What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-27 · 205 added, 238 removed, 683 unchanged (39% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders' Equity

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We have audited the accompanying consolidated balance sheets of Denali Therapeutics Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

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

Accrued research and development expenses

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

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

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

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

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

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

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

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

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

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

Accrued and prepaid research and development costs

Description of the Matter As more fully described in Note 1 to the consolidated financial statements, the Company records accrued liabilities for estimated costs of research and development (R&D) activities and prepaid research and development costs based upon the estimated cost of services provided.

As of December 31, 2023, accrued clinical and other R&D costs were $19.0 million and prepaid clinical R&D costs were $10.2 million.

The accrued and prepaid R&D costs (“Accrued and Prepaid R&D Costs”) are based on estimated clinical trial and other R&D costs incurred under service agreements with organizations that conduct R&D activities on behalf of the Company.

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

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

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

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

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

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

iii) testing significant assumptions used in estimating costs of services provided including meeting with personnel outside of the accounting department to discuss the basis for such assumptions;

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

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Short-term marketable securities 907,405 1,118,171

Cost sharing reimbursements due from related party — 1,226

Prepaid expenses and other current assets 29,626 36,104

Total current assets 1,064,137 1,372,319

Long-term marketable securities — 425,449

Property and equipment, net 45,589 44,087

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

Operating lease right-of-use asset

26,048 30,437

Other non-current assets 18,143 13,399

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Related party contract liability, current — 290,053

Contract liabilities, current — 27,915

Total current liabilities 77,982 363,922

Related party contract liability, less current portion — 479

Contract liabilities, less current portion — 3,398

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

Operating lease liability, less current portion

44,981 53,032

Other non-current liabilities — 379

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Additional paid-in capital 2,144,811 2,018,617

Accumulated other comprehensive loss ( 6,886 ) ( 2,499 )

Accumulated other comprehensive income (loss)

643 ( 6,886 )

Accumulated deficit ( 1,116,211 ) ( 970,987 )

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Denali Therapeutics Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

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Total operating expenses 527,230 449,207 344,412

Income (loss) from operations ( 340,744 ) ( 295,751 ) 62,718

Loss from operations ( 196,699 ) ( 340,744 ) ( 295,751 )

Interest and other income, net 51,505 14,774 4,595

Income (loss) before income taxes ( 325,970 ) ( 291,156 ) 71,959

Loss before income taxes ( 145,194 ) ( 325,970 ) ( 291,156 )

Income tax benefit (expense) ( 30 ) ( 21 ) 575

Net income (loss) ( 325,991 ) ( 290,581 ) 71,136

Net loss ( 145,224 ) ( 325,991 ) ( 290,581 )

Other comprehensive income (loss):

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

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

Net income (loss) per share:

Basic net income (loss) per share $ ( 2.60 ) $ ( 2.39 ) $ 0.65

Diluted net income (loss) per share $ ( 2.60 ) $ ( 2.39 ) $ 0.63

Weighted-average shares used in calculating:

Basic net income (loss) per share 125,530,703 121,524,795 108,974,137

Diluted net income (loss) per share 125,530,703 121,524,795 112,703,108

Net unrealized gain (loss) on marketable securities, net of tax 7,529 ( 4,387 ) ( 2,254 )

Comprehensive loss $ ( 137,695 ) $ ( 330,378 ) $ ( 292,835 )

Net loss per share, basic and diluted $ ( 1.06 ) $ ( 2.60 ) $ ( 2.39 )

Weighted average number of shares outstanding, basic and diluted 137,370,897 125,530,703 121,524,795

__________________________________________________

(1) Includes related-party collaboration revenue from customers of $ 295.5 million, $ 3.2 million, and $ 3.7 million for the years ended December 31, 2023, 2022 and 2021 respectively.

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

(2) Includes expense for cost sharing payments to a related party of $ 17.7 million and $ 8.2 million for the years ended December 31, 2023 and 2022, respectively, and an offset to expense from related-party cost reimbursements of $ 6.5 million for the year ended December 31, 2021.

See accompanying notes to consolidated financial statements.

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(In thousands, except share amounts)

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

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit Total Stockholders' Equity

Shares Amount

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

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

9,000,000 90 193,858 — — 193,948

Issuance of common stock in connection with the Biogen Stock Purchase Agreement 13,310,243 133 420,013 — — 420,146

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

1,722,058 17 20,638 — — 20,655

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

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

— — 50,351 — — 50,351

Net Income — — — — 71,136 71,136

Net loss — — — — ( 290,581 ) ( 290,581 )

Other comprehensive loss — — — ( 2,254 ) — ( 2,254 )

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

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

11,933,962 120 296,095 — — 296,215

Issuances under equity incentive plans 911,555 10 14,445 — — 14,455

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

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

11,933,962 120 296,095 — — 296,215

Issuances under equity incentive plans 1,232,526 12 17,808 — — 17,820

911,555 10 14,445 — — 14,455

Vesting of restricted stock units 1,187,054 13 ( 13 ) — — —

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Net loss — — — — ( 145,224 ) ( 145,224 )

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

Other comprehensive income — — — 7,529 — 7,529

Balance at December 31, 2023 138,385,498 $ 1,711 $ 2,144,811 $ 643 $ ( 1,116,211 ) $ 1,030,954

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Operating activities

Net income (loss) $ ( 325,991 ) $ ( 290,581 ) $ 71,136

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

$ ( 145,224 ) $ ( 325,991 ) $ ( 290,581 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 16,726 10,383 8,593

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Other non-current liabilities ( 379 ) — ( 322 )

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

Net cash used in operating activities

( 357,991 ) ( 244,716 ) ( 211,389 )

Investing activities

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Maturities and sales of marketable securities 2,075,947 991,486 1,409,812

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

Net cash provided by (used in) investing activities

249,308 ( 141,387 ) ( 21,626 )

Financing activities

Proceeds from issuance of common stock in connection with Collaboration Agreements — — 420,146

Proceeds from public offering of common stock, net of issuance costs — 296,215 —

1 unchanged sentence

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 decrease in cash, cash equivalents and restricted cash

( 90,863 ) ( 75,433 ) ( 213,667 )

Cash, cash equivalents and restricted cash at beginning of year 219,544 294,977 508,644

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Monetary assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates, non-monetary assets and liabilities denominated in foreign currencies are remeasured at historical rates, and transactions in foreign currencies are remeasured at average exchange rates.

Foreign currency gains and losses resulting from remeasurement are recognized in interest and other income, net in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Foreign currency gains and losses resulting from remeasurement are recognized in interest and other income, net in the Consolidated Statements of Operations and Comprehensive Loss.

Use of Estimates

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GAAP requires the Company to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of expenses during the reporting period.

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

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

Concentration of Credit Risk and Other Risks and Uncertainties

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

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

Further, the company is also subject to broad market risks and uncertainties resulting from recent events, such as bank failures or instability in the financial services sector, the COVID-19 pandemic, war and armed conflicts, inflation, rising interest rates, and recession risks as well as supply chain and labor shortages.

Convertible Preferred Stock

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Cash equivalents are reported at fair value.

Cash, cash equivalents, and restricted cash reported within the Consolidated Statements of Cash Flows is composed of cash and cash equivalents reported in the Consolidated Balance Sheets and $ 1.5 million of restricted cash for the letter of credit for the Company’s headquarters building lease which is included within other non-current assets in the Consolidated Balance Sheets.

Cash, cash equivalents, and restricted cash reported within the Consolidated Statements of Cash Flows is composed of cash and cash equivalents reported in the Consolidated Balance Sheets and $ 1.6 million and $ 1.5 million of restricted cash for the letter of credit for the Company’s headquarters building lease which is included within other non-current assets in the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

Marketable Securities

The Company generally invests its excess cash in money market funds and investment grade short to intermediate-term fixed income securities.

Such investments are included in cash and cash equivalents, short-term marketable securities, or long-term marketable securities on the Consolidated Balance Sheets, are considered available-for-sale, and reported at fair value with net unrealized gains and losses included as a component of stockholders’ equity.

Such investments are included in cash and cash equivalents, or short-term marketable securities on the Consolidated Balance Sheets, are considered available-for-sale, and are reported at fair value with net unrealized gains and losses included as a component of stockholders’ equity.

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

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

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

Realized gains and losses and declines in value determined to be due to credit losses on marketable securities, if any, are included in interest and other income, net.

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The accounts receivable balance represents amounts receivable from the Company's collaboration partners, excluding related parties, net of an allowance for credit losses, if required.

Derivatives and Hedging Activities

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

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

dollar, primarily the Euro and British Pound.

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

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

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

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

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

Property and Equipment, Net

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Leasehold improvements shorter of life of asset or lease term

Manufacturing and laboratory equipment five years

Computer hardware and software three years

Office furniture and equipment five years

Computer equipment and purchased software

Laboratory equipment

Furniture and fixtures

Manufacturing equipment

Impairment of Long-Lived Assets

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The Company does not assume renewals in its determination of the lease term unless the renewals are deemed by management to be reasonably certain at lease inception.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, unless they include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

Leases with an initial term of twelve months or less are not recorded on the balance sheet, unless they include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

The Company recognizes lease expenses on a straight-line basis over the lease term.

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Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception, or to a single performance obligation as applicable.

The Company accounts for the exercise of a material right as either a contract modification or as a continuation of the existing contract, as is most appropriate based on the facts and circumstances.

Management may be required to exercise considerable judgment in estimating revenue to be recognized.

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

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

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

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The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Comprehensive Income (Loss)

Comprehensive income (loss) is composed of net income (loss) and certain changes in stockholders’ equity that are excluded from net income (loss), primarily unrealized gains or losses on the Company’s marketable securities.

Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents.

Diluted net income (loss) per share is computed based on the treasury stock method by dividing net income by the weighted-average number of common shares outstanding during the period plus potentially dilutive common equivalent shares outstanding.

However, where there is a net loss per ordinary share, no adjustment is made for potentially issuable ordinary shares since their effect would be anti-dilutive.

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

Comprehensive Loss

Comprehensive loss is composed of net loss and certain changes in stockholders’ equity that are excluded from net loss, primarily unrealized gains or losses on the Company’s marketable securities.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents.

Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments in this Update are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The guidance is to be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid.

The amendments in this Update are effective to be applied prospectively for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of the new standard on its income tax disclosures.

Fair Value Measurements

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Money market funds $ 121,034 $ — $ — $ 121,034

government treasuries 43,781 — — 43,781

Commercial paper — 9,948 — 9,948

Short-term marketable securities:

1 unchanged sentence

government agency securities — 7,086 — 7,086

Corporate debt securities — 54,215 — 54,215

Commercial paper — 31,147 — 31,147

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

Short-term marketable securities:

government treasuries 43,781 — — 43,781

Corporate debt securities — 70,009 — 70,009

Commercial paper — 9,948 — 9,948

Long-term marketable securities:

Short-term marketable securities:

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

government agency securities — 16,861 — 16,861

Corporate debt securities — 54,215 — 54,215

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

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

Commercial paper — 43,591 — 43,591

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

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

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

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government agency securities (1)

Corporate debt securities (2)

7,089 — ( 3 ) 7,086

Commercial paper 31,147 — — 31,147

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

Total $ 906,410 $ 998 $ ( 3 ) $ 907,405

1 unchanged sentence

(1) Unrealized holding losses on 2 securities with an aggregate fair value of $ 7.1 million.

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

December 31, 2022

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

government agency securities 16,823 38 — 16,861

Corporate debt securities (2)

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Commercial paper 43,591 — — 43,591

Total short-term marketable securities 572,250 1 ( 321 ) 571,930

Long-term marketable securities:

government treasuries (3)

411,904 — ( 1,757 ) 410,147

Corporate debt securities (4)

15,373 — ( 71 ) 15,302

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

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

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

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

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

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

As of December 31, 2023 and 2022, some of the Company's marketable securities were in an unrealized loss position.

The Company has no t recognized an allowance for credit losses as of December 31, 2023 or 2022.

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

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

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

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

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

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

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

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To date, the Company has paid consideration of $ 49.8 million in the aggregate, consisting of up-front and preclinical contingent consideration, all of which was recorded as research and development expense as incurred.

This amount includes a $ 30.0 million contingent consideration payment which was triggered and recorded as research and development expense in March 2023 upon the achievement of a specified clinical milestone in the ETV:IDS program.

This contingent consideration payment fully satisfies the Company's clinical contingent consideration obligations under the Purchase Agreement.

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

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

Under the F-star Collaboration Agreement, the Company was responsible for certain research costs incurred by F-star Ltd in conducting activities under an agreed development plan for each Fcab, for up to 24 months after the target Fcab is accepted.

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

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

The Company has not recognized research and development expense related to the funding of F-star Ltd activities under development plans during the years ended December 31, 2023 or 2022, respectively, and recognized $ 0.1 million in research and development expense during the year ended December 31, 2021.

Collaboration Agreements

In August 2020, the Company entered into a binding Provisional Collaboration and License Agreement (“Provisional Biogen Collaboration Agreement”) with Biogen Inc.’s subsidiaries, Biogen MA Inc.

(“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”) pursuant to which the Company granted Biogen a license to co-develop and co-commercialize Denali’s small molecule LRRK2 inhibitor program (the “LRRK2 Program”), an option in respect of each of (i) the Company’s amyloid beta program utilizing the Company's Transport Vehicle ("TV") technology platform to cross the blood-brain barrier ("BBB") and (ii) one other unnamed program also utilizing the Company's TV technology platform (the “Option Programs”), and a right of first negotiation with respect to two additional unnamed programs for indications within Alzheimer’s disease, Parkinson’s disease, amyotrophic lateral sclerosis ("ALS") and multiple sclerosis utilizing the Company's TV technology platform (the “ROFN Programs”), should the Company decide to seek a collaboration with a third party for such programs.

(“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”) pursuant to which the Company granted Biogen a license to co-develop and co-commercialize Denali’s small molecule LRRK2 inhibitor program (the “LRRK2 Program”), an option in respect of each of (i) the Company’s amyloid beta program utilizing the Company's Transport Vehicle ("TV") technology platform to cross the blood-brain barrier ("BBB") and (ii) one other unnamed program also utilizing the Company's TV technology platform (the “Option Programs”), and a right of first negotiation with respect to two additional unnamed programs for indications within Alzheimer’s disease, Parkinson’s disease, amyotrophic lateral sclerosis ("ALS") and multiple sclerosis ("MS") utilizing the Company's TV technology platform (the “ROFN Programs”), should the Company decide to seek a collaboration with a third party for such programs.

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

The Provisional Biogen Collaboration Agreement expired in October 2020 upon the execution of a Definitive LRRK2 Collaboration and License Agreement (“LRRK2 Agreement”) with Biogen on October 4, 2020 and a Right of First Negotiation, Option and License Agreement (the “ROFN and Option Agreement”) on October 6, 2020 (collectively, the "Biogen Collaboration Agreement").

Biogen made an upfront payment of $ 560.0 million upon execution of the Biogen Collaboration Agreement in October 2020.

Biogen made an upfront payment of $ 560.0 million upon execution of the Biogen Collaboration Agreement in October 2020, which was included in the transaction price at inception.

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

LRRK2 Agreement

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Such milestone payments include $ 375.0 million in development, $ 375.0 million upon first commercial sale, and $ 375.0 million in net sales-based milestones.

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.

The Company will share 50 % of the profits and losses with Biogen for LRRK2 Products in the United States, and 40 % of such profits and losses in China.

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

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

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

On September 22, 2020, the Company closed the sale of the Shares to BIMA pursuant to the Stock Purchase Agreement.

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

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

The shares of common stock owned by Biogen as of December 31, 2022 and through September 30, 2023, represented approximately 10 % of the voting interest of the Company, and as such, Biogen was considered a related party as defined in ASC 850.

As of December 31, 2023, the percentage voting interest has declined such that Biogen is no longer considered a related party as defined in ASC 850.

ROFN and Option Agreement

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

Biogen’s option may be exercised up to initiation of investigational new drug ("IND")-enabling studies for each program and continues for each program until a specified period of time after delivery of an option data package, or thirty business days after the 5th anniversary of the effective date of the Provisional Biogen Collaboration Agreement, whichever is earlier.

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

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

However, if the Company does not execute an agreement with a third party with respect to a particular ROFN Program offered to Biogen within a specified amount of time, Biogen will have one additional right to exercise the ROFN again with respect to such ROFN Program.

Under the ROFN and Option Agreement, with respect to the options granted by the Company to Biogen, if exercised, Biogen is obligated to pay to the Company an aggregate of up to $ 270.0 million in option exercise and development milestone payments, up to $ 325.0 million upon first commercial sale, and up to $ 290.0 million of net sales-based milestone payments, following the achievement of certain prespecified milestone events and if Biogen exercises both of its options.

Furthermore, Biogen is obligated to pay to the Company royalties in the mid-single digit to mid-teens percentages, depending on the program for which Biogen exercises its option and upon the achievement of certain sales thresholds.

The Biogen Collaboration Agreement was considered a contract modification to the Provisional Biogen Collaboration Agreement and was accounted for as a termination of the provisional agreement and commencement of a new contract.

Under the ROFN and Option Agreement, Biogen received an exclusive option to license two preclinical programs enabled by the Company's TV technology platform, which platform aims to improve brain uptake of biotherapeutics, including its ATV-enabled anti-amyloid beta program ("ATV:Abeta program") and a second program utilizing the Company's TV technology for an unnamed target ("TV program").

In April 2023, Biogen exercised its option to license the Company's ATV:Abeta program and made a $ 5.0 million option exercise fee payment.

Further, in August 2023, Biogen waived its option to the second option program upon execution of the Biogen Amendment.

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

In August 2023, Biogen waived its ROFN rights upon execution of the Biogen Amendment.

Under the amended ROFN and Option Agreement, w ith respect to the ATV:Abeta license granted by the Company to Biogen, Biogen is obligated to pay an aggregate of up to $ 142.5 million in development milestone payments, an aggregate of up to $ 180.0 million upon first commercial sale, and up to $ 190.0 million of net sales-based milestone payments, following the achievement of certain prespecified milestone events.

Furthermore, Biogen is obligated to pay royalties in the mid-single digit percentages, upon the achievement of certain sales thresholds.

The Biogen Collaboration Agreement was considered to be a contract modification to the Provisional Biogen Collaboration Agreement and was accounted for as a termination of the provisional agreement and commencement of a new contract.

The Biogen Amendment was considered to be a continuation of the Biogen Collaboration Agreement.

The Company identified the following distinct performance obligations associated with the Biogen Collaboration Agreement that had not yet been delivered under the original contract:

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Since ASC 808 does not address recognition and measurement, the Company looked to other accounting literature for guidance where the performance obligation does not fall under ASC 606, and determined that for the interim LRRK2 development activities subject to cost sharing provisions, the guidance in ASC 730, Research and Development should be applied.

The transaction price at inception included fixed consideration consisting of the upfront fee of $ 560.0 million and the $ 44.9 million premium on the sale of common stock.

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

From inception of the Biogen Collaboration Agreement through December 31, 2022 , there was no change to the transaction price.

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

The respective standalone value for each of the performance obligations was determined at inception by applying the SSP method and the transaction price of $ 604.9 million at inception was allocated based on the relative SSP method with revenue recognition timing to be determined either by delivery, resolution of an option, or the provision of services.

The Company used an adjusted market assessment approach to estimate the selling price for the LRRK2 Program license, an expected cost plus margin approach for estimating the Option Research Services and estimated the intrinsic value of the material right for the option, taking into account the likelihood that an option would be exercised.

The LRRK2 Program license was delivered on or around the effective date of the Biogen Collaboration Agreement and the revenue allocated to this performance obligation was recognized during the year ended December 31, 2020 .

The Option Research Services are expected to be delivered over time as the services are performed, with revenue being recognized over time based on costs incurred to perform the services, since the level of costs incurred over time is thought to best reflect the transfer of services to Biogen.

Revenue allocated to the material right for an option under the ROFN and Option Agreement is deferred as a contract liability until the option opt in period ends, expiration or ROFN and Option Agreement termination.

The LRRK2 Development Activities cost sharing reimbursements or expenses will be recognized over time as earned or incurred, since this is believed to directly correlate to the value of the services performed.

The Option Research Services were delivered over time as the services are performed, with revenue being recognized over time based on costs incurred to perform the services.

As of December 31, 2023 , all revenue allocated to the Option Research Services has been recognized since, after Biogen's ATV:Abeta option exercise, and the waiving of the second option right in the Biogen Amendment, the underlying performance obligations have been fully satisfied.

The $ 288.9 million of revenue allocated to the material right for an option under the ROFN and Option Agreement was initially deferred as a contract liability, and was recognized in full during the year ended December 31, 2023 , upon Biogen's ATV:Abeta option exercise, along with the $ 5.0 million option exercise fee which was fully allocated to the material right.

The LRRK2 Development Activities cost sharing reimbursements or expenses are being recognized over time as earned or incurred, since this is believed to directly correlate to the value of the services performed.

No related-party contract liability remains on the Consolidated Balance Sheet as of December 31, 2023 .

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

Approximately $ 288.9 million of this contract liability relates to the revenue allocated to the material right for an option under the ROFN and Option Agreement which is being deferred until resolution of the option, which is expected to be within six months of the balance sheet date, and $ 1.6 million of this contract liability relates to the portion of the Option Research Services performance obligation yet to be satisfied, with such amount to be recognized over the estimated period of the services, which is expected to be more than one year .

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

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

The Company recorded $ 17.7 million and $ 8.2 million of cost sharing payments to Biogen for LRRK2 development activities in research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023 , and 2022, respectively, of which $ 3.2 million was recorded as cost sharing payments included within accounts payable on the Consolidated Balance Sheet as of December 31, 2023, and $ 4.4 million was recorded as cost sharing payments due to related party on the Consolidated Balance Sheet as of December 31, 2022.

The Company recorded $ 6.5 million of cost sharing reimbursements for LRRK2 Development Activities as an offset to research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

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

As of December 31, 2022 , the Company had no t achieved any milestones and had no t recorded any product sales under the Biogen Collaboration Agreement.

As of December 31, 2023 , the Company had earned $ 5.0 million in option fee payments, but had no t recorded milestone revenue or product sales under the Biogen Collaboration Agreement.

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

("Sanofi") pursuant to which certain small molecule CNS and peripheral receptor interacting serine/threonine protein kinase 1 ("RIPK1") inhibitors contributed by Sanofi and by the Company will be developed and commercialized.

The Sanofi Collaboration Agreement became effective in November 2018 at which time Sanofi paid the Company an upfront payment of $ 125.0 million.

The Sanofi Collaboration Agreement became effective in November 2018 at which time Sanofi paid the Company an upfront payment of $ 125.0 million which was included in the transaction price at inception.

Under the Sanofi Collaboration Agreement, the Company is eligible to receive milestone payments from Sanofi up to approximately $ 1.1 billion upon achievement of certain clinical, regulatory and sales milestone events.

Such milestone payments include $ 215.0 million in clinical milestone payments and $ 385.0 million in regulatory milestone payments for CNS Products, as defined, that are developed and approved in the United States, by the European Medicines Agency ("EMA") and in Japan for three indications, including Alzheimer's disease.

These milestones also include $ 120.0 million in clinical milestone payments, $ 175.0 million in regulatory milestone payments and $ 200.0 million in commercial milestone payments for Peripheral Products, as defined, that are developed and approved in the United States, by the EMA and Japan for three indications.

The Company will share profits and losses equally with Sanofi for CNS Products sold in the United States and China, and receive variable royalties on net sales for CNS Products sold outside of the United States and China and for Peripheral Products sold worldwide.

The Company and Sanofi will jointly develop CNS Products pursuant to a global development plan.

The Company will be responsible, at its own cost, for conducting Phase 1 and Phase 2 trials for CNS Products in Alzheimer’s disease and any activities required to support such clinical trials and specific for Alzheimer’s disease ("Denali CNS Development Activities").

Other than with the Denali CNS Development Activities, Sanofi is responsible, at its cost, for all other Phase 1 and Phase 2 trials for CNS Products, including for ALS and multiple sclerosis.

The Company and Sanofi are jointly developing CNS Products pursuant to a global development plan.

The Company is responsible, at its own cost, for conducting Phase 1 and Phase 2 trials for CNS Products in Alzheimer’s disease and any activities required to support such clinical trials and specific for Alzheimer’s disease ("Denali CNS Development Activities").

Other than the Denali CNS Development Activities, Sanofi is responsible, at its cost, for all other Phase 1 and Phase 2 trials for CNS Products, including ALS and MS.

Sanofi will lead the conduct of all Phase 3 and later stage development trials for CNS Products, with Sanofi and the Company funding 70 % and 30 % of such costs, respectively.

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Since ASC 808 does not address recognition and measurement, the Company looked to other accounting literature for guidance where the performance obligation does not fall under ASC 606, and determined that for the Alzheimer's Disease Services, the guidance in ASC 606 should be analogized for the recognition, measurement and reporting of this performance obligation, and for the cost sharing provisions, the Company determined that the guidance in ASC 730, Research and Development should be applied.

The transaction price at inception included upfront fixed consideration of $ 125.0 million.

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

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

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

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

During the year ended December 31, 2023 , a $ 25.0 million milestone payment was triggered upon the commencement of dosing in a Phase 2 study of SAR443820/DNL788, in individuals with MS.

During the years ended December 31, 2022 and 2021, the Company earned clinical milestones of $ 50.0 million and $ 15.0 million, respectively.

These milestones were recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss during for the years ended December 31, 2023 , 2022 and 2021, respectively, s ince the associated performance obligation has been satisfied .

The Company used an adjusted market assessment approach to estimate the selling price for the program licenses, and an expected cost plus margin approach for estimating the Alzheimer’s Disease Services and the Retained Activities.

The program licenses and existing know-how were delivered on the effective date of the Sanofi Collaboration Agreement.

The program licenses and existing know-how were delivered on the effective date of the Sanofi Collaboration Agreement, and as such upfront revenue allocated to these performance obligations were recognized at this time.

Further, clinical milestones are recognized as earned since these relate to the underlying program licenses previously delivered.

The Alzheimer’s Disease Services and the Retained Activities were expected to be delivered over time as the services are performed.

For the Alzheimer's Disease Services, revenue is being recognized over time using the input method, based on costs incurred to perform the services, since the level of costs incurred over time is thought to best reflect the transfer of services to Sanofi.

For the Alzheimer's Disease Services, revenue was recognized over time using the input method, based on costs incurred to perform the services, since the level of costs incurred over time was thought to best reflect the transfer of services to Sanofi.

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

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

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

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

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

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

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

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

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

The Company has no remaining performance obligations under the Sanofi Collaboration Agreement, and no contract liability remains on the Consolidated Balance Sheets as of December 31, 2023 or 2022 .

The Company did no t record any receivable associated with the Sanofi Collaboration Agreement on the Consolidated Balance Sheets as of December 31, 2023 or 2022.

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

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

As of December 31, 2023, the Company had earned milestone payments of $ 100.0 million and had no t recorded any product sales under the Sanofi Collaboration Agreement.

Takeda Collaboration Agreement

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

The programs were the Company ’s ATV:BACE1/Tau, ATV:TREM2 and PTV:PGRN programs.

The programs subject to the Takeda Collaboration Agreement were the Company ’s ATV:BACE1/Tau, ATV:TREM2 and PTV:PGRN programs.

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

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

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

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

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

Subsequent to the ATV:Tau termination, total preclinical milestone payments that Takeda owed under the Takeda Collaboration Agreement was $ 55.0 million for all three programs, all of which had been earned and received as of December 31, 2022 .

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

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

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

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

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

Further, during the research period, the Company believes that the arrangement is a contract with a customer as defined in ASC 606, Revenue From Contracts With Customers .

The Takeda Collaboration Agreement and the Stock Purchase Agreement are being accounted for as one arrangement because they were entered into at the same time with interrelated financial terms.

Further, during the research period, the Company believes that the arrangement was a contract with a customer as defined in ASC 606, Revenue From Contracts With Customers .

The Takeda Collaboration Agreement and the Stock Purchase Agreement were accounted for as one arrangement because they were entered into at the same time with interrelated financial terms.

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

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

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

The transaction price of the Takeda Collaboration Agreement increased by $ 24.0 million during the year end December 31, 2022 due to two $ 12.0 million in preclinical milestones becoming unconstrained and recorded as collaboration revenue from customers.

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

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

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

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

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

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

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

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

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

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

The transaction price also included variable consideration of $ 26.0 million relating to future milestones that were not constrained upon inception and have since all been met and received.

Transaction price has also subsequently increased by $ 24.0 million since inception pertaining to further preclinical milestones earned that had previously been constrained.

Revenue was recognized over time using the input method, based on costs incurred to perform the research services, and all revenue under the Takeda Collaboration Agreement was recognized prior to December 31, 2022.

The Company did no t record any product sales and there are no remaining performance obligations under the initial Takeda Collaboration Agreement.

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

PTV:PGRN and ATV:TREM2 Collaboration Agreements

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

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

From inception of the PTV:PGRN Collaboration Agreement and the ATV:TREM2 Collaboration Agreement through December 31, 2023, there was no change to the terms of either agreement.

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

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

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

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

From inception of the PTV:PGRN Collaboration Agreement and the ATV:TREM2 Collaboration Agreement through December 31, 2022, there was no change to the terms of, or the transaction price in either agreement.

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

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

The entire transaction price was allocated to the underlying Technology License in each Collaboration Agreement, which was delivered on or around the effective date of the respective Collaboration Agreement, with the revenue allocated to this performance obligation recognized during the year ended December 31, 2021.

The entire transaction price of $ 5.0 million on inception was allocated to the underlying Technology License in each Collaboration Agreement, which was delivered on or around the effective date of the respective Collaboration Agreement, with the revenue allocated to this performance obligation recognized during the year ended December 31, 2021.

During the year ended December 31, 2023, a $ 10.0 million milestone was triggered upon achievement of a specified clinical milestone in the Phase 1/2 clinical trial of TAK-594/DNL593 in patients with FTD-GRN, which was recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2023 since the associated performance obligation has been satisfied.

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

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

The Company recorded $ 7.1 million, $ 11.3 million, and $ 7.7 million of cost sharing reimbursements for PTV:PGRN, and $ 5.1 million, $ 6.9 million, $ 6.0 million of cost sharing reimbursements for ATV:TREM2 Development Activities for the years ended December 31, 2023, 2022, and 2021 respectively, as offsets to research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss.

Cost sharing reimbursements of $ 2.7 million and $ 8.9 million are recorded as receivables on the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

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

As of December 31, 2022, the Company had earned $ 10.0 million in option fee payments from Takeda under the PTV:PGRN and the ATV:TREM2 Collaboration Agreements, and had no t recorded any product sales under either agreement.

As of December 31, 2023, the Company had earned $ 10.0 million in option fee payments and $ 10.0 million in milestone payments from Takeda under the PTV:PGRN and the ATV:TREM2 Collaboration Agreements, and had no t recorded any product sales under either agreement.

Collaboration Revenue

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Alzheimer's Disease Services (2)

Retained Activities — — 969

Total Sanofi Collaboration Revenue 25,000 53,398 15,004

Biogen Collaboration Agreement:

LRRK2 Program License — — 306,545

ATV:Abeta Program License (3)

Option Research Services (2)

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

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

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

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

(2) Revenue for all periods presented was included in the contract liability balance at the beginning of the respective year.

(3) Revenue of $ 288.9 million for the year ended December 31, 2023 was included in the related-party contract liability balance at the beginning of the period.

License Agreements

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

I n the year ended December 31, 2022 , the Company paid Genentech a $ 7.5 million clinical milestone payment triggered upon the commencement of dosing in the global Phase 2b LUMA study to evaluate the efficacy and safety of BIIB122/DNL151 by the Company's collaboration partner Biogen, and a $ 5.0 million clinical milestone payment triggered upon the commencement of dosing in the g lobal Phase 3 LIGHTHOUSE study to evaluate the efficacy and safety profile of BIIB122/DNL151 by Biogen.

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

I n the year ended December 31, 2022, the Company paid Genentech two clinical milestone payments of $ 7.5 million and $ 5.0 million, triggered upon the commencement of dosing in the global Phase 2b LUMA study to evaluate the efficacy and safety of BIIB122/DNL151, and the commencement of dosing in the g lobal Phase 3 LIGHTHOUSE study to evaluate the efficacy and safety profile of BIIB122/DNL151, respectively, by the Company's collaboration partner Biogen.

Biogen is responsible for 50 % of any payment obligation to Genentech under the Biogen Collaboration Agreement, including these clinical milestones, and accordingly $ 6.3 million of research and development expense was recognized in the year ended December 31, 2022 in the Consolidated Statements of Operations and Comprehensive Loss.

No expenses were recognized under the Genentech License Agreement in the years ended December 31, 2023 or 2021.

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Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consists of the following (in thousands):

As of December 31,

Accounts receivable and other receivables

$ 3,420 $ 9,282

Prepaid clinical research & development costs

Prepaid manufacturing and other research & development costs

12,192 13,834

Other prepaid assets and other current assets

Total prepaid expenses and other current assets $ 29,626 $ 36,104

Property and Equipment, Net

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Leasehold improvements $ 41,238 $ 43,698

Manufacturing and laboratory equipment 34,419 30,114

Computers equipment and purchased software 1,605 1,337

Laboratory equipment

36,985 34,419

Manufacturing equipment

Computer equipment and purchased software

Furniture and fixtures 1,906 1,580

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Depreciation expense was $ 16.7 million , $ 10.4 million and $ 8.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

D epreciation expense for the year ended December 31, 2023 includes $ 7.9 million of accelerated depreciation on leasehold improvements due to the Company terminating the previous SLC Lease in March 2023.

Accrued Expenses and Other Current Liabilities

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As of December 31,

Accrued manufacturing costs $ 22,307 $ 9,955

Accrued compensation $ 21,590 $ 17,087

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

Accrued clinical and other research & development costs

19,035 16,297

Accrued manufacturing costs 15,462 22,307

Operating lease liability, current 7,260 7,318

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

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

The Headquarters Lease has a contractual term of 10 years from the legal commencement date, which was April 1, 2019 when the building was ready for occupancy.

For accounting purposes, the lease commencement date was determined to be August 1, 2018, which was the date at which the Company was deemed to have obtained control over the property.

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

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

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

In August 2021, the Company entered into an operating lease for laboratory, office and warehouse facilities in Salt Lake City, Utah.

In March 2023, the Company terminated this operating lease, which resulted in the recognition of $ 7.9 million of accelerated depreciation on leasehold improvements during the year ended December 31, 2023 .

The lease had not commenced for accounting purposes.

In April 2023, the Company entered into a new operating lease in Salt Lake City for a 59,336 square foot laboratory, office and warehouse premises (the "SLC Lease") with a contractual term of approximately 15 years upon commencement, and future undiscounted lease payments of approximately $ 13.4 million, which was subsequently amended in October 2023.

The Company has the option to extend the lease term for a period of ten years at the end of the lease term.

For accounting purposes, the SLC Lease, as amended, had not commenced as of December 31, 2023 since the landlord had not yet made the underlying asset available for use by the Company, and as such, no lease liability or ROU asset has been recorded on the Consolidated Balance Sheet as of December 31, 2023, and no operating lease expense has been recorded for the year ended December 31, 2023.

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

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

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

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

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

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

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

The discount rates of our operating leases are an approximation of the Company's incremental borrowing rate and are dependent upon the term and economics of the agreement.

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

There were no changes to the terms of the leases recognized under ASC 842 during the year ended December 31, 2023.

Operating lease costs, including variable l ease costs recognized under ASC 842, were $ 12.4 million, $ 12.0 million, and $ 11.0 million for the years ended December 31, 2023 , 2022 and 2021 , respectively.

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

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Net operating lease liabilities $ 52,241

In October 2018, the Company entered into a sublease agreement ("Sublease Agreement") to sublease approximately 36,835 rentable square feet of space in its Headquarters.

The Sublease Agreement has a term of five years from the commencement date of April 12, 2019 and provides for the Company to receive monthly base rent amounts escalating over the term of the lease.

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

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

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

Year Ended December 31:

Total undiscounted sublease receipts $ 3,972

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

Indemnification

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In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees.

No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s Consolidated Balance Sheets , Consolidated Statements of Operations and Comprehensive Income (Loss), or Consolidated Statements of Cash Flows .

Effective September 2017, the Company entered into a Development and Manufacturing Services Agreement as amended (“DMSA”) with Lonza Sales AG (“Lonza”) for the development and manufacture of biologic products.

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

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

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

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

Unless earlier terminated, the DMSA will expire when all development and manufacturing services are completed, which is not expected to be before November 2029.

As of December 31, 2023 and 2022, the Company had total non-cancellable purchase commitments under the DMSA of $ 37.6 million and $ 32.3 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, the Company incurred costs of $ 39.5 million, $ 28.6 million, and $ 17.4 million, respectively, and made payments of $ 37.1 million, $ 23.9 million, and $ 14.9 million respectively, for the development and manufacturing services rendered under the DMSA.

In the normal course of business, the Company enters into various firm purchase commitments primarily related to research and development activities.

The Company had contractual obligations under development and manufacturing agreements other than the DMSA of $ 9.6 million and $ 11.5 million, as of December 31, 2022 and 2021, respectively, with certain amounts subject to cost sharing with Takeda.

Further, the Company had other commitments of $ 1.6 million and $ 1.7 million as of December 31, 2022 and 2021, respectively, and a purchase commitment related to manufacturing equipment for the SLC Facility of $ 5.6 million as of December 31, 2022.

In the normal course of business, the Company enters into other firm purchase commitments primarily related to research and development activities.

The Company had contractual obligations under certain clinical and manufacturing agreements other than the DMSA of $ 34.8 million and $ 9.6 million, as of December 31, 2023 and 2022, respectively, with certain amounts subject to cost sharing with Takeda.

Further, the Company had other commitments of $ 1.6 million as of both December 31, 2023 and 2022, respectively, and a purchase commitment related to manufacturing equipment for the SLC Facility of $ 5.6 million as of December 31, 2022.

There is no purchase commitment related to manufacturing equipment for the SLC Facility as of December 31, 2023.

Contingencies

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Balance at December 31, 2022

14,673,717 $ 27.03 6.24 $ 127,865

Granted 3,482,231 27.51

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Balance at December 31, 2023

16,490,551 $ 27.34 5.97 $ 61,982

Vested and expected to vest at December 31, 2023

15,680,680 $ 28.72 6.23 $ 45,153

Exercisable at December 31, 2023

10,918,798 $ 25.93 5.14 $ 45,085

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

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Dividend yield — — —

Performance and Market Contingent Stock Options Granted to Employees

In August and November 2015, the Board of Directors granted approximately 1.6 million and 0.1 million shares of performance- and market- contingent awards to members of the senior management team, respectively.

These awards have an exercise price of $ 0.68 per share.

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

The first of these market triggers has been met.

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

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

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

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

This valuation methodology utilized the estimated fair value of the Company’s common stock on grant date and several key assumptions, including expected volatility of the Company’s stock price based on comparable public companies, risk-free rates of return and expected dividend yield.

Restricted Stock Activity

8 unchanged sentences

Unvested and expected to vest at December 31, 2023 3,635,157 $ 35.60

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

The aggregate intrinsic value of RSUs is calculated as the closing price per share of the Company's common stock on the last trading day of the fiscal period, multiplied by outstanding RSUs as of December 31, 2023 .

The total intrinsic value of RSUs expected to vest was $ 78.0 million as of December 31, 2023.

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There was no tax benefit realized related to awards vested or exercised during the years ended December 31, 2023, 2022 and 2021.

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

There is no tax benefit on total stock-based compensation expense for the years ended December 31, 2023 , 2022 and 2021 since the company has recorded a full valuation allowance on all deferred tax assets.

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21.0 % 21.0 % 21.0 %

Effect of Tax Act

Change in valuation allowance

1 unchanged sentence

Research tax credits

4.9 4.1 ( 9.2 )

Stock-based compensation

( 3.2 ) ( 0.5 ) 3.2

Nondeductible acquisition-related costs ( 3.5 ) — —

Impact of IRC 162m

( 0.8 ) ( 0.4 ) 0.1

18 unchanged sentences

Net deferred tax assets $ — $ —

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

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

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

Based upon the weight of available evidence, especially the uncertainties surrounding the realization of deferred tax assets through future taxable income, the Company believes it is not more likely than not that the deferred tax assets will be fully realizable.

Accordingly, the Company has provided a 100 % valuation allowance against its net deferred tax assets as of December 31, 2022 and 2021.

Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets as of December 31, 2023 and 2022.

There was an increase in the net valuation allowance of $ 43.2 million during the year ended December 31, 2023.

13 unchanged sentences

Additions for tax positions taken in a prior year

168 135 1,042

Additions for tax positions taken in the current year

1 unchanged sentence

Reductions for tax positions taken in the prior year

— ( 207 ) ( 169 )

Unrecognized tax benefits at December 31

$ 26,175 $ 19,371 $ 13,699

If recognized , none of the unrecognized tax benefits would reduce the annual effective tax rate for the year ended December 31, 2022.

If recognized , none of the unrecognized tax benefits would reduce the effective tax rate for the year ended December 31, 2023.

The Company will recognize both accrued interest and penalties related to unrecognized benefits in income tax expense.

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federal, state and local income tax authorities for all tax years in which a loss carryforward is available.

Net Income (Loss) and Net Income (Loss) Per Share

The following table sets forth the computation of the basic and diluted net income (loss) per share (in thousands, except share and per share data):

Net Loss and Net Loss Per Share

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share data):

Year Ended December 31,

2023 2022 2021

Net income (loss) $ ( 325,991 ) $ ( 290,581 ) $ 71,136

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

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

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

Net income (loss) per share, basic $ ( 2.60 ) $ ( 2.39 ) $ 0.65

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

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

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

$ ( 145,224 ) $ ( 325,991 ) $ ( 290,581 )

Weighted average number of shares outstanding, basic and diluted

137,370,897 125,530,703 121,524,795

Net loss per share, basic and diluted

$ ( 1.06 ) $ ( 2.60 ) $ ( 2.39 )

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

Potentially dilutive securities, including all options issued and outstanding, ESPP shares issuable, and restricted shares subject to future vesting, that were not included in the diluted per share calculations for all periods presented because they would be anti-dilutive totaled approximately 20.5 million, 18.2 million, and 16.5 million shares as of December 31, 2023, 2022, and 2021, respectively.

Subsequent events

Collaboration and Development Funding Agreement

In January 2024, the Company entered into a Collaboration and Development Funding Agreement with an unrelated third party, pursuant to which this third party will provide $ 75.0 million of funding and collaborate with the Company to conduct a global Phase 2a study of BIIB122/DNL151 in patients with Parkinson’s disease and confirmed pathogenic variants of LRRK2.

Pursuant to this agreement, an upfront payment of $ 12.5 million was received in January 2024, with the remainder to be paid based on time and operational milestones in the study.

After the full $ 75.0 million investment has been made, 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.

Private Investment in Public Equity ("PIPE") financing

On February 27, 2024, the Company entered into a securities purchase agreement with certain investors for the private placement of (i) 3,244,689 shares of Denali's common stock at a price of $ 17.07 per share and (ii) pre-funded warrants to purchase an aggregate of 26,046,065 shares of Denali's common stock at a purchase price of $ 17.06 per pre-funded warrant, which represents the per share price for the common stock less the $ 0.01 exercise price.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data