What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-02-27 · 179 added, 134 removed, 245 unchanged (56% of the section changed)

4 unchanged sentences

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

Our discovery and development strategy is guided by three overarching principles that we believe will significantly increase the probability of success and accelerate the timing to bring effective therapeutics to patients with neurodegenerative diseases:

• Degenogene Pathways – each of our programs addresses a molecular target or biological pathway that is genetically validated to cause or increase the risk for neurodegenerative diseases.

• BBB Platform Technology – we engineer our product candidates to cross the BBB and act directly in the brain by following a rigorous approach in designing small molecules and by using our proprietary TV platform technology to effectively deliver large therapeutic molecules, such as enzymes, proteins, antibodies, and oligonucleotides, across the BBB after intravenous administration.

• Biomarker-Driven Development – we discover, develop and use biomarkers to inform dose selection, assess clinical activity, and to identify patients most likely to respond to our therapies.

Ou r clinic al-stage programs are:

• our ETV:IDS program, our lead brain-penetrant ERT, enabled by our ETV, which is designed to restore IDS, and reduce GAGs, both peripherally and in the brain, in patients with MPS II, or Hunter syndrome;

• our recombinant PGRN biotherapeutic enabled by our PTV, being developed in collaboration with Takeda, to address certain types of FTD, especially FTD-GRN caused by PGRN deficiency;

• our novel, selective, high affinity TREM2 antibody, enabled by our ATV, being developed in collaboration with Takeda for the potential treatment of Alzheimer's disease;

• our LRRK2 inhibitor program, being developed in collaboration with Biogen, to address Parkinson’s disease;

• our eIF2B activator program to address diseases such as ALS and FTD;

• our CNS-penetrant RIPK1 inhibitor program, partnered with Sanofi, to address neurological diseases such as ALS, MS and Alzheimer's disease;

• a second non-CNS penetrant RIPK1 inhibitor, partnered with Sanofi, to address peripheral inflammatory diseases such as CLE and UC.

• Degenogenes:

Genetic Pathway Realization – each of our programs addresses a molecular target or biological pathway that is genetically validated to cause or increase the risk for neurodegenerative diseases.

• Brain Delivery:

Validation and Optionality – we engineer our product candidates to cross the BBB and act directly in the brain.

Our proprietary TV platform technology is designed to effectively deliver large therapeutic molecules, such as enzymes, proteins, antibodies, and oligonucleotides, across the BBB after intravenous administration.

• Biomarker-Driven Development and Approval – we discover, develop and use biomarkers to inform dose selection, assess clinical activity, and identify patients most likely to respond to our therapies.

We are actively engaged in discussions with health authorities regarding the potential use of biomarkers as primary clinical endpoints to support faster paths to approval.

Ou r clinic al-stage large molecule programs are as follows:

• Tividenofusp alfa (DNL310, ETV:IDS), our lead ERT program enabled by our ETV , ETV:IDS is designed to cross the BBB and restore IDS and reduce GAGs , both peripherally and in the brain, in patients with MPS II (Hunter syndrome);

• TAK-594/DNL593 (PTV:PGRN), our recombinant PGRN biotherapeutic enabled by our PTV, being developed in collaboration with Takeda, to address certain types of FTD, specifically FTD-GRN caused by PGRN deficiency;

• DNL126 (ETV:SGSH), our second most advanced ETV enabled program, which is designed to restore lysosomal activity of SGSH, an enzyme responsible for degrading heparan sulfates in the lysosome, in patients with MPS IIIA (Sanfilippo syndrome Type A).

Our clinic al-stage small molecule programs are as follows:

• BIIB122/DNL151 (LRRK2), our LRRK2 inhibitor program, being developed in collaboration with Biogen, to address Parkinson’s disease;

• DNL343 (eIF2B), our eIF2B activator program to address diseases such as ALS and FTD;

• SAR443820/DNL788 (CNS-penetrant RIPK1 inhibitor) , our CNS-penetrant RIPK1 inhibitor program, partnered with Sanofi, to address neurological diseases such as MS and Alzheimer's disease;

• Eclitasertib (SAR443122/DNL758, peripheral RIPK1 inhibitor) , a second non-CNS penetrant RIPK1 inhibitor, partnered with Sanofi, to address peripheral inflammatory diseases such as UC.

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

Program Product Candidate Clinical Study(ies) Indication Operational Control

ETV:IDS DNL310 Ph 1/2

Hunter syndrome (MPS II) Denali

TAK-594/DNL593 Ph 1/2 FTD-GRN

ETV:IDS Tividenofusp alfa, or DNL310 Ph 1/2 Hunter syndrome (MPS II) Denali

TAK-594/DNL593 Ph 1/2 (paused) 1

Joint with Takeda

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

LRRK2 BIIB122/DNL151 Ph 2b

Parkinson's disease Joint with Biogen

ETV:SGSH DNL126 Ph 1/2 Sanfilippo syndrome Type A (MPS IIIA) Denali

LRRK2 BIIB122/DNL151 Ph 2a (planned)

Parkinson's disease Denali

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

RIPK1 (Peripheral) SAR443122/DNL758 Ph 2 CLE

ALS Joint with Healey Center

RIPK1 (CNS-penetrant) SAR443820/DNL788

Ph 2 (closing) 2

RIPK1 (Peripheral) Eclitasertib, or SAR443122/DNL758 Ph 2 UC

__________________________________________________

(1) Study has been voluntarily paused in order to implement protocol modifications and is expected to resume this year.

(2) Study will be closing as it did not meet its primary endpoint.

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 for the year ended December 31, 2023 and in 2024 to date include:

◦ 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 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;

• Tividenofusp alfa DNL310 (ETV:IDS)

◦ 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.

1 unchanged sentence

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.

Additional biomarker data out to 49 weeks continued to demonstrate that DNL310 enabled rapid and sustained normalization of cerebrospinal fluid ("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 January 2022, the 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 March 2022, we initiated a Phase 1/2 Clinical Trial of TAK-594/DNL593 for FTD-GRN;

◦ 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.

Final data from Part A of the Phase 1/2 study is expected in mid 2023.

◦ In January 2022, we announced that the TAK-920/DNL919 IND application had been placed on clinical hold by the 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 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 August 2022, dosing commenced in the Phase 1 single ascending dose study of TAK-920/DNL919 in healthy volunteers in the Netherlands.

Data from the Phase 1 single ascending dose study in healthy volunteers is expected by year-end 2023;

◦ 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 ;

◦ I n 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 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 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 December 2022, o ur collaboration partner Sanofi commenced dosing in the Phase 2 study of SAR443122/ DNL758 in patients with UC , triggering a $10.0 million milestone payment, which was received in December 2022;

◦ 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;

◦ In August 2023, we presented new interim data from the Phase 1/2 study of DNL310 in MPS II in an oral presentation at the Society for the Study of Inborn Errors of Metabolism ("SSIEM") Annual Symposium 2023.

The interim clinical outcomes data, safety profile, and biomarker effects, including normalization of CSF heparan sulfate and reduction in NfL, continue to support development of DNL310 in MPS II;

◦ In January 2024, we announced that enrollment continues in the global Phase 2/3 COMPASS study and is expected to be completed in 2024.

We continue to engage with the U.S.

Food and Drug Administration on a faster path to approval;

◦ In February 2024, we presented additional interim data from the open-label, single-arm Phase 1/2 study of DNL310 at the 2024 WORLD Symposium TM .

Data out to 104 weeks showed additional improvement and stabilization in multiple measures of clinical outcomes, including those of adaptive behavior, cognition, hearing, and growth trajectory.

In addition, robust and sustained responses in biomarkers of neuronal health (e.g., CSF heparan sulfate, neurofilament light (NfL)) and peripheral activity (e.g.

urine heparan sulfate and dermatan sulfate) were observed .

DNL310 continued to be generally well tolerated.

• TAK-594/DNL593 (PTV:PGRN)

◦ 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 we received in May 2023;

◦ In July 2023, we presented 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;

◦ In January 2024, we announced that Part B in the TAK-594/DNL593 Phase 1/2 study in participants with FTD-GRN has been voluntarily paused to implement protocol modifications and is expected to resume this year.

• DNL126 (ETV:SGSH)

◦ In February 2024, we announced that dosing had been initiated in the Phase 1/2 study of DNL126 in MPS IIIA;

biomarker proof of concept and safety data are expected by the end of 2024.

Further, in February 2024, we presented preclinical data at WORLD Symposium TM demonstrating that DNL126 improves lysosomal and microglial morphology, degeneration, and cognitive behavior in MPS IIIA mice.

• BIIB122/DNL151 (LRRK2)

◦ 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 August 2023, we executed an amendment to the Definitive LRRK2 Collaboration and License Agreement and Waiver of and Amendment to Right of First Negotiation (ROFN), Option, and License Agreement.

As part of the amendment, certain milestone criteria were changed while the total amount of development, regulatory, and commercial milestones across all indications remains the same.

In addition, Biogen agreed to waive the remaining option and rights of first negotiation under the ROFN and Option Agreement;

◦ In February 2024, we announced the execution of a Collaboration and Development Funding Agreement in January 2024 with a third party related to a global Phase 2a study of BIIB122/DNL151, which we plan to solely operationalize to evaluate safety and biomarkers associated with BIIB122 in participants with Parkinson’s disease and confirmed pathogenic variants of LRRK2.

This agreement includes committed funding of $75.0 million, of which $12.5 million was received in January 2024, and the remainder will be triggered based on time and operational milestones in the study.

Biogen will continue to conduct the ongoing global Phase 2b LUMA study in early-stage Parkinson’s disease.

Denali and Biogen will co-commercialize BIIB122/DNL151 assuming regulatory approval.

The third party will be eligible to receive low single-digit royalties from Denali on annual worldwide net sales of LRRK2 inhibitors for the treatment of Parkinson’s disease, with royalty amounts varying based on the scope of the label .

• SAR443820/DNL788 and Eclitasertib (SAR443122/DNL758) (RIPK1)

◦ 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 December 2022, we announced DNL343 interim phase 1b data in ALS and entry into the Phase 2/3 HEALEY ALS platform trial.

Final data from the 28-day double-blind, placebo-controlled portion of the Phase 1b study is expected in mid-2023.

and the initiation of the Phase 2/3 study in the HEALEY ALS Platform Trial is expected to occur in mid-2023.

◦ 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 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 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 February 2023, we presented supportive preclinical data at the WORLD Symposium demonstrating that DNL126 reduced heparan sulfate in a dose-dependent manner in brain and CSF in an MPS IIIA model.

We anticipate submitting an investigational new drug (IND) application in the first half of 2023, with Phase 1/2 recruitment activities to begin in the second half of 2023.

In November 2023 we announced that Sanofi has completed enrollment in this study;

◦ In August 2023, we announced that Sanofi had completed enrollment in the global Phase 2 HIMALAYA study of SAR443820/DNL788 in ALS in July;

◦ In August 2023, we announced that Sanofi completed a Phase 2 study of eclitasertib, also known as SAR443122/DNL758, in patients with CLE in June.

In October 2023, Sanofi announced that the development of eclitasertib in CLE is being discontinued because the Phase 2 proof-of-concept study did not meet its primary endpoint (percent change from baseline in CLASI-A at week 12).

Eclitasertib was found to be generally well-tolerated.

Sanofi continues to recruit the Phase 2 study of eclitasertib in patients with UC;

◦ In February 2024, we announced that the Phase 2 HIMALAYA study evaluating SAR443820/DNL788 in participants with ALS did not meet the primary endpoint of change in ALS Functional Rating Scale-Revised (ALSFRS-R).

Sanofi intends to present the detailed efficacy and safety results of the ALS Phase 2 HIMALAYA study at a future scientific forum.

Sanofi is evaluating SAR443820/DNL788 in another Phase 2 clinical trial in participants with MS, and the outcome of HIMALAYA study has no impact on the ongoing MS study.

• DNL343 (eIF2B)

◦ 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;

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

Recruitment of participants continues for this trial.

◦ 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 April 2023, we entered into a new operating lease in Salt Lake City, Utah for a 59,336 square foot laboratory (the "Utah site"), 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 of $5.0 million, which we received in May 2023;

◦ 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 continue to 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 January 2024, we announced our intention to spin out our preclinical small molecule portfolio.

We will maintain ownership of, and continue to advance, our current portfolio of clinical stage small molecule programs.

The decision was made based on clinical validation and prioritization of our TV-enabled platforms for brain delivery of large molecules;

◦ In February 2024, we announced that on February 27, 2024 we entered into a securities purchase agreement with certain existing accredited investors for the private placement of 3,244,689 shares of our common stock at a price of $17.07 per share and pre-funded warrants to purchase an aggregate of 26,046,065 shares of our common stock at a purchase price of $17.06 per pre-funded warrant, resulting in anticipated gross proceeds of approximately $499.7 million.

The pre-funded warrants will have an exercise price of $0.01 per share of Common Stock, be immediately exercisable and remain exercisable until exercised in full.

The private placement is expected to close on February 29, 2024, subject to customary closing conditions.

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

2 unchanged sentences

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

We had net losses of $326.0 million and $290.6 million for the years ended December 31, 2022 and 2021, respectively.

Due to revenue recognized from our collaboration arrangement with Biogen, we had net income of $71.1 million for the year ended December 31, 2020.

As of December 31, 2022, we had an accumulated deficit of $971.0 million.

We had net losses of $145.2 million, $326.0 million, and $290.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, we had an accumulated deficit of $1.12 billion.

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

8 unchanged sentences

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

In August 2020, we entered into the Provisional Biogen Collaboration Agreement with Biogen pursuant to which we granted Biogen a license to co-develop and co-commercialize our LRRK2 Program, an option in respect of two Option Programs, and a right of first negotiation with respect to the ROFN Programs should we decide to seek a collaboration with a third party for such programs.

In connection with the Provisional Biogen Collaboration Agreement, we also entered into a common stock purchase agreement with BIMA, pursuant to which we sold 13,310,243 shares of our common stock to BIMA for an aggregate purchase price of $465.0 million .

In October 2020, we entered into the LRRK2 Agreement and the ROFN and Option Agreement with Biogen, collectively the "Biogen Collaboration Agreement." Under the terms of the Biogen Collaboration Agreement, we received $560.0 million in upfront payments in October 2020.

In October 2020, we entered into the LRRK2 Agreement with Biogen pursuant to which we granted Biogen a license to co-develop and co-commercialize our small molecule LRRK2 Program, in addition to the ROFN and Option Agreement pursuant to which we granted an option and a right of first negotiation to certain of our programs utilizing our TV technology platform;

collectively the "Biogen Collaboration Agreement." In connection with our collaboration with Biogen, we also entered into a common stock purchase agreement pursuant to which we sold 13,310,243 shares of our common stock to BIMA for an aggregate purchase price of $465.0 million .

Under the terms of the Biogen Collaboration Agreement, we received $560.0 million in upfront payments in October 2020.

In April 2023, Biogen exercised its option to license our ATV:Abeta program and we received additional consideration of $5.0 million for an option exercise fee.

In August 2023, we executed an Amendment (the “Biogen Amendment”) to the LRRK2 Agreement and ROFN and Option Agreement with Biogen.

Pursuant to the Biogen Amendment, the schedule of potential LRRK2 Agreement milestones was amended, while maintaining the same total value of milestones that Denali is eligible to receive.

In addition, Biogen waived its option right to the second option program and waived its rights of first negotiation for two other TV-enabled programs under the ROFN and Option Agreement.

Further details regarding the terms of the agreements between us and Biogen are included in this Annual Report on Form 10-K in the section titled "Business - Licenses and Collaborations."

In relation to the Biogen Collaboration Agreement, we have recognized related party collaboration revenue of $3.1 million, $3.7 million, and $307.4 million in the years ended December 31, 2022, 2021 and 2020, respectively, related party research and development expense of $8.2 million for cost sharing payments to Biogen in the year ended December 31, 2022, and related party offsets to research and development expense as a result of cost sharing reimbursements from Biogen of $6.5 million and $9.3 million in the years ended December 31, 2021 and 2020, respectively.

We have recorded cost sharing payments due to a related party of $4.4 million on the Consolidated Balance Sheet as of December 31, 2022.

Through December 31, 2022, we have not received any milestone payments from Biogen and have not recorded any product sales under the Biogen Collaboration Agreement.

In relation to the Biogen Collaboration Agreement, we have recognized related party collaboration revenue of $295.5 million, $3.1 million, and $3.7 million in the years ended December 31, 2023, 2022 and 2021, respectively, related party research and development expense of $17.7 million and $8.2 million for cost sharing payments to Biogen in the year ended December 31, 2023 and 2022, respectively, and a related party offset to research and development expense as a result of cost sharing reimbursements from Biogen of $6.5 million in the year ended December 31, 2021.

We have recorded cost sharing payables of $3.2 million and $4.4 million on the Consolidated Balance Sheet as of December 31, 2023 and 2022, respectively.

Through December 31, 2023, we had earned $5.0 million in option fee payments but had not recorded any milestone revenue or product sales under the Biogen Collaboration Agreement.

In October 2018, we entered into the Sanofi Collaboration Agreement with Sanofi pursuant to which certain small molecule CNS and peripheral RIPK1 inhibitors contributed by Sanofi and by us are being, or will be developed and commercialized.

2 unchanged sentences

Through December 31, 2023, we had received milestone payments of $100.0 million and we had not recorded any product sales under the Sanofi Collaboration Agreement.

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

In January 2018, we entered into the Takeda Collaboration Agreement pursuant to which we granted Takeda an option to develop and commercialize, jointly with us, our ATV:TREM2, PTV:PGRN and ATV:BACE1/Tau programs, the latter of which was later replaced with our ATV:Tau program.

3 unchanged sentences

Further details regarding the terms of the agreement between us and Takeda, and historic payments between the parties under the agreements, are included in this Annual Report on Form 10-K in the section titled "Business - Licenses and Collaborations."

We have recognized collaboration revenue of $51.9 million, $29.9 million and $27.2 million associated with the Takeda Collaboration Agreement in the years ended December 31, 2022, 2021 and 2020, respectively, and offsets to research and development expense for cost sharing reimbursements of $18.2 million and $13.7 million in the years ended December 31, 2022 and 2021, respectively.

We recorded a receivable of $5.0 million and $13.7 million from Takeda as of December 31, 2022 and 2021, respectively.

Through December 31, 2022, we have received $55.0 million in preclinical milestone payments and $10.0 million of option exercise fees from Takeda, and we have not recorded any product sales under the Takeda Collaboration Agreement.

We recognized collaboration revenue of $10.0 million, $51.9 million and $29.9 million associated with the Takeda Collaboration Agreement in the years ended December 31, 2023, 2022 and 2021, respectively, and offsets to research and development expense for cost sharing reimbursements of $12.2 million, $18.2 million and $13.7 million in the years ended December 31, 2023, 2022, and 2021, respectively.

We recorded receivables of $2.7 million and $8.9 million from Takeda as of December 31, 2023 and 2022, respectively.

Through December 31, 2023, we have received $65.0 million in milestone payments and $10.0 million of option exercise fees from Takeda, and we have not recorded any product sales under the Takeda Collaboration Agreement.

In August 2016, we entered into the F-star Collaboration Agreement with the F-star entities.

5 unchanged sentences

Further details regarding the terms of the arrangements between us and the F-star entities, and historic payments between the parties under the agreements, are included in this Annual Report on Form 10-K in the section titled "Business - Licenses and Collaborations."

Through December 31, 2022 we have recognized consideration under the F-star Purchase Agreement of $19.8 million as research and development expenses, with no research and development expense recognized in the years ended December 31, 2022, 2021, or 2020.

We recognized $0.1 million and $1.2 million of research and development expense related to the funding of F-star research costs for the years ended December 31, 2021 and 2020 , respectively.

No research and development expense related to the funding of F-star research costs were recognized for the year ended December 31, 2022.

Through December 31, 2023 we have recognized consideration paid under the F-star Purchase Agreement of $49.8 million as research and development expenses consisting of up-front, preclinical and clinical contingent consideration payments, of which $30.0 million of research and development expense was recognized in the year ended December 31, 2023 for a contingent consideration payment triggered in March 2023 upon the achievement of a specified clinical milestone in the ETV:IDS program.

There was no contingent consideration research and development expense recognized in the years ended December 31, 2022 or 2021.

We recognized $0.1 million of research and development expense related to the funding of F-star research costs for the year ended December 31, 2021, but none for the years ended December 31, 2023 or 2022 .

In June 2016, we entered into an exclusive license agreement with Genentech.

1 unchanged sentence

Our collaboration partner in the LRRK2 program, Biogen, is responsible for 50% of any payment obligation to Genentech under the Biogen Collaboration Agreement.

As consideration to date, we have paid Genentech $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, after cost sharing reimbursements from Biogen.

Included within this amount, i n the year ended December 31, 2022, we 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 Biogen, and a further $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.

Of these milestones, we recognized $6.3 million as research and development expense as incurred after cost sharing reimbursements from Biogen in the year ended December 31, 2022.

There were no expenses recognized under this agreement in the years ended December 31, 2021 or 2020 .

We recognized no expenses under this agreement in the years ended December 31, 2023 and 2021.

Components of Operating Results

2 unchanged sentences

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

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.

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 profit sharing 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, profit sharing reimbursement, other payments and product sales, to the extent any are successfully commercialized.

If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

17 unchanged sentences

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 ongoing COVID-19 pandemic and increased geopolitical uncertainty.

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.

38 unchanged sentences

Loss before income taxes (145,194) (325,970) 180,776 (55)

Income tax benefit (expense) (21) 575 (596) *

Income tax expense (30) (21) (9) 43

Net loss $ (145,224) $ (325,991) $ 180,767 (55) %

3 unchanged sentences

Collaboration revenue was $330.5 million for the year ended December 31, 2023 compared to $108.5 million for the year ended December 31, 2022.

The increase of $59.8 million was primarily due to increases in revenue related to our collaborations with Takeda and Sanofi of $22.0 million and $38.4 million, respectively.

Takeda revenue increased for the year ended December 31, 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 ATV:Tau program.

Sanofi revenue increased for the year ended December 31, 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, and a $10.0 million milestone earned in December 2022 upon first patient dosed in a Phase 2 study of SAR443122/DNL758 in individuals with UC, 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 2022.

This increase was partially offset by a decrease of $0.6 million in revenue recognized under our Biogen Collaboration Agreement.

The increase in collaboration revenue of $222.0 million was 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, partially offset by a decrease of $41.9 million in revenue earned under the Takeda Collaboration Agreement, as well as a decrease of $28.4 million in milestone revenue earned under the Sanofi Collaboration Agreement.

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

Research and development expenses.

5 unchanged sentences

PTV:PGRN program external expenses 11,306 18,464 (7,158) (39)

ATV:TREM2 program external expenses 8,855 13,408 (4,553) (34)

TV platform and other program external expenses

3 unchanged sentences

Other external research and development expenses 26,923 33,971 (7,048) (21)

33,971 30,594 3,377 11

Personnel related expenses (1)

1 unchanged sentence

Other unallocated research and development expenses 48,985 39,697 9,288 23

39,697 35,896 3,801 11

Net cost sharing payments (reimbursements) (2)

4 unchanged sentences

(1) Personnel-related expenses include stock-based compensation expense of $62.9 million and $60.2 million for the years ended December 31, 2023 and 2022, respectively, reflecting an increase of $2.7 million.

(2) Net cost sharing reimbursements of $10.0 million includes reimbursements from Takeda for the PTV:PGRN program (included within PTV:PGRN program external program expenses and Personnel related expenses) of $11.3 million, and reimbursements from Takeda for the ATV:TREM2 program (included within ATV:TREM2 program external expenses and Personnel related expenses) of $6.9 million.

Cost sharing reimbursements were partially offset by cost sharing payments of $8.2 million to Biogen.

For the year ended December 31, 2021, cost sharing reimbursements from Biogen were $6.5 million for the LRRK2 program, and cost sharing reimbursements from Takeda were $7.7 million and $6.0 million relating to the PTV:PGRN and ATV:TREM2 programs, respectively.

(2) Net cost sharing payments (reimbursements) details are broken down as shown in the table below.

The underlying costs for reimbursements are included with the specified external expenses line and personnel related expenses in the table above.

ATV:TREM2 program external expenses are presented within the TV platform and other program external expenses line.

Year Ended December 31,

net reimbursements for ATV:TREM2 program

$ (5,100) $ (6,954)

net reimbursements for PTV:PGRN program

(7,065) (11,276)

net payments for LRRK2 program

Net cost sharing payments (reimbursements)

$ 5,513 $ (10,043)

The increase in research and development expenses of approximately $65.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to the following:

• An increase of $29.8 million in ETV:IDS program external expenses reflecting the 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 $16.2 million and $4.9 million in TV platform and other program external expenses, and PTV:PGRN program external expenses, respectively, reflecting our continued investment in developing our TV platform and associated programs, as well as the progress in our Phase 1/2 study in PTV:PGRN;

• An increase in external expenses related to the LRRK2 program of $7.0 million primarily due to $12.5 million in clinical milestone payments owed to Genentech in the year ended December 31, 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;

• Increases of $3.8 million and $3.4 million in other unallocated research and development expenses, and other external research and development expenses, respectively, due to our continued investment in developing our robust pipeline;

• An increase of $23.6 million in personnel-related expenses, consisting of $13.4 million in employee compensation and $10.2 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;

• A decrease of $10.2 million in cost sharing reimbursements from collaboration partners due to the transition of LRRK2 clinical activities to Biogen, resulting in cost sharing reimbursements flipping to payments in 2022.

These increases were partially offset by a decrease of $4.6 million in ATV:TREM2 program external expenses, primarily due to the timing of activities year over year.

• An increase of $53.2 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.

Further, the increase reflects the continued progress of this program in clinical trials during 2023, including costs related to our ongoing Phase 1/2 study and our potentially registrational Phase 2/3 study;

• An increase of $9.6 million in eIF2B program external expenses reflecting the continued progress of the Phase 2/3 HEALEY ALS Platform Trial in 2023;

• An increase of $15.6 million in net cost sharing payments primarily due to an increase in payments to Biogen for LRRK2 program expenses, and a decrease in costs and associated reimbursements from Takeda in the PTV:PGRN and ATV:TREM2 programs;

• An increase of $9.3 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 previous SLC Lease as well as other general research costs;

• An increase of $16.4 million in personnel-related expenses, consisting of $13.7 million in employee compensation and $2.7 million in stock-based compensation expense 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 $14.2 million in LRRK2 program external expenses due to the transition of LRRK2 clinical activities to Biogen, $10.5 million in TV platform and other program external expenses as a result of discontinuation of clinical development of TAK-920/DNL919, and $7.0 million in other external research and development expenses and $7.2 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 .

1 unchanged sentence

The increase of $12.9 million was primarily attributable to the following:

• An increase of $7.1 million of 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;

• An increase of $2.8 million of other costs, including general corporate services, IT services and subscriptions, taxes, and travel related expenses required to support our growing business;

• An increase of $0.8 million in consulting service expenses related to investment in IT system implementation and market research for our key programs;

• An increase of $0.7 million in facilities related expenses, including outside services, utilities, and depreciation expense reflecting our growing infrastructure.

• An increase of $9.5 million of personnel-related expenses consisting of employee compensation and stock-based compensation expense associated with additional salary expenses and equity award grants driven primarily by higher general and administrative headcount;

• An increase of $3.4 million in professional services, facilities and other corporate costs.

Comparison of the years ended December 31, 2022 and 2021

4 unchanged sentences

As of December 31, 2023, we had cash, cash equivalent s and marketable securities in the amount of $1.03 billion .

We fund our operations primarily with the proceeds from public offerings of our common stock, and payments received from our collaboration agreements with Takeda, Sanofi and Biogen.

In our January 2020 follow-on offering, we sold 9.0 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 $23.00 per share for aggregate net proceeds of approximately $193.9 million.

In February 2022, we established a registered “at-the-market” facility for the sale of up to $400.0 million of shares of common stock from time to time by entering into an equity distribution agreement with Goldman Sachs & Co.

We fund our operations primarily with the proceeds from the sale of common stock and payments received from collaboration partners, including those received under agreements with Takeda, Sanofi, and Biogen.

We have sold common stock in public offerings and stock purchase agreements with Takeda and Biogen.

Through December 31, 2023 we have obtained aggregate net proceeds of approximately $754.4 million from public offerings of our common stock, including $296.2 million obtained through the sale of 11.9 million shares of common stock in October 2022.

Under stock purchase agreements with collaboration partners we have received a further $575.0 million through December 31, 2023 .

I n February 2022, we established a registered “at-the-market” facility for the sale of up to 400.0 million of shares of common stock from time to time by entering into an equity distribution agreement with Goldman Sachs & Co.

LLC, SVB Securities LLC and Cantor Fitzgerald & Co.

as sales agents.

We have not yet issued any shares under the facility.

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 December 31, 2022 we have received upfront, option and milestone payments of $105.0 million , $200.0 million , and $560.0 million , respectively, and have also received $26.9 million and $16.2 million of gross cost sharing reimbursements from Takeda and Biogen, respectively, and $13.7 million in 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 December 31, 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.

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

Pursuant to our collaboration agreements with Takeda, Sanofi and Biogen, through December 31, 2023 we have received upfront, option and milestone payments of $115.0 million , $225.0 million , and $560.0 million , respectively, and have also received $41.3 million and $16.2 million of gross cost sharing reimbursements from Takeda and Biogen, respectively, and $13.7 million in specified reimbursements from Sanofi.

Future Funding Requirements and Commitments

12 unchanged sentences

Any of the foregoing could significantly harm our business, financial condition and prospects.

We have incurred significant net losses in every year since our inception until the year ended December 31, 2022, including net losses $326.0 million and $290.6 million for the years ended December 31, 2022 and 2021 respectively.

We had net income of $71.1 million for the year ended December 31, 2020, as a result of revenue recognized associated with our collaboration arrangement with Biogen.

We have also experienced negative cash flow from operations in every year since our inception, except in certain years in which we received significant cash inflows from collaboration partners which were recognized as revenue.

As of December 31, 2022, we had an accumulated deficit of $971.0 million.

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

We have an accumulated deficit of $1.12 billion through December 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 Form 10-K, 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 Form 10-K, 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.

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 December 31, 2023, operating lease liabilities were $52.2 million .

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

Under the DMSA with Lonza, we had total non-refundable purchase commitments of $32.3 million as of December 31, 2022, with certain amounts subject to cost sharing with Takeda.

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 of $74.0 million as of December 31, 2023, 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.

We had contractual obligations under other development and manufacturing agreements of $9.6 million as of December 31, 2022, with certain amounts subject to cost sharing with Takeda.

In addition, we had firm purchase commitments related to manufacturing equipment for the SLC Facility of $5.6 million and other commitments of $1.6 million as of December 31, 2022.

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

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 8, "Commitments and Contingencies" to the consolidated financial statements included in Item 8.

15 unchanged sentences

2023 2022 2021

Net cash (used in) provided by operating activities $ (244,716) $ (211,389) $ 416,152

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

Net cash used in operating activities $ (357,991) $ (244,716) $ (211,389)

Net cash provided by (used in) investing activities 249,308 (141,387) (21,626)

Net cash provided by financing activities 17,820 310,670 19,348

Net increase (decrease) in cash, cash equivalents and restricted cash $ (75,433) $ (213,667) $ 427,695

Net Cash (Used In) Provided by Operating Activities

During the year ended December 31, 2022, net cash used in operating activities was $244.7 million, which consisted of a net loss of $326.0 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net amortization of premiums and (discounts) on marketable securities and non-cash adjustment to operating lease expenses.

Net cash used in operating activities was also driven by changes in our operating assets and liabilities, including most significantly a decrease in contract liabilities of $31.3 million primarily associated with the Takeda Collaboration Agreement.

Net Cash Used In Investing Activities

During the year ended December 31, 2022, net cash used in investing activities was $141.4 million, which primarily consisted of $1.1 billion of purchases of marketable securities and $17.8 million capital expenditures to purchase property and equipment, partially offset by $991.5 million in proceeds from the maturities of marketable securities.

Net decrease in cash, cash equivalents and restricted cash $ (90,863) $ (75,433) $ (213,667)

Net Cash Used In Operating Activities

During the year ended December 31, 2023, net cash used in operating activities was $358.0 million, which consisted of a net loss of $145.2 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net amortization of premiums and (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, the most significant of which was the reduction in our related-party contract liability as a result of Biogen's option exercise during the second quarter of 2023.

Net Cash Provided By (Used In) Investing Activities

During the year ended December 31, 2023, net cash provided by investing activities was $249.3 million, which consisted of $2.1 billion in proceeds from the maturities and sales of marketable securities, partially offset by $1.8 billion of purchases of marketable securities, and $12.9 million capital expenditures to purchase property and equipment.

Net Cash Provided By Financing Activities

During the year ended December 31, 2022, net cash provided by financing activities was $310.7 million, which consisted of $296.2 million in net cash proceeds from our follow-on offering completed in October 2022 and $14.5 million in proceeds from the exercise of options to purchase common stock and issuance of shares pursuant to our employee stock purchase plan.

During the year ended December 31, 2023, net cash provided by financing activities was $17.8 million, which consisted of proceeds from the exercise of options to purchase common stock and purchases of ESPP shares.

Years ended December 31, 2022 and 2021

33 unchanged sentences

Research and Development Expenses

A significant portion of our research and development expenses in the statements of operations and comprehensive income (loss) are external costs, which we track on a program-specific basis once a program has commenced a late-stage IND-enabling study.

A significant portion of our research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss are external costs, which we track on a program-specific basis once a program has commenced a late-stage IND-enabling study.

These research and development expenses include the conduct of preclinical studies and clinical trials, contract manufacturing activities and consulting services.

The measurement of these research and development expenses can impact the measurement of research and development expenses in the statements of operations and comprehensive income (loss), and of prepaid assets and accrued liabilities on the Consolidated Balance Sheets .

The measurement of these research and development expenses can impact the measurement of research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss , and of prepaid assets and accrued liabilities on the Consolidated Balance Sheets .

The level of judgment required to estimate research and development expenses varies based on the nature of the services being performed and the underlying support obtained.

2 unchanged sentences

Although we do not expect our estimates to be materially different from amounts actually incurred, incomplete or inaccurate data from vendors could impact our understanding of the status and timing of services performed which could result in us reporting expenses that are too high or too low in any particular period.

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.

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

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.

9 unchanged sentences

To date, there have been no material true ups from estimated to actual reimbursements owed or owing.

Management exercises 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.

To date, there have been no material changes to estimates relating to lease arrangements.

Recent Accounting Pronouncements

1 unchanged sentence

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 7. Management’s Discussion and Analysis