss on 16 securities with an aggregate fair value of $ 410.1 million.

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

December 31, 2021

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$ 450,689 $ — $ ( 253 ) $ 450,436

government agency securities (2)

25,214 5 ( 2 ) 25,217

Corporate debt securities (2)

70,076 1 ( 68 ) 70,009

Commercial paper 51,485 — — 51,485

2 unchanged sentences

government treasuries (3)

411,904 — ( 1,757 ) 410,147

Corporate debt securities (4)

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(2) Unrealized holding losses on 16 securities with an aggregate fair value of $ 68.5 million.

(3) Unrealized holding loss on 1 security with an aggregate fair value of $ 20.1 million.

As of December 31, 2021 and 2020, many 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 December 31, 2021 and 2020.

(3) Unrealized holding losses on 16 securities with an aggregate fair value of $ 410.1 million.

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

As of December 31, 2022 and 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 December 31, 2022 or 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.

Further, the majority of securities in an unrealized loss position are U.S.

government securities.

The remainder of these marketable securities were initially, and continue to be, held with investment grade, high credit quality institutions.

All of these marketable securities have been in a loss position for less than twelve months or the loss is not material.

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

Derivative Financial Instruments

Foreign Currency Exchange Rate Exposure

The Company uses forward foreign currency exchange contracts to hedge certain operational exposures resulting from potential changes in foreign currency exchange rates.

Such exposures result from portions of the Company's forecasted cash flows being denominated in currencies other than the U.S.

dollar, primarily the Euro and British Pound.

The derivative instruments the Company uses to hedge this exposure are not designated as cash flow hedges, and as a result, changes in their fair value are recorded in interest and other income, net, on the Company's Consolidated Statements of Operations and Comprehensive Income (Loss).

The fair values of forward foreign currency exchange contracts are estimated using current exchange rates and interest rates and take into consideration the current creditworthiness of the counterparties.

Information regarding the specific instruments used by the Company to hedge its exposure to foreign currency exchange rate fluctuations is provided below.

The following table summarizes the Company’s forward foreign currency exchange contracts outstanding as of December 31, 2021 and 2020 (notional amounts in thousands):

Foreign Exchange Contracts Number of Contracts Aggregate Notional (1) Amount in Foreign Currency

Euros 7 800 Jan 2022 - Jun 2022

British Pounds 6 900 Jan 2022 - Jun 2022

Total at December 31, 2021

Euros 26 3,855 Jan 2021 - Nov 2021

British Pounds 21 2,658 Jan 2021 - Nov 2021

Total at December 31, 2020

_________________________________________________

(1) The notional amount represents the net amount of foreign currency that will be received upon maturity of the forward contracts.

Further, a majority of these securities are held in U.S.

government securities, and the remainder were initially, and continue to be, held with investment grade, high credit quality institutions.

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

As of December 31, 2022 all of the Company’s marketable securities have an effective maturity of less than one year .

In August 2016, the Company entered into a License and Collaboration Agreement (“F-star Collaboration Agreement”) with F-star Gamma Limited (“F-star Gamma”), F-star Biotechnologische Forschungs-und Entwicklungsges M.B.H ("F-star GmbH") and F-star Biotechnology Limited ("F-star Ltd") (collectively, “F-star”) to leverage F-star’s modular antibody technology and the Company’s expertise in the development of therapies for neurodegenerative diseases.

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The Company made initial exercise payments under the Purchase Agreement and the F-star Gamma License, in the aggregate, of $ 17.8 million.

In addition, the Company is required to make future contingent payments, to F-star Ltd and the former shareholders of F-star Gamma, up to a maximum amount as of the date of acquisition of $ 447.0 million in the aggregate upon the achievement of certain defined preclinical, clinical, regulatory and commercial milestones.

In addition, the Company is required to make contingent payments, to F-star Ltd and the former shareholders of F-star Gamma, up to a maximum amount following completion of the research phase of the F-star collaboration of $ 243.0 million in the aggregate upon the achievement of certain defined preclinical, clinical, regulatory and commercial milestones.

These include up to $ 3.0 million in preclinical contingent payments, $ 30.0 million in clinical contingent payments, $ 60.0 million in regulatory contingent payments and $ 150.0 million in commercial contingent payments.

The amount of the contingent payments will vary based on whether F-star delivers an Fcab (constant Fc-domains with antigen-binding activity) that meets pre-defined criteria and whether the Fcab has been identified solely by the Company or solely by F-star or jointly by the Company and F-star.

Through December 31, 2022, $ 1.5 million of preclinical contingent payments had been paid to F-star.

The Company concluded that the assets acquired and liabilities assumed upon the exercise of the Option Agreement did not meet the accounting definition of a business, and as such, the acquisition was accounted for as an asset purchase.

As the transaction was accounted for as an asset purchase rather than a business combination, the Company did no t recognize any contingent consideration on the acquisition date.

To date, the Company has paid consideration of $ 19.8 million in the aggregate, consisting of up-front and contingent consideration, all of which was recorded as research and development expense as incurred.

The Company recognized $ 1.5 million of contingent consideration as research and development expense for the year ended December 31, 2019.

There was no contingent consideration recognized for the years ended December 31, 2021 and 2020.

As the transaction was accounted for as an asset purchase rather than a business combination, the Company did no t recognize any contingent consideration liability on the acquisition date.

To date, the Company has paid consideration of $ 19.8 million in the aggregate, consisting of up-front and preclinical contingent consideration, all of which was recorded as research and development expense as incurred.

There was no contingent consideration expense recognized for the years ended December 31, 2022, 2021, or 2020.

Any future contingent consideration is expected to be recognized as incurred in research and development expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).

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In July 2021, a side letter was executed to the Company's agreements with F-star, which confirmed the completion of the research services performed by F-star Ltd that were funded by the Company.

The Company recognized $ 0.1 million, $ 1.2 million, and $ 1.1 million in research and development expense related to the funding of F-star Ltd activities under development plans during the years ended December 31, 2021, 2020, and 2019, respectively.

The Company has no t recognized research and development expense related to the funding of F-star Ltd activities under development plans during the year ended December 31, 2022, but recognized $ 0.1 million and $ 1.2 million in research and development expense related to the funding of F-star Ltd activities under development plans during the years ended December 31, 2021 and 2020, respectively.

Collaboration Agreements

On August 5, 2020, the Company 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 the Company granted Biogen a license to co-develop and co-commercialize Denali’s small molecule LRRK2 inhibitor program (the “LRRK2 Program”), an option in respect of each of (i) the Company’s amyloid beta program utilizing the Company's Transport Vehicle ("TV") technology platform to cross the blood-brain barrier ("BBB") and (ii) one other unnamed program also utilizing the Company's 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, amyotrophic lateral sclerosis ("ALS") or multiple sclerosis utilizing the Company's TV technology platform (the “ROFN Programs”) should the Company decide to seek a collaboration with a third party for such programs.

In August 2020, the Company 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 the Company granted Biogen a license to co-develop and co-commercialize Denali’s small molecule LRRK2 inhibitor program (the “LRRK2 Program”), an option in respect of each of (i) the Company’s amyloid beta program utilizing the Company's Transport Vehicle ("TV") technology platform to cross the blood-brain barrier ("BBB") and (ii) one other unnamed program also utilizing the Company's 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, amyotrophic lateral sclerosis ("ALS") and multiple sclerosis utilizing the Company's TV technology platform (the “ROFN Programs”), should the Company decide to seek a collaboration with a third party for such programs.

The Provisional Biogen Collaboration Agreement was a binding agreement, which became effective on the closing of the Common Stock Purchase Agreement ("SPA"), as described further below.

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Stock Purchase Agreement

In connection with the Provisional Biogen Collaboration Agreement, the Company entered into a common stock purchase agreement (the "Stock Purchase Agreement") with BIMA on August 5, 2020, pursuant to which the Company agreed to issue and sell, and BIMA agreed to purchase, 13,310,243 shares of the Company’s common stock (the “Shares”) for an aggregate purchase price of $ 465.0 million pursuant to the terms and conditions thereof.

Since the shares of common stock owned by Biogen as of December 31, 2021 represent more than 10% of the voting interest of the Company, Biogen is considered a related party as defined in ASC 850.

In connection with the Provisional Biogen Collaboration Agreement, the Company entered into a common stock purchase agreement (the "Stock Purchase Agreement") with BIMA on August 5, 2020, pursuant to which the Company sold 13,310,243 shares of common stock (the “Shares”) to BIMA for an aggregate purchase price of $ 465.0 million.

Since the shares of common stock owned by Biogen as of December 31, 2022 represent approximately 10 % of the voting interest of the Company, Biogen is considered a related party as defined in ASC 850.

Management determined that it was appropriate to account for the Provisional Biogen Collaboration Agreement and the SPA as one arrangement because they were entered into at the same time with interrelated financial terms.

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The estimated fair market value of the Shares issued to BIMA was $ 420.1 million, based on the closing stock price of $ 35.87 on the date of issuance adjusted by a discount for lack of marketability due to certain holding period restrictions, which was valued using an option pricing model.

This stock issuance resulted in a $ 44.9 million premium paid to the Company above the estimated fair value of the Company's common stock (the "Stock Premium"), which forms part of the transaction price for the Biogen Collaboration Agreement.

This stock issuance resulted in a $ 44.9 million premium paid to the Company above the estimated fair value of the Company's common stock, which forms part of the transaction price for the Biogen Collaboration Agreement.

ROFN and Option Agreement

Abeta program ("ATV-enabled anti-amyloid beta program") and a second program utilizing the Company's TV technology for an unnamed target ("TV program"), excluding small molecules, Adeno-associated viruses ("AAV") and oligonucleotides.

Under this agreement, Biogen received an exclusive option to license two preclinical programs enabled by the Company's TV technology platform, which platform aims to improve brain uptake of biotherapeutics, including its ATV-enabled anti-amyloid beta program ("ATV-Abeta program") and a second program utilizing the Company's TV technology for an unnamed target ("TV program"), excluding small molecules, Adeno-associated viruses ("AAV") and oligonucleotides.

Biogen’s option may be exercised up to initiation of investigational new drug ("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 thirty business days after the 5th anniversary of the effective date of the Provisional Biogen Collaboration Agreement, whichever is earlier.

Further, Biogen will have the right of first negotiation ("ROFN") on two additional TV-enabled therapeutics within Alzheimer’s disease, Parkinson’s disease, ALS or multiple sclerosis should the Company decide to seek a collaboration with a third party for such programs, but this does not include any of the Company’s small molecule, AAV or oligonucleotide programs.

Further, Biogen will have the right of first negotiation ("ROFN") on two additional TV-enabled therapeutics within Alzheimer’s disease, Parkinson’s disease, ALS and MS should the Company decide to seek a collaboration with a third party for such programs, but this does not include any of the Company’s small molecule, AAV or oligonucleotide programs.

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

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A related party contract liability of $ 290.5 million was recorded on the Consolidated Balance Sheet as of December 31, 2022 .

Approximately $ 288.9 million of this 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 $ 4.8 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 $ 6.5 million and $ 9.3 million of cost sharing reimbursements for interim LRRK2 development activities and LRRK2 Development Activities as an offset to research and development expenses in the Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2021 and 2020, respectively , of which $ 1.2 million and $ 5.7 million was recorded as cost sharing reimbursements due from related party on the Consolidated Balance Sheet as of December 31, 2021 and 2020, respectively.

Approximately $ 288.9 million of this 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 six months of the balance sheet date, and $ 1.6 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 $ 8.2 million of cost sharing payments to Biogen for LRRK2 development activities in research and development expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2022 , of which $ 4.4 million was recorded as cost sharing payments due to related party on the Consolidated Balance Sheet as of December 31, 2022 .

The Company recorded $ 6.5 million and $ 9.3 million of cost sharing reimbursements for LRRK2 Development Activities as an offset to research and development expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020, respectively , of which $ 1.2 million was recorded as cost sharing reimbursement due from related party on the Consolidated Balance Sheet as of December 31, 2021.

In assessing the Biogen Collaboration Agreement, management exercised considerable judgment in estimating revenue to be recognized, specifically related to estimating the discount for lack of marketability associated with the stock issuance, determining the separate performance obligations under the Biogen Collaboration Agreement, and estimating the standalone selling price of those performance obligations.

As of December 31, 2021 , the Company had no t achieved any milestones or recorded any product sales under the Biogen Collaboration Agreement.

As of December 31, 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.

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All potential future milestones and other payments were considered constrained at the inception of the Sanofi Collaboration Agreement since the Company could not conclude it was probable that a significant reversal in the amount recognized would not occur.

The transaction price increased by $ 15.0 million and $ 10.0 million for the years ended December 31, 2021 and 2019, respectively, related to clinical milestones received, and by $ 1.0 million and a further $ 10.4 million, for the years ended December 31, 2020 and 2019, respectively, related to costs incurred for Retained Activities that were no longer constrained.

The transaction price increased by $ 50.0 million and $ 15.0 million for the years ended December 31, 2022 and 2021 , respectively, related to clinical milestones received, and by $ 1.0 million for the year ended December 31, 2020 related to costs incurred for Retained Activities that were no longer constrained.

The respective standalone value for each of the performance obligations was determined by applying the SSP method and the transaction price allocated based on the relative SSP method with revenue recognition timing to be determined either by delivery or the provision of services.

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For the Retained Activities, revenue was recognized over time using the output method, based on amounts invoiced to Sanofi, since this is believed to directly correlate to the value of the services performed.

A contract liability of $ 3.4 million was recorded on the Consolidated Balance Sheets as of each of December 31, 2021 and 2020 .

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, and a receivable of $ 44,303 associated with the Sanofi Collaboration Agreement on the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively.

A contract liability of $ 3.4 million was recorded on the Consolidated Balance Sheet as of December 31, 2021, which related to the portion of the Alzheimer's Disease Services performance obligation yet to be satisfied.

This performance obligation has been satisfied, and therefore no contract liability remains on the Consolidated Balance Sheet as of December 31, 2022 .

The Company did no t record a receivable associated with the Sanofi Collaboration Agreement on the Consolidated Balance Sheets as of December 31, 2022 or 2021.

In assessing the Sanofi Collaboration Agreement, management is required to exercise considerable judgment in estimating revenue to be recognized.

Management applies judgment in determining the separate performance obligations, in estimating the selling price, in determining when control was transferred to Sanofi for the licenses, and in estimating total future costs when using the input method.

Through December 31, 2021, the Company has earned milestone payments of $ 25.0 million, including a $ 15.0 million milestone triggered in June 2021 upon first patient in a Phase 2 study of SAR443122/DNL758 in patients with cutaneous lupus erythematosus, which the Company received in July 2021.

As of December 31, 2022, the Company has earned milestone payments of $ 75.0 million, including a $ 40.0 million milestone triggered in April 2022 upon first patient dosed in a Phase 2 study of SAR443820/DNL788 in individuals with ALS which was received in May 2022, and a $ 10.0 million milestone triggered in December 2022 upon first patient dosed in a Phase 2 study of SAR443122/DNL758 in individuals with UC which was received in December 2022 .

A further $ 25.0 million milestone was earned and received in January 2023 upon commencement of dosing in the Phase 2 study of SAR443820/ DNL788 in patients with MS.

The Company has no t recorded any product sales under the Sanofi Collaboration Agreement.

Takeda Collaboration Agreement

In January 2018, the Company entered into a Collaboration and Option Agreement ("Takeda Collaboration Agreement") with Takeda Pharmaceutical Company Limited ("Takeda"), pursuant to which the Company granted Takeda an option to develop and commercialize, jointly with the Company, certain biologic products that are enabled by the Company's BBB delivery technology and intended for the treatment of neurodegenerative disorders.

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The Takeda Collaboration Agreement became effective in February 2018, at which time Takeda paid the Company an upfront payment of $ 40.0 million.

Takeda may pay up to an aggregate of $ 25.0 million with respect to each of the three programs directed to a target and based upon the achievement of certain preclinical milestone events, up to $ 75.0 million in total, $ 5.0 million of which was paid upon the Takeda Collaboration Agreement becoming effective.

In February 2019, the agreem ent was amended to replace the ATV:BACE1/Tau program with the ATV:Tau program.

The amendment did not have a material impact to the consolidated financial statements.

Under the Takeda Collaboration Agreement and unless otherwise agreed jointly between both parties, the Company is responsible, at its cost, for conducting activities relating to pre-IND development of biologic products directed to the three identified targets and enabled by its BBB delivery technology targeting TfR during the applicable research period.

The period through which the option can be exercised continues for each target until the first biologic product directed to the relevant target is IND-ready or approximately five years after selection of the target, whichever is earlier.

If Takeda exercises its option with respect to a particular target, then Takeda will have the right to develop and commercialize, jointly with the Company, a specified number of biologic products enabled by its BBB delivery technology that were developed during the research period and which are directed to the relevant target.

The Company will grant to Takeda a co-exclusive license under the intellectual property the Company controls related to those biologic products.

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

In addition, if Takeda exercises its option for all three collaboration programs, Takeda may be obligated to pay the Company up to an aggregate of $ 407.5 million upon achievement of certain clinical milestone events and up to an aggregate of $ 300.0 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 $ 225.0 million if one biologic product from each program achieves this milestone.

Subsequent to Takeda exercising its option for a particular target, the Company and Takeda will share equally in the development and commercialization costs, and, if applicable, the profits, for each collaboration program.

Pursuant to the terms of the Takeda Collaboration Agreement, the Company entered into a common stock purchase agreement (the "Stock Purchase Agreement") with Takeda on January 3, 2018, pursuant to which Takeda purchased 4,214,559 shares of the Company’s common stock (the "Shares") for an aggregate purchase price of $ 110.0 million.

The sale of the Shares closed on February 23, 2018.

The fair market value of the common stock sold to Takeda was $ 94.4 million, based on the closing stock price of $ 22.40 on the date of issuance, resulting in a $ 15.6 million premium paid to the Company above the fair value of the Company's common stock which was credited to contract liability in the Company's Consolidated Balance Sheets.

In March 2022, Takeda and the Company agreed to terminate activity on the ATV:Tau program over which Takeda had an option to develop and commercialize jointly with the Company.

Subsequent to this decision, total preclinical milestone payments that Takeda may owe was $ 55.0 million, all of which had been earned and received as of December 31, 2022 .

Pursuant to the terms of the Takeda Collaboration Agreement, the Company entered into a common stock purchase agreement with Takeda on January 3, 2018, pursuant to which Takeda purchased 4,214,559 shares of the Company’s common stock on February 23, 2018 for an aggregate purchase price of $ 110.0 million.

The fair market value of the common stock sold to Takeda was $ 94.4 million, resulting in a $ 15.6 million premium paid to the Company above the fair value of the Company's common stock.

Under the Takeda Collaboration Agreement and unless otherwise agreed jointly between both parties, the Company was responsible, at its cost, for conducting activities relating to pre-IND development of biologic products directed to the three identified targets and enabled by its BBB delivery technology targeting TfR during the applicable research period.

The period through which the option could be exercised for each target was until the first biologic product directed to the relevant target was IND-ready or approximately five years after selection of the target, whichever was earlier.

Subsequent to Takeda exercising 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 has the right to develop and commercialize, jointly with the Company, a specified number of biologic products enabled by its BBB delivery technology that were developed during the research period and which are directed to the relevant target, and the Company grants to Takeda a co-exclusive license under the intellectual property the Company controls related to those biologic products.

The Company believes that the Takeda Collaboration Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Arrangements.

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The Company identified performance obligations during the research period consisting of the license, the development options, and joint steering committee ("JSC") participation together with the research services for each collaboration program.

The license rights, JSC involvement, option and research services are considered to be a single performance obligation for each program since the research services are highly interrelated with the option and JSC involvement and will significantly modify the license.

The license rights, JSC involvement, option and research services were considered to be a single performance obligation for each program since the research services were highly interrelated with the option and JSC involvement and significantly modify the license.

The performance obligations under each of the three programs are separate since the activities and risks under the programs are distinct.

The Company determined that all other goods or services which are contingent upon Takeda exercising its option for each program were not considered performance obligations at the inception of the Takeda Collaboration Agreement.

The Company determined that all other goods or services which were contingent upon Takeda exercising its option for each program were not performance obligations at the inception of the Takeda Collaboration Agreement.

The transaction price at inception included fixed consideration consisti ng of the upfron t fee of $ 40.0 million, the $ 15.6 million premium on the sale of common stock, and the first preclinical milestone payment of $ 5.0 million .

It also included variable consideration of $ 26.0 million relating to future milestones that were not constrained, and have since all been met and received.

The remaining $ 44.0 million of preclinical milestones were considered constrained at the inception of the Takeda Collaboration Agreement since the Company could not conclude it is probable that a significant reversal in the amount recognized will not occur.

Additionally, cost and profit-sharing income, and the development and commercial milestones as outlined above, have not been considered given Takeda has not exercised its options for the development and commercial phases for any program.

No change in the transaction price has been recorded since inception.

This will be reassessed at each reporting period.

The transaction price has been ascribed in its entirety to the three performance obligations identified in the research term of the Takeda Collaboration Agreement.

The transaction price of the Takeda Collaboration Agreement increased by $ 24.0 million during the year end December 31, 2022 due to two $ 12.0 million in 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.

Payments for the PTV:PGRN and ATV:TREM2 milestones were received in February and July 2022, respectively.

Revenue is recognized when, or as, the Company satisfies its performance obligations by transferring the promised services to Takeda.

Revenue is being recognized over time using the input method, based on costs incurred to perform the research services, since the level of costs incurred over time is thought to best reflect the transfer of services to Takeda.

There were no material changes in estimates during the years ended December 31, 2021 and 2020.

A contract liability of $ 27.9 million and $ 39.8 million was recorded on the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively.

The contract liability as of December 31, 2021 relates to the remaining Tau program services, with such amounts to be recognized within twelve months.

In December 2020 GLP toxicology studies were initiated for DNL593 (PTV:PGRN) triggering an $ 8.0 million milestone which was recorded as a receivable as of December 31, 2020 and received in January 2021.

In November 2021, Takeda exercised its option for DNL593 under the Takeda Collaboration Agreement, triggering the $ 5.0 million option fee, which was received in December 2021, at which point the opt in became effective.

In January 2022, a clinical trial application for DNL593 was approved by the Medicines and Healthcare products Regulatory Agency in the UK, triggering a $ 12.0 million milestone from Takeda which was received in February 2022.

In January 2021, GLP toxicology studies were initiated for DNL919 (ATV:TREM2) triggering an $ 8.0 million milestone which was received in March 2021.

In December 2021, Takeda exercised its option for DNL919 under the Takeda Collaboration Agreement, triggering the $ 5.0 million option fee, which was received in December 2021, at which point the opt in became effective.

Through December 31, 2021, the Company has received $ 31.0 million in preclinical milestone payments from Takeda which are included in the transaction price described above, and has no t recorded any product sales under the Takeda Collaboration Agreement.

Revenue was recognized over time using the input method, based on costs incurred to perform the research services, since the level of costs incurred over time was thought to best reflect the transfer of services to Takeda.

There were no material changes in estimates during the years ended December 31, 2022, 2021, or 2020.

A contract liability of $ 27.9 million was recorded on the Consolidated Balance Sheet as of December 31, 2021 relating to the remaining Tau program services.

As a result of the decision to terminate the ATV:Tau program, the performance obligation related to ATV:Tau was considered fully satisfied, and the contract liability was recognized in its entirety within collaboration revenue from customers in the Consolidated Statements of Operations and Comprehensive Income (Loss) for year ended December 31, 2022.

No contract liability remains on the Consolidated Balance Sheet as of December 31, 2022.

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

The Company has no t recorded any product sales and has no remaining performance obligations under the Takeda Collaboration Agreement.

The Takeda Collaboration Agreement was superseded by the PTV:PGRN and ATV:TREM2 Collaboration Agreements subsequent to opt-in for the two programs, recognition of all preclinical milestones, and termination of the ATV:Tau program.

PTV:PGRN and ATV:TREM2 Collaboration Agreements

In November and December 2021, Takeda exercised its options to jointly develop and commercialize the PTV:PGRN and ATV:TREM2 programs, respectively, triggering the option fee of $ 5.0 million for each program .

Management determined that the opt-in by Takeda on the PTV:PGRN and ATV:TREM2 programs represent two new contracts with a customer for accounting purposes (the "PTV:PGRN Collaboration Agreement" and the "ATV:TREM2 Collaboration Agreement"), both effective in December 2021 upon payment of the respective option fees.

For each contract, the Company identified a single performance obligation under ASC 606, and initially one unit of account under ASC 808 associated with each of the PTV:PGRN and ATV:TREM2 Collaboration Agreements.

The performance obligation is the delivery of a co-exclusive license under the intellectual property the Company controls related to the PTV:PGRN or ATV:TREM2 program ("PTV:PGRN Technology License" or "ATV;TREM2 Technology License"), and the unit of account is the obligation to share in responsibility and costs for global development of PTV:PGRN or ATV:TREM2 Products pursuant to a mutually agreed development plan and budget ("PTV:PGRN Development Activities" or "ATV:TREM2 Development Activities"), which both include JSC involvement.

The performance obligation is the delivery of a co-exclusive license under the intellectual property the Company controls related to the PTV:PGRN or ATV:TREM2 program ("PTV:PGRN Technology License" or "ATV;TREM2 Technology License"), and the unit of account is the obligation to share in responsibility and costs for global development of PTV:PGRN or ATV:TREM2 Products pursuant to a mutually agreed upon development plan and budget ("PTV:PGRN Development Activities" or "ATV:TREM2 Development Activities"), which both include JSC involvement.

The PTV:PGRN Development Activities and JSC participation, and the ATV:TREM2 Development Activities and JSC participation are each considered to be single units of account since the activities are highly interrelated with the JSC involvement and these are not distinct in the context of the contract.

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Since ASC 808 does not address recognition and measurement, the Company looked to other accounting literature for the PTV:PGRN Development Activities and ATV:TREM2 Development Activities units of account, and determined that the guidance in ASC 730, Research and Development should be applied.

The transaction price for each contract at inception includes fixed consideration consisting of the option fee of $ 5.0 million .

The transaction price for each contract at inception included fixed consideration consisting of the option fee of $ 5.0 million .

All potential future milestones and other payments were considered constrained at the inception of the PTV:PGRN and the ATV:TREM2 Collaboration Agreements since the Company could not conclude it was probable that a significant reversal in the amount recognized would not occur.

From inception of the PTV:PGRN Collaboration Agreement and the ATV:TREM2 Collaboration Agreement through December 31, 2021, there was no change to the transaction price in either agreement.

From inception of the PTV:PGRN Collaboration Agreement and the ATV:TREM2 Collaboration Agreement through December 31, 2022, there was no change to the terms of, or the transaction price in either 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 entire transaction price was allocated to the underlying Technology License in each Collaboration Agreement, which was delivered on or around the effective date of the respective Collaboration Agreement, with the revenue allocated to this performance obligation recognized during the year ended December 31, 2021.

The Development Activities cost sharing reimbursements or expenses will be recognized over time as earned or incurred, since this is believed to directly correlate to the value of the services performed.

The Company recorded $ 7.7 million and $ 6.0 million of cost sharing reimbursements for PTV:PGRN and ATV:TREM2 Development Activities, respectively, as an offset to research and development expenses in the Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2021, the entirety of which is also recorded as a receivable on the Consolidated Balance Sheet as of December 31, 2021.

In assessing the Takeda Collaboration Agreement and the PTV:PGRN and the ATV:TREM2 Collaboration Agreements, management is required to exercise considerable judgment in estimating revenue to be recognized.

Management applies judgment in determining whether opt-in resulted in a modification to an existing contract or a new contract, in determining the separate performance obligations in the research period and estimating variable consideration.

The Company recorded $ 11.3 million and $ 7.7 million of cost sharing reimbursements for PTV:PGRN, and $ 6.9 million and $ 6.0 million of cost sharing reimbursements for ATV:TREM2 Development Activities for the years ended December 31, 2022 and 2021, respectively, as offsets to research and development expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Cost sharing reimbursements of $ 8.9 million and $ 13.7 million are recorded as receivables on the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively.

In assessing the Takeda Collaboration Agreement and the PTV:PGRN and the ATV:TREM2 Collaboration Agreements, management was required to exercise considerable judgment in estimating revenue to be recognized.

Management applied judgment in determining whether opt-in resulted in a modification to an existing contract or a new contract, in determining the separate performance obligations in the research period, and estimating variable consideration.

As of December 31, 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

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Sanofi Collaboration Agreement:

CNS Program License 40,000 — —

Peripheral Program License 10,000 15,000 —

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Option Research Services (3)

3,149 3,736 892

Total Biogen Collaboration Revenue 3,149 3,736 307,437

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_________________________________________________

(1) $ 15.9 million and $ 19.6 million of revenue for the year ended December 31, 2021 and 2020 was included in the contract liability balance at the beginning of the year.

All of the revenue recognized in the year ended December 31, 2019 was included in the contract liability balance at the beginning of the year.

(1) $ 27.9 million, $ 15.9 million, and $ 19.6 million of revenue for the years ended December 31, 2022, 2021 and 2020 was included in the contract liability balance at the beginning of the year.

(2) Revenue for the years ended December 31, 2022, 2021 and 2020 represent amounts that were included in the contract liability balance at the beginning of the respective year.

(3) Revenue for the year ended December 31, 2021 represents amounts that were included in the contract liability balance at the beginning of the year.

(3) Revenue for the years ended December 31, 2022 and 2021 represents amounts that were included in the contract liability balance at the beginning of the year.

License Agreements

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(“Genentech”).

The agreement gives the Company access to Genentech’s LRRK2 inhibitor small molecule program for Parkinson's disease.

This agreement gives the Company access to Genentech’s LRRK2 inhibitor small molecule program for Parkinson's disease.

Under the agreement, Genentech granted the Company (i) an exclusive, worldwide, sublicensable license under Genentech’s rights to certain patents and patent applications directed to small molecule compounds which bind to and inhibit LRRK2 and (ii) a non-exclusive, worldwide, sublicensable license to certain related know-how, in each case, to develop and commercialize certain compounds and licensed products incorporating any such compound.

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In addition, the Company may owe royalties on net sales of licensed products ranging from low to high single-digit percentages.

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 4, 2020.

To date, the Company has paid Genentech $ 12.5 million in the aggregate, including an upfront fee, a technology transfer fee and a clinical milestone payment, all of which was recorded as research and development expense as incurred.

No expenses were recorded in the years ended December 31, 2021, 2020 or 2019.

I n the year ended December 31, 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, and a $ 5.0 million clinical milestone payment 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 Biogen.

Under the terms of the Biogen collaboration agreement, Biogen is responsible for 50 % of any payment obligation to Genentech after October 4, 2020, including these clinical milestones, and accordingly $ 6.3 million of research and development expense under this agreement was recognized in the year ended December 31, 2022 associated with these milestones.

No expenses were recognized under the Genentech License Agreement in the years ended December 31, 2021 or 2020.

To date, the Company has made payments to Genentech of $ 25.0 million in the aggregate, including an upfront fee, a technology transfer fee and three clinical milestone payments, with $ 18.8 million of this recorded as research and development expense as incurred , net of cost sharing reimbursements from Biogen.

Balance Sheet Components

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As of December 31,

Manufacturing and laboratory equipment $ 30,114 $ 24,216

Leasehold improvements $ 43,698 $ 35,235

Manufacturing and laboratory equipment 34,419 30,114

Computers equipment and purchased software 1,605 1,337

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As of December 31,

Accrued manufacturing costs $ 22,307 $ 9,955

Accrued compensation 17,087 19,013

Accrued clinical costs and other research & development costs 16,297 15,887

Accrued manufacturing costs 9,955 7,140

Other accrued costs and current liabilities 2,857 3,037

Operating lease liability, current 7,318 5,453

Other accrued costs and current liabilities 3,682 2,857

Total accrued expenses and other current liabilities $ 66,691 $ 53,165

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Lease Obligations

In May 2018, the Company entered into an operating lease for its headquarters in South San Francisco (the "Headquarters Lease"), a 148,020 rentable square feet building in South San Francisco, California (the "Headquarters").

In May 2018, the Company entered into an operating lease for its corporate headquarters in South San Francisco (the "Headquarters Lease"), a 148,020 rentable square feet building in South San Francisco, California (the "Headquarters").

The Headquarters Lease has a contractual term of ten years from the legal commencement date, which was April 1, 2019 when the building was ready for occupancy.

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The Company is also required to pay the operating expenses for the Headquarters, such as taxes and insurance, which are treated as variable lease payments.

In August 2021, the Company entered into an operating lease for approximately 65,000 square feet of laboratory, office and warehouse premises ("SLC Premises") in Salt Lake City, Utah (“SLC Lease”), with a contractual term of approximately 8.4 years which will commence upon completion of certain improvements by the landlord and the Company, and future undiscounted lease payments totaling approximately $ 12.5 million.

For accounting purposes, the lease had not yet commenced as of December 31, 2021 since the landlord was completing initial build-out activities and had not yet made the underlying asset available for use by the Company, and as such, no lease liability or ROU asset is recorded on the consolidated balance sheet as of December 31, 2021 , and no operating lease expense has been recorded for the year ended December 31, 2021 .

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

The discount rate of our Headquarters Lease is an approximation of the Company's incremental borrowing rate at lease commencement and is dependent upon the term and economics of the agreement.

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

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):

In August 2021, the Company entered into an operating lease for laboratory, office and warehouse facilities ("SLC Facility") in Salt Lake City, Utah (“SLC Lease”).

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, had not commenced as of December 31, 2022 since the landlord had not yet made the underlying asset available for use by the Company, and as such, no lease liability or ROU asset has been recorded on the Consolidated Balance Sheet as of December 31, 2022 , and no operating lease expense has been recorded for the year ended December 31, 2022 .

Management exercised judgment in applying the requirements of ASC 842, including the determination as to whether certain contracts contain a lease, the type of lease in an arrangement, whether there are separate lease components, the lease consideration, and the commencement date of the lease.

Further, there is significant judgment in determining the discount rate to use in estimating the lease right of use ("ROU") asset and lease liability.

The discount rate is estimated using the rate implicit in the lease, if known, or alternatively is based on an estimate of our incremental borrowing rate on the date of lease commencement.

A change in these assumptions could result in changes in the timing and measurement of rent expense, ROU asset and lease liability or a change in future commitment disclosures.

There were no changes to the terms of the Company's existing operating leases recognized under ASC 842 for the year ended December 31, 2022.

Operating lease costs, including variable and short-term lease costs recognized under ASC 842, were $ 12.2 million, $ 11.2 million, and $ 11.1 million for the years ended December 31, 2022 , 2021 and 2020, respectively.

The following table contains a summary of other information pertaining to the Company’s operating leases for the periods presented (in thousands):

Year Ended December 31,

2022 2021 2020

Operating lease cost (1)

$ 11,223 $ 11,126 $ 10,194

Cash paid for amounts included in measurement of lease liability $ 10,336 $ 9,737 $ 5,421

Cash paid for amounts included in measurement of lease liabilities $ 11,189 $ 10,336 $ 9,737

As of December 31,

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Weighted average discount rate 8.9 % 9 % 9 %

__________________________________________________

(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 Consolidated Balance Sheet as of December 31, 2021 (in thousands):

The following table reconciles the undiscounted lease payments under our operating leases to the operating lease liabilities recorded in the Consolidated Balance Sheet as of December 31, 2022 (in thousands):

Year Ended December 31:

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The Company also passes through a portion of the operating expenses, such as taxes and insurance for the Headquarters to the sublessee, which are treated as variable sublease income.

Total sublease income, including rent and variable sublease cost reimbursements, was $ 3.8 million, $ 3.6 million and $ 2.6 million for the year ended December 31, 2021, 2020 and 2019 , respectively.

Total sublease income, including rent and variable sublease cost reimbursements, was $ 3.9 million, $ 3.8 million and $ 3.6 million for the years ended December 31, 2022, 2021 and 2020 , respectively.

The following table details the future undiscounted cash inflows relating to the Company's Sublease Agreement as of December 31, 2022 (in thousands):

Year Ended December 31:

2025 and thereafter —

Total undiscounted sublease receipts $ 3,972

In February 2023, the sublease was amended to reduce the rentable square feet, which resulted in a reduction in the total future undiscounted sublease receipts to approximately $ 1.1 million.

Indemnification

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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 September 6, 2022.

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

As of December 31, 2022 and 2021, the Company had open purchase orders for biological product development and manufacturing costs totaling $ 35.9 million and $ 35.8 million, respectively, of which certain amounts are subject to cost sharing with Takeda.

The activities under these purchase orders are expected to be completed by February 2028.

As of December 31, 2021 and 2020, the Company had total non-cancellable purchase commitments of $ 28.3 million and $ 27.1 million, respectively, under the DMSA.

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

As of December 31, 2022 and 2021, the Company had total non-cancellable purchase commitments under the DMSA of $ 32.3 million and $ 28.3 million, respectively.

During the years ended December 31, 2022, 2021 and 2020, the Company incurred costs of $ 28.6 million, $ 17.4 million, and $ 10.8 million, respectively, and made payments of $ 23.9 million, $ 14.9 million, and $ 7.3 million respectively, for the development and manufacturing services rendered under the DMSA.

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The Company records accruals for loss contingencies to the extent that the Company concludes that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated.

On September 10, 2020, the Company and all Directors were named in a shareholder derivative action filed in the Delaware Court of Chancery ("the Court") challenging the compensation paid to the Company's Directors since the IPO in December 2017.

On January 13, 2021, the parties to the derivative action entered into a settlement agreement, the terms of which were disclosed via Form 8-K filed on February 5, 2021.

The settlement agreement was approved by the Court on April 16, 2021.

Amounts paid by the Company pursuant to the settlement agreement were determined to not be material.

Stock-Based Awards

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The Company's equity incentive plans, the 2017 Equity Incentive Plan (the “2017 Plan”), and previously, the 2015 Stock Incentive Plan (the “2015 Plan”), reserve shares of common stock for the issuance of stock options, restricted stock and other stock awards, to employees, non-employee directors, and consultants under terms and provisions established by the Board of Directors and approved by the stockholders.

Upon adoption of the 2017 Plan, no new awards or grants are permitted under the 2015 Plan.

The 2015 Plan continues to govern restricted stock awards and option awards previously granted thereunder.

Awards granted under the 2017 Plan and 2015 Plan expire no later than ten years from the date of grant.

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Options granted typically vest over a four - year period but may be granted with different vesting terms.

Upon adoption of the 2017 Plan, no new awards or grants are permitted under the 2015 Plan, and the approximately 0.2 million shares that were then unissued and available for future award under the 2015 Plan became available under the 2017 Plan .

The 2015 Plan will continue to govern restricted stock awards and option awards previously granted thereunder.

The 2017 Plan provides that the number of shares reserved and available for issuance under the 2017 Plan will automatically increase each January 1, beginning on January 1, 2019, by the lesser of (i) 10.0 million shares, (ii) 5 % of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator of the 2017 Plan.

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Balance at December 31, 2021 13,686,386 $ 24.33 6.76 $ 333,011

Options granted 2,037,717 72.11

Options exercised ( 1,021,123 ) 14.86

Options forfeited ( 290,134 ) 35.35

Granted 2,255,840 43.06

Exercised ( 720,904 ) 14.59

Forfeited ( 547,605 ) 41.82

Balance at December 31, 2022 14,673,717 $ 27.03 6.24 $ 127,865

Options vested and expected to vest at December 31, 2021 11,950,691 $ 27.76 7.21 $ 256,779

Options exercisable at December 31, 2021 8,237,187 $ 15.78 6.21 $ 238,436

Vested and expected to vest at December 31, 2022 13,083,022 $ 30.24 6.67 $ 84,709

Exercisable at December 31, 2022 9,886,659 $ 21.71 5.66 $ 101,574

Aggregate intrinsic value represents the difference between the fair value of the Company's common stock and the exercise price of outstanding options.

The total intrinsic value of options exercised was $ 47.9 million, $ 43.8 million, and $ 13.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The total intrinsic value of options exercised was $ 12.6 million, $ 47.9 million, and $ 43.8 million as of December 31, 2022, 2021 and 2020, respectively.

During the years ended December 31, 2022, 2021, and 2020 the weighted-average grant-date fair value of the options vested was $ 23.96 , $ 11.83 , and $ 11.51 per share, respectively.

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The estimated fair value of stock options granted to employees were calculated using the Black-Scholes option-pricing model, which requires various assumptions, including the fair value of the Company’s common stock, expected term, expected dividend yield, expected volatility, and the risk-free interest rate.

The fair value of the Company’s common stock is based on the current market price, unless an adjustment is determined to be required, through discussion with senior management, due to material non-public information know by the Company at the time of grant.

The expected volatility of the Company’s stock options is estimated using a combination of average historical stock price volatility of the Company's stock and that of comparable public companies within the biotechnology and pharmaceutical industry that are deemed to be representative of future stock price trends, since the Company does not have sufficient trading history to rely solely on the volatility of its common stock.

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Management considers whether the Company is in possession of material non-public information at the time of grants when estimating volatility.

Management considers whether the Company is in possession of material non-public information at the time of grants when making certain estimates, including volatility and the fair value of the Company's common stock.

The expected term of stock options represents the period that the Company’s stock-options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

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The expected dividend rate is zero as the Company currently has no history or expectation of declaring cash dividends on the Company’s common stock.

Management considers whether the company is in possession of material non-public information at the time of grants when making certain estimates, including volatility and the fair value of the Company's common stock.

The following assumptions were used in estimating the fair value of grants during the:

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These awards have two separate market triggers for vesting based upon either (i) the successful achievement of stepped target closing prices on a national securities exchange for 90 consecutive trading days later than 180 days after the Company’s initial public offering for its common stock, or (ii) stepped target prices for a change in control transaction.

In the event that neither of these market triggers are achieved by the specified timelines, such awards will terminate with respect to that portion of the shares.

The expense recognized associated with these performance- and market- contingent awards was $ 0.3 million of general and administrative expense during the year ended December 31, 2020, and $ 5.2 million and $ 0.5 million of general and administrative expense and research and development expense, respectively, for the year ended December 31, 2019.

There was no expense recognized in the year ended December 31, 2021.

The first of these market triggers has been met.

In the event the second market trigger is not achieved by the specified timelines, such awards will terminate with respect to that portion of the shares.

The expense recognized associated with these performance- and market- contingent awards was $ 0.3 million of general and administrative expense during the year ended December 31, 2020.

There was no expense recognized in the years ended December 31, 2022 and 2021.

The Company used a lattice model with a Monte Carlo simulation to value these stock options.

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Restricted Stock Activity

Under the 2017 Plan, the Company may grant restricted stock awards ("RSAs"), which represent restricted shares of issued common stock for which the recipient's rights in the stock are restricted until the shares are vested, and restricted stock units ("RSUs"), which represent a commitment to issue shares of common stock in the future upon vesting.

The fair value of restricted stock underlying the RSAs and RSUs is determined based on the closing market price of the Company's common stock on the date of grant.

We grant restricted stock units ("RSUs") under the 2017 Plan.

The fair value of restricted stock underlying the RSUs is determined based on the closing market price of the Company's common stock on the date of grant.

Aggregated information regarding RSUs granted under the Plan for the year ended December 31, 2022 is summarized below:

Share Units Weighted-Average Fair Value at Date of Grant per Share

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

Unvested at December 31, 2021 2,629,980 $ 43.97

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Forfeited ( 259,461 ) 44.52

Unvested at December 31, 2021 2,629,980 $ 43.97

Expected to vest – December 31, 2021 2,629,980 $ 43.97

Unvested and expected to vest at December 31, 2022 3,330,654 $ 41.39

The aggregate intrinsic value of RSUs is calculated as the closing price per share of the Company's common stock on the last trading day of the fiscal period, multiplied by the number of RSUs expected to vest.

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During the years ended December 31, 2021 and 2020 the weighted-average grant-date fair value of RSUs granted was $ 68.30 and $ 29.31 , respectively.

The total fair value of RSUs that vested during the years ended December 31, 2021 and 2020 was $ 39.8 million and $ 8.7 million , respectively, and of RSUs and RSAs that vested during the year ended December 31, 2019 was $ 8.8 million .

The total fair value of RSUs that vested during the years ended December 31, 2022, 2021, and 2020 was $ 29.4 million, $ 39.8 million, and $ 8.7 million , respectively.

Stock-Based Compensation Expense

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

The Company’s stock-based compensation expense was as follows (in thousands):

Year Ended December 31,

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Total $ 99,847 $ 85,247 $ 50,351

As of December 31, 2021, total unamortized stock-based compensation expense related to employee and non-employee awards was $ 190.8 million .

As of December 31, 2022, total unamortized stock-based compensation expense was $ 197.6 million .

The weighted-average period over which such stock-based compensation expense will be recognized is approximately 2.5 years.

There was no tax benefit realized related to awards vested or exercised during the years ended December 31, 2021 and December 31, 2019.

There was no tax benefit realized related to awards vested or exercised during the years ended December 31, 2022 and 2021 .

For the year ended December 31, 2020 a tax benefit of $ 1.0 million was realized related to awards vested or exercised during the period.

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The 401(k) plan authorizes employer safe harbor contributions.

The 401(k) plan is intended to qualify under Sections 401(a) and 501(a) of the Code.

As a tax-qualified retirement plan, pre-tax contributions to the 401(k) plan and earnings on those pre-tax contributions are not taxable to the employees until distributed from the 401(k) plan, and earnings on Roth contributions are not taxable when distributed from the 401(k) plan.

The Company made contributions to the Plan for eligible participants, and recorded contribution expenses o f $ 2.8 million , $ 2.3 million and $ 1.9 million for the years ended December 31, 2022, 2021, and 2020 respectively.

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Year Ended December 31,

2022 2021 2020

Federal $ — $ — $ —

State 7 ( 576 ) 823

Foreign 14 1 —

Total Current $ 21 $ ( 575 ) $ 823

Federal $ — $ — $ —

Foreign — — —

Total deferred $ — $ — $ —

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Tax credit carryforwards 69,562 48,058

Research expense capitalization 61,869 —

Contract liabilities 70,824 75,281

Operating lease liability 15,040 17,179

Operating lease liabilities 14,712 15,040

Stock-based compensation 44,473 30,185

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Gross deferred tax assets 347,313 243,234

243,234 150,520

Valuation allowance ( 332,580 ) ( 228,586 )

( 228,586 ) ( 133,054 )

Net deferred tax assets 14,733 14,648

14,648 17,466

Deferred tax liabilities:

Property and equipment ( 7,314 ) ( 7,424 )

( 7,424 ) ( 9,329 )

Operating lease right-of-use asset ( 7,224 ) ( 8,137 )

Operating lease right-of-use assets ( 7,419 ) ( 7,224 )

Net deferred tax assets $ — $ —

In line with the requirements of the 2017 Tax Cuts and Jobs Act, effective January 1, 2022, our research and development expenditures incurred during the year ended December 31, 2022 have been capitalized for federal income tax purposes, to be amortized over periods of 5 and 15 years for costs incurred in the US and outside the US, respectively.

This resulted in a gross deferred tax asset of $ 61.9 million as of December 31, 2022 .

Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not.

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Weighted average number of shares outstanding, basic 125,530,703 121,524,795 108,974,137

Dilutive effect of outstanding common stock options, ESPP shares issuable, and restricted shares — 3,728,971 —

Dilutive effect of shares issuable under equity incentive plans — — 3,728,971

Weighted average number of shares outstanding, diluted 125,530,703 121,524,795 112,703,108

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Net income (loss) per share, diluted $ ( 2.60 ) $ ( 2.39 ) $ 0.63

Potentially dilutive securities that were not included in the diluted per share calculations for the years ended December 31, 2021, 2020, and 2019, respectively, because they would be anti-dilutive were as follows:

Year Ended December 31,

2021 2020 2019

Options issued and outstanding and ESPP shares issuable 13,836,282 3,286,045 11,921,434

Restricted shares subject to future vesting 2,629,980 879,792 882,636

Total 16,466,262 4,165,837 12,804,070

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive totaled approximately 18.2 million, 16.5 million, and 4.2 million shares as of December 31, 2022, 2021, and 2020, respectively.

These consist primarily of all or certain options issued and outstanding and restricted stock awards subject to future vesting.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data