What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-03 · 67 added, 127 removed, 216 unchanged (47% of the section changed)

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• our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

• our potential plans and ability to develop our own manufacturing facilities;

• our plans and ability to develop our own manufacturing facilities;

• the pricing and reimbursement of our product candidates, if approved and commercialized;

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• our ability to enhance operational, financial and information management systems;

• the impact of increasing geopolitical uncertainty, rising inflation and increased labor market competition;

• the impact of the COVID-19 pandemic, rising interest rates, and global economic and social conditions on our business;

• the impact of adverse economic conditions such as instability in the financial services sector, rising interest rates, rising inflation and increased labor market competition;

• the impact of the COVID-19 pandemic, increased geopolitical uncertainty and related global economic disruptions and social conditions on our business;

• our financial performance.

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• a second non-CNS penetrant RIPK1 inhibitor, partnered with Sanofi, to address peripheral inflammatory diseases such as cutaneous lupus erythematosus ("CLE") and ulcerative colitis ("UC").

The following table summarizes key information about our planned and ongoing clinical studies:

The following table summarizes key information about our clinical stage programs:

Program Product Candidate Clinical Study(ies) Indication Operational Control

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LRRK2 BIIB122/DNL151 Ph 2b

PD Joint with Biogen

Parkinson's disease Joint with Biogen

eIF2B DNL343 Ph 1b ALS Denali

Ph 2/3 (planned) ALS Joint with Healey Center

RIPK1 (CNS-penetrant) SAR443820/DNL788 Ph 2

Ph 2 (planned)

RIPK1 (Peripheral) SAR443122/DNL758 Ph 2 CLE

Ph 2 (planned) UC

Collaborations and partnering are central components of our strategy to build, develop and commercialize our portfolio of product candidates.

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

We currently rely on third-party contract manufacturers to manufacture and supply our preclinical and clinical materials to be used during the development of our product candidates.

We currently do not need commercial manufacturing capacity.

Since we commenced operations, we have devoted substantially all of our resources to discovering, acquiring and developing product candidates, building our BBB platform technology and assembling our core capabilities in understanding key neurodegenerative disease pathways.

Key operational and financing milestones in 2023 to date include:

• In January 2022, we announced that Sanofi plans to initiate a Phase 2 trial of SAR443820/ DNL788 in MS, and a Phase 2 trial of SAR443122/ DNL758 in patients with UC;

• In February 2022, we presented interim data from the Phase 1/2 clinical trial of DNL310 at the WORLDSymposium™ on lysosomal diseases.

Longer-term data in 20 patients with MPS II continued to show sustained normalization of CSF heparan sulfate, consistent with durable CNS activity, with up to one year of intravenous dosing with DNL310.

DNL310 remained generally well tolerated with a safety profile consistent with standard-of-care enzyme replacement therapy;

• In March 2022, we announced the initiation of a Phase 1/2 Clinical Trial of TAK-594/DNL593 for Frontotemporal Dementia-Granulin (FTD-GRN).

In January 2022, the clinical trial application ("CTA") for TAK-594/DNL593 (PTV:PGRN) was approved by the MHRA, triggering a $12.0 million milestone payment from Takeda which was received in February 2022.

In November 2022, we announced that interim results from Part A of the Phase 1/2 study demonstrated that single doses of TAK-594/DNL593 resulted in substantial increases in CSF progranulin levels suggesting brain delivery of TAK-594/DNL593 was achieved and has the potential to address progranulin deficiency, which drives disease progression in people living with FTD-GRN.

Single doses of TAK-594/DNL593 were also generally well tolerated, based on blinded safety analysis.

These data support dosing in participants with FTD-GRN in Part B of the study;

• In March 2022, we mutually agreed under the Takeda Collaboration Agreement to terminate activity on the ATV:Tau program over which Takeda had an option to develop and commercialize jointly with the Company;

• In April 2022, our collaboration partner Sanofi commenced dosing in the HIMALAYA Phase 2 study of SAR443820/DNL788 expected to enroll approximately 260 participants with ALS , triggering a $40.0 million milestone payment, which was received in May 2022;

• In May 2022, Steve Krognes transitioned from his role as Chief Financial Officer to join the Company’s Board of Directors, and Alexander Schuth, M.D., former Chief Operating Officer and Secretary of the Company, added the Chief Financial Officer role to his responsibilities, becoming Denali’s Chief Operating and Financial Officer;

• In May 2022, our collaboration partner Biogen commenced dosing in the global Phase 2b LUMA study to evaluate the efficacy and safety of BIIB122/DNL151, as compared to placebo in approximately 640 participants with early-stage Parkinson’s disease, which triggered a clinical milestone payment of $7.5 million owed to Genentech ;

• In August 2022, dosing commenced in the Phase 1 single ascending dose study of TAK-920/DNL919 in healthy volunteers in the Netherlands.

In June 2022, the CTA for TAK-920/DNL919 (ATV:TREM2) was approved, triggering a $12.0 million milestone payment from Takeda which was received in July 2022.

In January 2022, we announced that the TAK-920/DNL919 Investigational New Drug ("IND") application had been placed on clinical hold by the U.S.

Food and Drug Administration ("FDA").

Denali plans to continue to engage with the FDA and regulatory authorities in Europe to define the path forward for the TAK-920/DNL919 clinical program;

• In August 2022, we announced that new longer-term interim data from the ongoing Phase 1/2 study for DNL310 (ETV:IDS) continues to show sustained normalization to healthy levels of CSF heparan sulfate and improvements in markers of lysosomal function consistent with durable CNS activity, and the safety profile with up to 85 weeks of dosing remains comparable with standard of care therapy.

In addition, 49-week open label data on global impression of change continues to suggest stabilization and/or improvement in MPS II symptoms.

The Phase 2/3 COMPASS study continues to enroll up to 54 participants with Hunter syndrome with and without neuronopathic disease;

upon completion of the ongoing Phase 1/2 study, and together with data from the global COMPASS study, this combined data package will potentially support registration;

• In October 2022, we announced that in September 2022, our collaboration partner Biogen commenced dosing in the global Phase 3 LIGHTHOUSE study to evaluate the efficacy and safety profile of BIIB122/DNL151, as compared to placebo in approximately 400 participants with Parkinson’s disease and a confirmed pathogenic mutation in the leucine-rich repeat kinase 2 (LRRK2) gene, which triggered a clinical milestone payment of $5.0 million owed to Genentech;

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

• In November 2022, our collaboration partner Sanofi presented Phase 1 healthy volunteer data on SAR443820/DNL788 at the Annual Northeast Amyotrophic Lateral Sclerosis ("NEALS") Meeting demonstrating a safety profile that was well-tolerated after single ascending doses and 14 days of multiple ascending doses taken orally once or twice daily, with favorable pharmacokinetic properties and excellent CNS penetrance.

These data further support the ongoing global Phase 2 HIMALAYA study in participants with ALS.

• In January 2023, our collaboration partner Sanofi commenced dosing in the Phase 2 study of SAR443820/ DNL788 in patients with MS , triggering a $25.0 million milestone payment, which was received in January 2023 ;

• In February 2023, at the WORLD Symposium TM , we reported additional interim data from the open-label, single-arm Phase 1/2 study of DNL310.

Over 49 weeks of DNL310 treatment in the Phase 1/2 study, positive changes across measures of exploratory clinical outcomes including VABS-II (adaptive behavior) and BSID-III (cognitive capabilities) scores and global impression scales were observed.

The data also suggested that DNL310 improved hearing, as assessed by auditory brainstem response testing.

Additional biomarker data out to 49 weeks continued to demonstrate that DNL310 enabled rapid and sustained normalization of CSF heparan sulfate to normal healthy levels and improvement in lysosomal function biomarkers.

Reduction in urine heparan sulfate and dermatan sulfate after switch from standard of care to DNL310 suggested additional sustained peripheral activity of DNL310.

The DNL310 safety profile, with up to two years of treatment, remained consistent with standard of care;

• In March 2023, a contingent consideration payment of $30.0 million associated with our acquisition of F-star Gamma was triggered upon the achievement of a specified clinical milestone in the ETV:IDS program.

This payment fully satisfies our clinical contingent consideration obligations under the Purchase Agreement;

• In March 2023, a $10.0 million milestone payment from Takeda was triggered upon achievement of a specified clinical milestone in the Phase 1/2 study of TAK-594/DNL593 in patients with FTD-GRN, which is due in May 2023;

• In April 2023, we entered into a new operating lease in Salt Lake City for a 59,336 square foot laboratory, office and warehouse premises, after terminating our previous SLC lease in March 2023, decreasing future lease payment by $6.1 million while increasing the lease term by approximately five and a half years.

The Utah site will expand our clinical manufacturing capabilities for biologic therapeutics (large molecules) as we plan to use the premises for the manufacture of materials for toxicology studies and drug substance for early human clinical studies with the goal of increasing flexibility and speed in advancing new investigational therapies into clinical trials;

• In April 2023, our collaboration partner Biogen exercised its option to develop and commercialize our ATV program targeting Amyloid Beta, triggering an option exercise payment, which we expect to receive in May 2023;

• In April 2023, we presented final data from the 28-day treatment period of the Phase 1b study of DNL343 in participants with ALS at the 75 th Annual Meeting of the American Academy of Neurology (AAN).

The results continued to demonstrate that once-daily oral dosing with DNL343 for 28 days was generally well tolerated and demonstrated extensive CSF penetration.

In addition, robust inhibition of biomarkers associated with the ISR pathway was observed in blood samples from study participants.

The Phase 1b data continue to support plans to initiate dosing with DNL343 in the Phase 2/3 HEALEY Platform Trial in ALS.

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

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

Our net losses wer e $103.3 million and $227.3 million for the three and nine months ended September 30, 2022, respectively, and $84.6 million and $215.3 million for three and nine months ended September 30, 2021 , respectively.

As of September 30, 2022, we had an accumulated deficit o f $872.3 million.

Our net losses were $109.8 million and $65.2 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, we had an accumulated deficit o f $1.08 billion.

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

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

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

Future revenue may be recognized from the Takeda Collaboration Agreement, Sanofi Collaboration Agreement, and Biogen Collaboration Agreement, and may be generated from product sales or milestone payments, royalties and cost reimbursement from other collaboration agreements, strategic alliances and licensing arrangements.

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

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These expenses primarily relate to salaries and benefits, stock-based compensation, facility expenses including rent and depreciation, and lab consumables.

Where we share costs with our collaboration partners, such as in our Biogen Collaboration Agreement and Takeda Collaboration Agreement , research and development expenses may include cost sharing reimbursements from, or payments to, our partner.

It is challenging to predict the nature, timing and estimated long-range costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates.

This is made more challenging by events outside of our control, such as the COVID-19 pandemic and the Russian invasion of Ukraine.

This is made more challenging by events outside of our control, such as the COVID-19 pandemic and increased geopolitical uncertainty.

We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates.

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Interest and Other Income, Net

Interest and other income, net , consists pr imarily of interest income and investment income earned on our cash, cash equivalents, and marketable securities, gains and losses on foreign currency hedges, and sublease income.

Interest and other income, net , consists pr imarily of interest income and investment income earned on our cash, cash equivalents, and marketable securities, and sublease income.

Results of Operations

Comparison of the three and nine months ended September 30, 2022 and 2021

Comparison of the three months ended March 31, 2023 and 2022

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

Three Months Ended September 30, Change

2022 2021 $ %

Collaboration revenue:

Collaboration revenue from customers

$ 184 $ 5,285 $ (5,101) (97) %

Other collaboration revenue

3,375 — 3,375 *

Total collaboration revenue

3,559 5,285 (1,726) (33)

Operating expenses:

Research and development

87,786 71,559 16,227 23

General and administrative

23,259 19,319 3,940 20

Total operating expenses

111,045 90,878 20,167 22

Loss from operations (107,486) (85,593) (21,893) (26)

Interest and other income, net

4,187 1,005 3,182 *

Loss before income taxes (103,299) (84,588) (18,711) (22)

Net loss $ (103,299) $ (84,588) $ (18,711) (22) %

__________________________________________________

* Percentage is not meaningful.

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2023 2022 $ %

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$ 35,141 $ 42,141 $ (7,000) (17) %

Other collaboration revenue

3,375 4 3,371 *

Total collaboration revenue

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11,034 1,278 9,756 *

Loss before income taxes (227,286) (215,320) (11,966) (6)

Income tax expense (27) — (27) *

Net loss $ (109,781) $ (65,220) $ (44,561) 68 %

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Collaboration revenue.

Collaboration revenue was $3.6 million and $98.2 million for the three and nine months ended September 30, 2022, respectively, and $5.3 million and $36.1 million for the three and nine months ended September 30, 2021.

The decrease in collaboration revenue of $1.7 million for the three months ended September 30, 2022, compared to the comparative period in the prior year, was primarily due to a decrease in revenue from our collaboration with Takeda as the preclinical performance obligations are now satisfied under the Takeda Collaboration Agreement, partially offset by an increase in revenue from our collaboration with Sanofi pertaining to Alzheimer's Disease service performance.

The increase in collaboration revenue of $62.1 million for the nine months ended September 30, 2022, compared to the comparative period in the prior year was primarily due to our collaborations with Takeda and Sanofi.

Takeda revenue increased for the nine months ended September 30, 2022 primarily due to preclinical milestone payments of $24.0 million earned for CTA approvals of TAK-920/DNL919 and TAK-594/DNL593, as well as $27.9 million recognized for the performance obligation satisfaction associated with termination of the Tau program.

Sanofi revenue increased for the nine months ended September 30, 2022 primarily due to a $40.0 million milestone payment earned in April 2022 upon dosing the first patient in a Phase 2 study of SAR443820/DNL788 in individuals with ALS, compared with a $15.0 million milestone payment recognized in the comparable period related to the initiation of a Phase 2 study of SAR443122/DNL758 as well as revenue earned for performance of Alzheimer's Disease services in the third quarter of 2022.

Collaboration revenue was $35.1 million and $42.1 million for the three months ended March 31, 2023 and 2022 , respectively.

The decrease in collaboration revenue of $7.0 million for the three months ended March 31, 2023, compared to the comparative period in the prior year, was primarily due to a $29.9 million decrease in revenue from our collaboration with Takeda primarily due to completion of the preclinical research service performance obligations, and a decrease in revenue of $2.1 million under the Biogen Collaboration Agreement due to completion of the ATV:Abeta Option Research Services.

These decreases are partially offset by a $25.0 million increase in revenue from our collaboration with Sanofi as a result of the milestone achieved in January 2023 upon the commencement of dosing in a Phase 2 study of SAR443820/DNL788 in individuals with MS.

Research and development expen ses.

Research and development expenses were $87.8 million and $266.6 million for the three and nine months ended September 30, 2022, compared to $71.6 million and $197.5 million for the three and nine months ended September 30, 2021, respectively.

Research and development expenses were $128.8 million and $86.1 million for the three months ended March 31, 2023 and 2022 , respectively.

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

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

2022 2021 2022 2021

Three Months Ended March 31,

ETV:IDS program external expenses $ 46,644 $ 17,890

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TV platform and other program external expenses

6,102 3,694 19,252 5,749

LRRK2 program external expenses 1,905 1,196

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Other external research and development expenses

8,314 8,988 26,182 22,222

Personnel related expenses (1)

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Other unallocated research and development expenses

9,967 9,412 27,963 26,916

Net cost sharing payments (reimbursements) (2)

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(1) Personnel related expenses include stock-based compensation expense of $14.7 million and $45.1 million for the three and nine months ended September 30, 2022, respectively, and $12.2 million and $37.0 million for the three and nine months ended September 30, 2021, respectively, reflecting an increase of $2.5 million and $8.1 million, respectively.

(2) For the three and nine months ended September 30, 2022, net cost sharing reimbursements includes reimbursements from Takeda for the PTV:PGRN program (included within PTV:PGRN program external program expenses and Personnel related expenses) of $2.3 million and $8.0 million, respectively, and reimbursements from Takeda for the ATV:TREM2 program (included within ATV:TREM2 program external expenses and Personnel related expenses) of $1.6 million and $5.2 million, respectively.

For the three and nine months ended September 30, 2022, cost sharing reimbursements were partially offset by cost sharing payments of $1.4 million and $3.8 million, respectively, owed to Biogen.

For the three and nine months ended September 30, 2021, the entire amount represents cost sharing reimbursements from Biogen.

The increase in research and development expenses of approximately $16.2 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, was primarily attributable to the following:

• An increase of $4.3 million in ETV:IDS program external expenses reflecting the continued progress of this program in clinical trials during 2022, including costs related to our ongoing Phase 1/2 study and our potentially registrational Phase 2/3 study;

• An increase in external expenses related to the LRRK2 program of $3.9 million primarily due to a $5.0 million clinical milestone payment owed to Genentech which was triggered upon the commencement of dosing in the global Phase 3 LIGHTHOUSE study to evaluate the efficacy and safety of BIIB122/DNL151 by our collaboration partner Biogen, partially offset by decreases in costs due to the transition of clinical activities to Biogen;

• Increases of $2.4 million and $1.2 million in TV platform and other program external expenses and PTV:PGRN program external expenses, respectively, reflecting the progress in our continued investment in developing our TV platform and associated programs;

(1) Personnel related expenses include stock-based compensation expense of $16.8 million and $15.6 million for the three months ended March 31, 2023 and 2022 , respectively, reflecting an increase of $1.2 million.

(2) There were $1.0 million in net cost sharing payments and $2.3 million in net cost sharing reimbursements during the three months ended March 31, 2023 and 2022 , respectively.

For the three months ended March 31, 2023, net cost sharing payments includes cost sharing payments of $4.2 million owed to Biogen, partially offset by cost sharing reimbursements from Takeda for the PTV:PGRN program (included within PTV:PGRN program external program expenses and Personnel related expenses) of $1.5 million and the ATV:TREM2 program (included within ATV:TREM2 program external expenses and Personnel related expenses) of $1.7 million, respectively.

For the three months ended March 31, 2022, net cost sharing reimbursements includes $2.9 million of reimbursements from Takeda for the PTV:PGRN program (included within PTV:PGRN program external program expenses and Personnel related expenses) and $2.1 million of reimbursements from Takeda for the ATV:TREM2 program (included within ATV:TREM2 program external expenses and Personnel related expenses).

These cost sharing reimbursements were partially offset by cost sharing payments of $2.7 million to Biogen for LRRK2 program external expenses and program internal expenses (included within Personnel related expenses).

The increase in research and development expenses of approximately $42.7 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, was primarily attributable to the following:

• An increase of $28.8 million in ETV:IDS program external expenses primarily due to the accrued contingent consideration payment of $30.0 million related to the acquisition of F-star Gamma, which was triggered in March 2023 upon the achievement of a specified clinical milestone in the ETV:IDS program;

• An increase of $7.6 million in other unallocated research and development expenses primarily due to increased facility costs as a result of accelerated depreciation on leasehold improvements associated with the termination of the SLC Lease;

• An increase of $5.0 million in personnel related expenses, consisting of $3.8 million in employee compensation and $1.2 million in stock-based compensation expense pertaining to additional salaries, related expenses, and equity award grants driven by an increase in our research and development headcount.

These increases were partially offset by a decrease of $2.1 million in ATV:TREM2 program external expenses due to the timing of significant clinical related activities year over year and an increase of $1.3 million in cost sharing reimbursements primarily due to the commencement of cost sharing in the Takeda collaboration, as discussed above.

The increase in research and development expenses of approximately $69.1 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, was primarily attributable to the following:

• An increase of $25.7 million in ETV:IDS program external expenses reflecting the continued progress of this program in clinical trials during 2022, including costs related to our ongoing Phase 1/2 study and our potentially registrational Phase 2/3 study;

• Increases of $13.5 million, $4.0 million and $3.2 million, in TV platform and other program external expenses, other external research and development expenses, and PTV:PGRN program external expenses, respectively, reflecting the progress in our PTV:PGRN program as well as our continued investment in developing our robust pipeline;

• An increase in external expenses related to the LRRK2 program of $9.0 million primarily due to $12.5 million in clinical milestone payments owed to Genentech in the nine months ended September 30, 2022 triggered upon commencement of dosing in the global Phase 2b LUMA study and the global Phase 3 LIGHTHOUSE study to evaluate the efficacy and safety of BIIB122/DNL151 by our collaboration partner Biogen, partially offset by decreases in costs due to the transition of clinical activities to Biogen;

• An increase of $22.1 million in personnel related expenses, consisting of increases of $14.0 million in employee compensation and $8.1 million in stock-based compensation expense pertaining to additional salaries, related expenses, and equity award grants driven by an increase in our research and development headcount.

These increases were partially offset by decreases of $3.7 million and $1.4 million in ATV:TREM2 program external expenses and eIF2B program external expenses due to the timing of significant clinical related activities year over year, and an increase of $4.2 million in cost sharing reimbursements primarily due to the commencement of cost sharing in the Takeda collaboration, as discussed above.

General and administrative expenses.

General and administrative expenses were $23.3 million for the three months ended September 30, 2022 compared to $19.3 million for the three months ended September 30, 2021.

The increase of $4.0 million was primarily attributable to the following:

• $1.9 million of increased personnel-related expenses consisting of employee compensation and stock-based compensation expense associated with additional salary expenses and equity award grants driven by higher general and administrative headcount;

• $1.2 million of increased other costs, including general corporate services, IT services and subscriptions, taxes, and travel-related expenses required to support our growing business;

• $0.9 million of increased consulting and legal professional service expenses, with specific increases in consulting expenses related to investment in IT system implementation and market research for our key programs.

These increases were partially offset by a decrease of $3.3 million in net cost sharing reimbursements due to the transition of LRRK2 clinical activities to Biogen, resulting in cost sharing reimbursements flipping to payments;

and decreases of $1.4 million and $1.3 million in TV platform and other program external expenses and PTV:PGRN program external expenses, respectively, due to the timing of significant external research and manufacturing related activities year over year.

General and administrative expenses.

General and administrative expenses were $67.0 million for the nine months ended September 30, 2022 compared to $57.3 million for the nine months ended September 30, 2021.

General and administrative expenses were $27.1 million for the three months ended March 31, 2023 compared to $22.5 million for the three months ended March 31, 2022.

The increase of $4.6 million was primarily attributable to the following:

• $2.7 million of increased facility costs, consulting, and legal professional service expenses;

• $1.8 million of increased personnel-related expenses consisting of employee compensation and stock-based compensation expense associated with additional salary expenses and equity award grants driven by higher general and administrative headcount.

• $2.5 million of increased other costs, including general corporate services, IT services and subscriptions, taxes, and travel related expenses required to support our growing business.

Liquidity and Capital Resources

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

Pursuant to our collaboration agreements with Takeda, Sanofi and Biogen, through September 30, 2022 we have received upfront, option and milestone payments of $105.0 million , $190.0 million, and $560.0 million, respectively, and have also received $23.0 million and $16.2 million of gross cost sharing reimbursements from Takeda and Biogen, respectively, and received $13.7 million of reimbursement from Sanofi for the Phase 1b trial for DNL747 for ALS and associated activities.

Further, under associated stock purchase agreements with Takeda and Biogen, through September 30, 2022 we have received $110.0 million and $465.0 million, respectively, for the sale and issuance of shares of our common stock to collaboration partners.

As of September 30, 2022, we had cash, cash equivalents and marketable securities in the amount of $1.11 billion.

Pursuant to our collaboration agreements with Takeda, Sanofi and Biogen, through March 31, 2023 we have received upfront, option and milestone payments of $105.0 million , $225.0 million, and $560.0 million, respectively, and have also received $31.9 million and $16.2 million of gross cost sharing reimbursements from Takeda and Biogen, respectively, and received $13.7 million of reimbursement from Sanofi for the Phase 1b trial for DNL747 for ALS and associated activities.

Further, under associated stock purchase agreements with Takeda and Biogen, through March 31, 2023 we have received $110.0 million and $465.0 million, respectively, for the sale and issuance of shares of our common stock to these collaboration partners.

As of March 31, 2023, we had cash, cash equivalents and marketable securities in the amount of $1.29 billion.

Future Funding Requirements and Commitments

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

We have an accumulated deficit of $872.3 million through September 30, 2022.

We have an accumulated deficit of $1.08 billion through March 31, 2023.

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

We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the 12 months following the filing date of this Quarterly Report on Form 10-Q, including our existing commitments as outlined below.

We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the twelve months following the filing date of this Quarterly Report on Form 10-Q, including our existing commitments as outlined below.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

In the longer term, we anticipate that we will need substantial additional resources to fund our operations and meet future commitments.

Our existing commitments primarily relate to our obligations under existing lease agreements and the DMSA with Lonza Sales AG ("Lonza") for the development and manufacture of biologic products.

As of September 30, 2022, operating lease liabilities were $62.0 million.

Under other leases which have not yet commenced, such as the SLC lease, we have future undiscounted lease payments totaling approximately $19.5 million.

Under the DMSA with Lonza, we had total non-refundable purchase commitments of $36.0 million as of September 30, 2022, with certain amounts subject to cost sharing with Takeda.

Further, in the normal course of business, we enter into various firm purchase commitments primarily related to research and development activities.

While the lease obligations span multiple years, the vast majority of the purchase commitments with Lonza and other obligations are due within 12 months.

These commitments are more fully described in Note 9, "Commitments and Contingencies" to the consolidated financial statements included in Item 1.

of our Annual Report on Form 10-K and have not materially changed during the nine months ended September 30, 2022.

Our existing commitments primarily relate to our obligations under existing lease agreements, and certain clinical and manufacturing agreements, including the DMSA with Lonza Sales AG ("Lonza") for the development and manufacture of biologic products.

As of March 31, 2023, operating lease liabilities were $57.1 million.

Under the SLC lease which was executed in April 2023, we have future undiscounted lease payments totaling approximately $13.4 million.

Under the DMSA with Lonza, and certain other clinical and manufacturing agreements, we had total non-refundable purchase commitments as of March 31, 2023 of $86.5 million, with certain amounts subject to cost sharing with Takeda.

While the lease obligations span multiple years, the majority of the purchase commitments with Lonza and other clinical and manufacturing agreements are due within twelve months, with some spanning several years.

These commitments are more fully described in Note 7 - Commitments and Contingencies of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Our future funding requirements, including changes to and new commitments, will depend on many factors, including:

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash used in operating activities $ (58,802) $ (72,109)

Net cash (used in) provided by investing activities (13,828) 19,124

Net cash used in investing activities (92,715) (117,878)

Net cash provided by financing activities 1,604 1,463

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Net Cash Used In Operating Activities

During the nine months ended September 30, 2022, net cash used in operating activities was $172.1 million, which consisted of a net loss of $227.3 million, adjusted by non-cash items primarily related to stock-based compensation and depreciation, net amortization of discounts on marketable securities and non-cash rent expenses.

During the three months ended March 31, 2023, net cash used in operating activities was $58.8 million, which consisted of a net loss of $109.8 million, adjusted by non-cash items primarily related to stock-based compensation and depreciation, net amortization of discounts on marketable securities and non-cash rent expenses.

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

Net Cash (Used In) Provided By Investing Activities

During the nine months ended September 30, 2022, net cash used in investing activities was $13.8 million, which consisted of $628.3 million of purchases of marketable securities and $13.0 million of capital expenditures to purchase property and equipment, partially offset by $627.5 million in proceeds from maturities of marketable securities.

Net Cash Used In Investing Activities

During the three months ended March 31, 2023, net cash used in investing activities was $92.7 million, which consisted of $523.7 million of purchases of marketable securities and $2.8 million of capital expenditures to purchase property and equipment, partially offset by $433.8 million in proceeds from maturities of marketable securities.

Net Cash Provided By Financing Activities

During the nine months ended September 30, 2022, cash provided by financing activities was $11.0 million in proceeds from the exercise of options to purchase common stock as well as the purchase of ESPP shares.

During the three months ended March 31, 2023, cash provided by financing activities was $1.6 million in proceeds from the exercise of options to purchase common stock.

Critical Accounting Estimates

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In our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 27, 2023, we described the accounting estimates that we believe involve a significant level of estimation uncertainty which could have a material impact on our financial condition or results of operations.

There have been no material changes to these critical accounting estimates during the nine months ended September 30, 2022.

There have been no material changes to these critical accounting estimates during the three months ended March 31, 2023.

Recent Accounting Pronouncements

There have been no new accounting pronouncements or changes to accounting pronouncements during the nine months ended September 30, 2022 , as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022, that are of significance or potential significance to us.

There have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended March 31, 2023 , as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 27, 2023, that are of significance or potential significance to us.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis