What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-08 · 124 added, 47 removed, 236 unchanged (42% of the section changed)

45 unchanged sentences

Ou r clinic al-stage programs are:

• our ETV:IDS program, our lead brain-penetrant enzyme replacement therapy ("ERT"), enabled by our ETV, which is designed to restore iduronate 2-sulfatase ("IDS"), and reduce glycosaminoglycans ("GAGs"), both peripherally and in the brain, in patients with mucopolysaccharidosis II ("MPS II", or "Hunter syndrome");

• our ETV:IDS program, our lead enzyme replacement therapy ("ERT"), enabled by our ETV, which is designed to cross the BBB and restore iduronate 2-sulfatase ("IDS"), and reduce glycosaminoglycans ("GAGs"), both peripherally and in the brain, in patients with mucopolysaccharidosis II ("MPS II", or "Hunter syndrome");

• our recombinant progranulin ("PGRN") biotherapeutic enabled by our protein transport vehicle ("PTV:PGRN"), being developed in collaboration with Takeda, to address certain types of FTD, especially FTD-GRN caused by PGRN deficiency;

• our novel, selective, high affinity triggering receptors expressed on myeloid cells 2 ("TREM2") antibody, enabled by our ATV, being developed in collaboration with Takeda for the potential treatment of Alzheimer's disease;

• our novel, selective, high affinity triggering receptors expressed on myeloid cells 2 ("TREM2") antibody, enabled by our ATV, for which development of TAK-920/DNL919 is being discontinued in Alzheimer's disease in conjunction with the closeout of the current Phase 1 clinical study of TAK-920/DNL919, and for which Denali and Takeda will explore back-up molecules in preclinical development;

• our second most advanced ETV enabled program, which is designed to restore lysosomal activity of N-sulfoglucosamine sulfohydrolase ("SGSH"), an enzyme responsible for degrading heparan sulfates in the lysosome, in patients with MPS IIIA (Sanfilippo syndrome Type A);

• our leucine-rich repeat kinase 2 ("LRRK2") inhibitor program, being developed in collaboration with Biogen, to address Parkinson’s disease ("PD");

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Joint with Takeda

ATV:TREM2 TAK-920/DNL919 Ph 1 Alzheimer's disease Joint with Takeda

ATV:TREM2 TAK-920/DNL919 Ph 1 (closing) (1)

Alzheimer's disease Joint with Takeda

ETV:SGSH DNL126 Ph 1 (planned) Sanfilippo syndrome Type A (MPS IIIA) Denali

LRRK2 BIIB122/DNL151 Ph 2b

Parkinson's disease Joint with Biogen

Ph 3 (closing)

eIF2B DNL343 Ph 1b ALS Denali

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

Ph 2/3 ALS Joint with Healey Center

RIPK1 (CNS-penetrant) SAR443820/DNL788 Ph 2

RIPK1 (Peripheral) SAR443122/DNL758 Ph 2 CLE

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(1) Study closing following our decision with Takeda to discontinue clinical development of TAK-920/DNL919 in Alzheimer's disease, and explore back-up molecules in preclinical development.

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.

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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.

• 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 payments 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").

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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.

• In May 2023, the first patient was dosed with DNL343 in the Phase 2/3 HEALEY ALS Platform Trial;

• In June 2023, in conjunction with Biogen, and based on review of portfolio timelines and resource prioritization, we announced plans to revise the clinical development program for BIIB122/DNL151.

Prior to the planned revisions, the BIIB122 clinical development program encompassed two global late-stage clinical trials:

the Phase 2b LUMA study in participants with early-stage Parkinson’s disease, which commenced in May 2022;

and the Phase 3 LIGHTHOUSE study in participants with Parkinson’s disease related to LRRK2 mutations, which commenced in September 2022.

In consideration of the LIGHTHOUSE study’s complexity, including the long timeline with anticipated study completion in 2031, Biogen and we plan to refocus our efforts to enable a timely readout on efficacy in idiopathic early-stage Parkinson’s disease while gaining further clinical data in Parkinson’s disease with and without a LRRK2 mutation.

The planned revisions to the BIIB122 clinical development program are not based on any safety or efficacy data from studies of BIIB122.

Biogen and we plan to modify the LUMA study’s enrollment criteria to allow for inclusion of eligible participants with Parkinson’s disease and a confirmed pathogenic variant of LRRK2, in addition to continuing to enroll eligible participants with idiopathic early-stage Parkinson’s disease.

Collectively, data from the LUMA study will inform next steps for the development of BIIB122 in Parkinson’s disease;

• In June 2023, we announced a robust reduction in Neurofilament Light ("NfL") with DNL310 treatment in MPS II (Hunter syndrome).

Interim results demonstrated average reduction of 64% (p <0.001) from baseline in serum NfL after two years of dosing with DNL310 in the Phase 1/2 study.

The FDA has recommended assessment of NfL, a marker of neuroaxonal damage, as a possible biomarker in MPS II.

Recruitment of participants with MPS II, with and without neuronopathic disease, in the global Phase 2/3 COMPASS study is ongoing;

• In July 2023, we presented additional healthy volunteer data from Part A of the Phase 1/2 study of TAK-594/DNL593 at the Alzheimer's Association International Conference, which continued to demonstrate that single doses of TAK-594/DNL593 resulted in substantial increases in CSF PGRN levels and were generally well tolerated.

Recruitment of participants with symptomatic FTD-GRN loss of function mutations in Part B (ascending multiple doses) of the Phase 1/2 study is ongoing;

• In August 2023, we announced that in July Sanofi completed enrollment in the Phase 2 HIMALAYA study;

primary completion of the study is estimated to be February 2024.

• In August 2023, we announced that Sanofi completed a Phase 2 study of SAR443122/DNL758 in patients with CLE in June and data analyses are ongoing.

Sanofi is conducting a Phase 2 trial of SAR443122/DNL758 in patients with ulcerative colitis (UC);

• In August 2023 we announced that, in agreement with Takeda, the companies will discontinue clinical development of TAK-920/DNL919 in Alzheimer’s disease.

This is a strategic decision based on the totality of clinical data emerging from the single ascending dose Phase 1 study of TAK-920/DNL919 in healthy volunteers and in consideration of the rapidly evolving treatment landscape for Alzheimer's disease whereby an understanding of drug combinations with newly approved therapies will be important.

A preliminary analysis of Phase 1 data indicates robust target engagement and effects on microglial biomarkers (e.g., CSF1R, SPP1, IL1RA, IP10, MIP1b, MCP-1), which were consistent with preclinical studies that demonstrate that ATV:TREM2 induces robust changes to a responsive microglial cell state (van Lengerich B, et al.

Nat Neurosci.

In the Phase 1 study, TAK-920/DNL919 was clinically well tolerated at doses with demonstrated changes in CSF biomarkers and there were no serious adverse events or severe treatment emergent adverse events;

however, safety signals of moderate, reversible hematologic effects were observed at the highest dose tested, suggesting a narrow therapeutic window for the Alzheimer’s disease patient population.

The Phase 1 safety findings are believed to be specific to properties of TAK-920/DNL919 and TREM2 biology.

Denali and Takeda will focus research efforts on back-up molecules in preclinical development, including exploration of potential combination therapy given recent new drug approvals in Alzheimer's disease;

• In August 2023, we announced that the Investigational New Drug (IND) application for DNL126 in MPS IIIA has been accepted and we plan to initiate recruiting activities for the Phase 1/2 study in the second half of 2023.

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

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

Due to revenue recognized from our collaboration arrangement with Biogen, we had net income of $183.4 million and $73.6 million for the three and six months ended June 30, 2023, respectively.

Our net losses were $58.8 million and $124.0 million for the three and six months ended June 30, 2022 , respectively.

As of June 30, 2023, we had an accumulated deficit o f $897.4 million.

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

Our net losses 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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Results of Operations

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

Comparison of the three and six months ended June 30, 2023 and 2022

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2023 2022 $ %

11 unchanged sentences

123,640 113,896 9,744 9

Loss from operations (120,815) (66,498) (54,317) 82

Income (loss) from operations 170,483 (61,416) 231,899 *

Interest and other income, net

12,900 2,649 10,251 *

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

Income (loss) before income taxes 183,383 (58,767) 242,150 *

Income tax benefit (expense) — (27) 27 *

Net income (loss) $ 183,383 $ (58,794) $ 242,177 * %

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* Percentage is not meaningful.

Six Months Ended June 30, Change

2023 2022 $ %

Collaboration revenue:

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.

Collaboration revenue from customers

$ 329,264 $ 94,621 $ 234,743 * %

Other collaboration revenue

Total collaboration revenue

329,264 94,621 234,643 *

Operating expenses:

Research and development

226,336 178,835 47,501 27

General and administrative

53,260 43,700 9,560 22

Total operating expenses

279,596 222,535 57,061 26

Income (loss) from operations 49,668 (127,914) 177,582 *

Interest and other income, net

23,934 3,927 20,007 *

Income (loss) before income taxes 73,602 (123,987) 197,589 *

Income tax benefit (expense) — (27) 27 *

Net income (loss) $ 73,602 $ (124,014) $ 197,616 * %

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* Percentage is not meaningful.

Collaboration revenue.

Collaboration revenue was $294.1 million and $329.3 million for the three and six months ended June 30, 2023, respectively, and $52.5 million and $94.6 million for the three and six months ended June 30, 2022.

The increases in collaboration revenue of $241.6 million and $234.7 million for the three month and six month comparable periods, respectively, were primarily due to $293.9 million in revenue recognized in April 2023 under the Biogen Collaboration Agreement as a result of Biogen exercising its option to license our ATV:Abeta program.

The increase for the six months ended June 30, 2023 compared to June 30, 2022 was partially offset by a decrease of $15.0 million in milestone revenue earned under the Sanofi Collaboration Agreement and a decrease of $41.9 million in revenue earned under the Takeda Collaboration Agreement.

The increase for the three months ended June 30, 2023 compared to June 30, 2022 was partially offset by a decrease of $40.0 million in milestone revenue earned under the Sanofi Collaboration Agreement and a decrease of $12.0 million in revenue earned under the Takeda Collaboration Agreement.

The decreases in revenues from the Sanofi and Takeda Collaboration Agreements are due to the timing of underlying activities and milestone triggers under the collaboration agreements.

Research and development expen ses.

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

Research and development expenses were $97.5 million and $226.3 million for the three and six months ended June 30, 2023, compared to $92.7 million and $178.8 million for the three and six months ended June 30, 2022, respectively.

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

Three Months Ended March 31,

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

2023 2022 2023 2022

ETV:IDS program external expenses $ 20,642 $ 17,243 $ 67,286 $ 35,133

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TV platform and other program external expenses

5,408 7,407 9,766 13,150

LRRK2 program external expenses 913 9,092 2,818 10,288

1 unchanged sentence

Other external research and development expenses

5,804 10,362 13,519 17,868

Personnel related expenses (1)

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Other unallocated research and development expenses

11,024 8,848 27,762 17,996

Net cost sharing payments (reimbursements) (2)

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(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;

(1) Personnel related expenses include stock-based compensation expense of $15.2 million and $32.0 million for the three and six months ended June 30, 2023, respectively, and $14.9 million and $30.4 million for the three and six months ended June 30, 2022, respectively, reflecting an increase of $0.3 million and $1.6 million, respectively.

(2) There were $3.5 million and $4.5 million in net cost sharing payments during the three and six months ended June 30, 2023, respectively, consisting of $7.0 million and $11.1 million, respectively, owed to Biogen for LRRK2 program external expenses and program internal expenses (included within Personnel related expenses), partially offset by $1.9 million and $3.4 million, respectively, of reimbursements from Takeda for the PTV:PGRN program (included within PTV program external program expenses and Personnel related expenses), and $1.5 million and $3.2 million respectively, of reimbursements from Takeda for the ATV:TREM2 program (included within TV platform and other program external expenses and Personnel related expenses).

For the three and six months ended June 30, 2022, net cost sharing reimbursements includes $2.8 million and $5.7 million respectively, of reimbursements from Takeda for the PTV:PGRN program (included within PTV program external program expenses and Personnel related expenses), and $1.5 million and $3.7 million respectively, of reimbursements from Takeda for the ATV:TREM2 program (included within TV platform and other program external expenses and Personnel related expenses).

For the three months ended June 30, 2022, cost sharing reimbursements includes $0.4 million of reimbursements from Biogen for LRRK2 program external expenses and program internal expenses (included within Personnel related expenses).

For the six months ended June 30, 2022, cost sharing reimbursements were partially offset by cost sharing payments of $2.4 million to Biogen.

The increase in research and development expenses of approximately $4.8 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, was primarily attributable to the following:

• An increase of $3.4 million in ETV:IDS program external expenses reflecting the continued progress of this program in clinical trials during 2023, including costs incurred to prepare for our planned potentially registrational Phase 2/3 study;

• An increase of $2.4 million in eIF2B program external expenses reflecting the continued progress of this program in clinical trials during 2023;

• An increase of $2.2 million in other unallocated research and development expenses primarily due to increased facilities costs, including utilities, building repairs and maintenance costs, as well as other research costs;

• An increase of $3.9 million in personnel related expenses, consisting of $3.6 million in employee compensation and $0.3 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 $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.

• An increase of $8.2 million in net cost sharing payments due to the transition of LRRK2 clinical activities to Biogen, resulting in cost sharing reimbursements flipping to payments.

These increases were partially offset by a decrease of $8.2 million in LRRK2 program external expenses due to the transition of LRRK2 clinical activities to Biogen, $4.6 million in other external research and development expenses, $2.0 million in TV platform and other program external expenses, and $1.3 million in PTV:PGRN program external expenses due to the timing of significant external research and manufacturing related activities year over year.

The increase in research and development expenses of approximately $47.5 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, was primarily attributable to the following:

• An increase of $32.2 million in ETV:IDS program external expenses primarily due to the contingent consideration payment of $30.0 million recorded in the first quarter of 2023 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 $9.8 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 as well as other research costs;

• An increase of $3.1 million in eIF2B program external expenses reflecting the continued progress of this program in clinical trials during 2023;

• An increase of $8.9 million in personnel related expenses, consisting of $7.3 million in employee compensation and $1.6 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;

• An increase of $11.5 million in net cost sharing payments due to the transition of LRRK2 clinical activities to Biogen, resulting in cost sharing reimbursements flipping to payments.

These increases were partially offset by a decrease of $7.5 million in LRRK2 program external expenses due to the transition of LRRK2 clinical activities to Biogen, and decreases of $4.3 million in other external research and development expenses, $3.4 million in TV platform and other program external expenses, and $2.6 million in PTV:PGRN program external expenses due to the timing of significant external research and manufacturing related activities year over year.

General and administrative expenses.

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.

General and administrative expenses were $26.1 million for the three months ended June 30, 2023 compared to $21.2 million for the three months ended June 30, 2022.

The increase of $4.9 million was primarily attributable to the following:

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

• $3.2 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;

• $1.7 million of increased facilities, consulting, professional services and other costs.

General and administrative expenses were $53.3 million for the six months ended June 30, 2023 compared to $43.7 million for the six months ended June 30, 2022.

The increase of $9.6 million was primarily attributable to the following:

• $5.0 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;

• $4.6 million of combined increases in facilities, consulting, professional services and other costs.

Liquidity and Capital Resources

5 unchanged sentences

as sales agents.

We have not yet issued any shares under the facility.

To date, no shares have been sold under the equity distribution agreement.

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 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.

Pursuant to our collaboration agreements with Takeda, Sanofi and Biogen, through June 30, 2023 we have received upfront, option and milestone payments of $115.0 million , $225.0 million, and $565.0 million, respectively, and have also received $35.1 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 June 30, 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 June 30, 2023, we had cash, cash equivalents and marketable securities in the amount of $1.19 billion .

Future Funding Requirements and Commitments

13 unchanged sentences

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

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

We have an accumulated deficit of $897.4 million through June 30, 2023.

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

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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.

As of June 30, 2023, operating lease liabilities were $55.5 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.

Under the DMSA with Lonza, and certain other clinical and manufacturing agreements, we had total non-refundable purchase commitments as of June 30, 2023 of $80.8 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.

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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):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities $ (171,971) $ (115,007)

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

Net cash provided by (used in) investing activities 75,352 (29,247)

Net cash provided by financing activities 10,623 5,865

1 unchanged sentence

Net Cash Used In Operating Activities

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 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.

During the six months ended June 30, 2023, net cash used in operating activities was $172.0 million, which consisted of a net loss of $73.6 million, adjusted by non-cash items primarily related to stock-based compensation, depreciation and amortization, net amortization of discounts on marketable securities and non-cash rent expenses.

Cash used in operating activities was also driven by changes in our operating assets and liabilities, including the $24.0 million contingent consideration payment to F-star during the three months ended June 30, 2023.

Net Cash Provided By (Used In) Investing Activities

During the six months ended June 30, 2023, net cash provided by investing activities was $75.4 million, which consisted of $985.8 million in proceeds from maturities and sales of marketable securities, partially offset by $901.8 million of purchases of marketable securities, and $8.6 million of capital expenditures to purchase property and equipment.

Net Cash Provided By Financing Activities

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.

During the six months ended June 30, 2023, cash provided by financing activities was $10.6 million which consisted of proceeds from the exercise of options to purchase common stock and purchases of ESPP shares.

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 three months ended March 31, 2023.

There have been no material changes to these critical accounting estimates during the six months ended June 30, 2023.

Recent Accounting Pronouncements

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.

There have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 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