Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
Denali Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)
March 31, 2025 December 31, 2024
Assets
Current assets:
Cash and cash equivalents $ 56,947 $ 174,960
Short-term marketable securities 760,979 657,371
Prepaid expenses and other current assets 60,712 32,105
Total current assets 878,638 864,436
Long-term marketable securities 235,844 359,373
Property and equipment, net 57,765 55,236
Finance lease right-of-use asset 50,199 47,533
Operating lease right-of-use asset 21,963 22,861
Other non-current assets 26,934 24,741
Total assets $ 1,271,343 $ 1,374,180
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 8,458 $ 11,137
Accrued compensation 7,655 24,728
Accrued clinical and other research and development costs 27,908 22,822
Accrued manufacturing costs 14,579 12,779
Operating lease liability, current 8,585 8,308
Deferred research and development funding liability, current 17,338 14,129
Other accrued costs and current liabilities 7,354 8,305
Total current liabilities 91,877 102,208
Operating lease liability, less current portion 34,449 36,673
Finance lease liability, less current portion 5,598 5,615
Deferred research funding and development liability, less current portion 16,733 —
Total liabilities 148,657 144,496
Commitments and contingencies (Note 6)
Stockholders' equity:
Convertible preferred stock, $ 0.01 par value; 40,000,000 shares authorized as of March 31, 2025 and December 31, 2024; 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024
— —
Common stock, $ 0.01 par value; 400,000,000 shares authorized as of March 31, 2025 and December 31, 2024; 145,251,258 shares and 144,220,986 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively
1,778 1,768
Additional paid-in capital 2,790,825 2,764,880
Accumulated other comprehensive income 2,037 2,020
Accumulated deficit ( 1,671,954 ) ( 1,538,984 )
Total stockholders' equity 1,122,686 1,229,684
Total liabilities and stockholders’ equity $ 1,271,343 $ 1,374,180
See accompanying notes to unaudited condensed consolidated financial statements.
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Denali Therapeutics Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended March 31,
2025 2024
Operating expenses:
Research and development
$ 116,227 $ 107,016
General and administrative 29,353 25,236
Total operating expenses 145,580 132,252
Gain from divestiture of small molecule programs — 14,537
Loss from operations ( 145,580 ) ( 117,715 )
Interest and other income, net 12,610 15,913
Net loss ( 132,970 ) ( 101,802 )
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable securities, net of tax
17 ( 1,939 )
Comprehensive loss $ ( 132,953 ) $ ( 103,741 )
Net loss per share, basic and diluted $ ( 0.78 ) $ ( 0.68 )
Weighted average number of shares outstanding, basic and diluted 171,222,030 149,404,188
See accompanying notes to unaudited condensed consolidated financial statements.
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Denali Therapeutics Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit Total Stockholders' Equity
Shares Amount
Balance at December 31, 2023 138,385,498 $ 1,711 $ 2,144,811 $ 643 $ ( 1,116,211 ) $ 1,030,954
Issuance of common stock and pre-funded warrants, net of issuance costs of $ 480
3,244,689 32 499,221 — — 499,253
Issuances under equity incentive plans 130,214 1 1,021 — — 1,022
Vesting of restricted stock units 752,455 7 ( 7 ) — — —
Stock-based compensation — — 27,987 — — 27,987
Net loss — — — — ( 101,802 ) ( 101,802 )
Other comprehensive loss
— — — ( 1,939 ) — ( 1,939 )
Balance at March 31, 2024 142,512,856 $ 1,751 $ 2,673,033 $ ( 1,296 ) $ ( 1,218,013 ) $ 1,455,475
Balance at December 31, 2024 144,220,986 $ 1,768 $ 2,764,880 $ 2,020 $ ( 1,538,984 ) $ 1,229,684
Issuances under equity incentive plans
113,792 1 594 — — 595
Vesting of restricted stock units 916,480 9 ( 9 ) — — —
Stock-based compensation
— — 25,360 — — 25,360
Net loss — — — — ( 132,970 ) ( 132,970 )
Other comprehensive income — — — 17 — 17
Balance at March 31, 2025 145,251,258 $ 1,778 $ 2,790,825 $ 2,037 $ ( 1,671,954 ) $ 1,122,686
See accompanying notes to unaudited condensed consolidated financial statements.
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Denali Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended
March 31,
2025 2024
Operating activities
Net loss $ ( 132,970 ) $ ( 101,802 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,325 2,162
Stock–based compensation expense 25,160 27,840
Net accretion of discounts on marketable securities ( 3,888 ) ( 10,516 )
Non-cash adjustment to operating lease expense
( 1,049 ) ( 957 )
Right-of-use asset amortization for finance lease
887 —
Non-cash gain from divestiture of small molecule programs — ( 14,537 )
Changes in operating assets and liabilities:
Prepaid expenses and other current assets ( 28,607 ) ( 18,766 )
Other non-current assets ( 943 ) —
Accounts payable ( 2,639 ) 635
Accruals and other current liabilities ( 6,477 ) 2,321
Deferred research and development funding liability, less current portion 16,733 —
Net cash used in operating activities ( 131,468 ) ( 113,620 )
Investing activities
Purchases of marketable securities ( 137,926 ) ( 834,157 )
Maturities and sales of marketable securities 161,752 383,120
Purchases of property and equipment ( 5,078 ) ( 2,150 )
Net cash provided by (used in) investing activities 18,748 ( 453,187 )
Financing activities
Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs of $ 480
— 499,253
Proceeds from exercise of awards under equity incentive plans 595 1,022
Payments for finance lease right-of-use asset ( 4,357 ) —
Net cash (used in) provided by financing activities ( 3,762 ) 500,275
Net decrease in cash, cash equivalents and restricted cash ( 116,482 ) ( 66,532 )
Cash, cash equivalents and restricted cash at beginning of period 176,535 128,681
Cash, cash equivalents and restricted cash at end of period $ 60,053 $ 62,149
Supplemental disclosures of cash flow information
Right-of-use asset obtained in exchange for new finance lease liabilities $ 2,876 $ —
Cash paid for finance lease interest $ 181 $ —
Equity consideration received in the divestiture of small molecule programs (Note 10) $ — $ 15,000
Property and equipment purchases accrued but not yet paid $ 488 $ 1,947
Issuance costs incurred but not yet paid $ — $ 394
See accompanying notes to unaudited condensed consolidated financial statements.
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Denali Therapeutics Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Significant Accounting Policies
Organization and Description of Business
Denali Therapeutics Inc. ("Denali" or the “Company”) is a biopharmaceutical company, incorporated in Delaware, that discovers and develops therapeutics to defeat neurodegenerative diseases and lysosomal storage diseases. The Company is headquartered in South San Francisco, California.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of the Securities and Exchange Commission ("SEC") Regulation S-X for interim financial information.
These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 27, 2025 (the "2024 Annual Report on Form 10-K"). The Condensed Consolidated Balance Sheet as of December 31, 2024 was derived from the audited annual consolidated financial statements as of and for the period then ended. Certain information and footnote disclosures typically included in the Company's annual consolidated financial statements have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All such adjustments are of a normal recurring nature except for the impacts of adopting new accounting standards, if any, discussed below. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.
During the three months ended March 31, 2025 there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2024 Annual Report on Form 10-K. For further information with regard to the remainder of the Company’s Significant Accounting Policies, please refer to Note 1, "Significant Accounting Policies," to the Company’s Consolidated Financial Statements included in the 2024 Annual Report on Form 10-K.
Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. For the Company and its subsidiaries, the functional currency has been determined to be U.S. dollars. 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 Condensed Consolidated Statements of Operations and Comprehensive Loss.
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Use of Estimates
The preparation of financial statements in conformity with U.S. 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 condensed 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 Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and Comprehensive Loss.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and marketable securities. Substantially all of the Company’s cash and cash equivalents are deposited in accounts with financial institutions that management believes are of high credit quality. Such deposits have and will continue to exceed federally insured limits. The Company maintains its cash with accredited financial institutions and accordingly, such funds are subject to minimal credit risk.
The Company’s investment policy limits investments to certain types of securities issued by the U.S. government and its agencies, as well as institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the Condensed Consolidated Balance Sheets. As of March 31, 2025 and December 31, 2024, the Company had no off-balance sheet concentrations of credit risk.
The Company is subject to a number of risks similar to other clinical-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under any license or collaboration agreements, and the need to secure and maintain adequate manufacturing arrangements with third parties. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability. 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, global pandemics, war and armed conflicts, inflation, rising interest rates, and recession risks as well as supply chain and labor shortages.
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Investments
The Company holds an equity investment in a venture-backed privately held company, Tenvie Therapeutics, Inc. ("Tenvie"). The privately held company is a Variable Interest Entity ("VIE"), but the Company is not the primary beneficiary. The Company does not have the power to direct the activities that most significantly impact the economic performance of the investee. The Company’s maximum exposure to loss from this VIE is limited to the value of the equity investment. The equity investment held by the Company lacks a readily determinable fair value and therefore the securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar equity securities of the same issuer. The Company reviews the carrying value of its equity investment for impairment whenever events or changes in business circumstances indicate the carrying amount of such asset may not be fully recoverable. Impairments, if any, are based on the excess of the carrying amount over the recoverable amount of the asset. There were no impairments during three months ended March 31, 2025 and 2024.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of 90 days or less at the date of purchase to be cash and cash equivalents. Cash equivalents are reported at fair value.
Cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Statements of Cash Flows is composed of cash and cash equivalents reported in the Condensed Consolidated Balance Sheets and restricted cash of $ 3.1 million and $ 1.6 million as of March 31, 2025 and December 31, 2024, respectively, which is included within other non-current assets in the Condensed Consolidated Balance Sheets.
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 Condensed 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 Condensed Consolidated Statements of Operations and Comprehensive 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.
The Company periodically evaluates the need for an allowance for credit losses. This evaluation includes consideration of several qualitative and quantitative factors, including whether it has plans to sell the security, whether it is more likely than not it will be required to sell any marketable securities before recovery of its amortized cost basis, and if the entity has the ability and intent to hold the security to maturity, and the portion of any unrealized loss that is the result of a credit loss. Factors considered in making these evaluations include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, expected cash flows from securities, other publicly available information that may affect the value of the marketable security, duration and severity of the decline in value, and the Company's strategy and intentions for holding the marketable security.
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Accounts Receivable
Accounts receivable are included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. The accounts receivable balance represents amounts receivable from the Company's collaboration partners net of an allowance for credit losses, if required.
Leases
The Company leases real estate and certain equipment for use in its operations. A determination is made as to whether an arrangement is a lease at inception. The Company recognizes finance and operating lease right-of-use ("ROU") assets, and finance and operating lease liabilities based on the present value of the future minimum lease payments at the commencement date. The Company adjusts ROU assets as needed for any lease incentives it receives and for assets it purchases that are regarded as landlord-owned. When determining the present value of lease payments, the Company uses its incremental borrowing rate on the date of lease commencement, or the rate implicit in the lease, if known. 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.
The Company recognizes amortization of the ROU assets and interest on the lease liabilities for its finance lease. Finance lease ROU assets are amortized on a straight-line basis from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. Operating lease expense is recognized on a straight-line basis over the lease term.
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 has leases with lease and non-lease components, which the Company has elected to account for as a single lease component.
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. The weighted-average common shares outstanding as of March 31, 2025 includes pre-funded warrants to purchase shares of common stock that were issued in connection with the February 2024 private placement, as discussed further in Note 7 - " Common Stock ".
Recently Issued Accounting Pronouncements
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 has not early adopted this update, and is currently evaluating the impact of the new standard on its income tax disclosures.
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In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): D isaggregation of Income Statement Expenses , which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments can be applied either prospectively or retrospectively. The Company has not early adopted this update, and is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.
2. Fair Value Measurements
Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands):
March 31, 2025
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents:
Money market funds $ 44,248 $ — $ — $ 44,248
Short-term marketable securities:
U.S. government treasuries 721,065 — — 721,065
Corporate debt securities — 39,914 — 39,914
Long-term marketable securities:
U.S. government treasuries 216,459 — — 216,459
Corporate debt securities — 19,385 — 19,385
Total $ 981,772 $ 59,299 $ — $ 1,041,071
December 31, 2024
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents:
Money market funds $ 126,728 $ — $ — $ 126,728
Short-term marketable securities:
U.S. government treasuries 629,400 — — 629,400
Corporate debt securities — 21,399 — 21,399
Commercial paper — 6,572 — 6,572
Long-term marketable securities:
U.S. government treasuries 334,892 — — 334,892
Corporate debt securities — 24,481 — 24,481
Total $ 1,091,020 $ 52,452 $ — $ 1,143,472
The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly.
The Company has not transferred any assets or liabilities between the fair value measurement levels for the three months ended March 31, 2025 or for the year ended December 31, 2024.
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3. Marketable Securities
All marketable securities were considered available-for-sale at March 31, 2025 and December 31, 2024. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs as discussed in Note 2, "Fair Value Measurements". The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):
March 31, 2025
Amortized Cost Unrealized Holding Gains Unrealized Holding Losses Aggregate Fair Value
Short-term marketable securities:
U.S. government treasuries
$ 719,287 $ 1,802 $ ( 24 ) $ 721,065
Corporate debt securities
39,766 148 — 39,914
Total short-term marketable securities
759,053 1,950 ( 24 ) 760,979
Long-term marketable securities:
U.S. government treasuries
216,057 413 ( 11 ) 216,459
Corporate debt securities
19,324 61 — 19,385
Total long-term marketable securities
235,381 474 ( 11 ) 235,844
Total
$ 994,434 $ 2,424 $ ( 35 ) $ 996,823
December 31, 2024
Amortized Cost Unrealized Holding Gains Unrealized Holding Losses Aggregate Fair Value
Short-term marketable securities:
U.S. government treasuries
$ 627,809 $ 1,618 $ ( 27 ) $ 629,400
Corporate debt securities
21,337 62 — 21,399
Commercial paper
6,572 — — 6,572
Total short-term marketable securities
655,718 1680 ( 27 ) 657,371
Long-term marketable securities:
U.S. government treasuries
334,300 788 ( 196 ) 334,892
Corporate debt securities
24,354 127 0 24,481
Total long-term marketable securities
358,654 915 ( 196 ) 359,373
Total
$ 1,014,372 $ 2,595 $ ( 223 ) $ 1,016,744
As of March 31, 2025 and December 31, 2024, 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 March 31, 2025 or December 31, 2024. The Company determined that it had the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery. Further, a majority of these marketable securities are held in U.S. government securities, and the remainder were initially, and continue to be, held with investment grade, high credit quality institutions. All marketable securities with unrealized losses as of each balance sheet date have been in a loss position for less than twelve months or the loss is not material.
As of March 31, 2025, all of the Company’s marketable securities have an effective maturity of less than two years .
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4. Research and Development Funding Collaboration Agreement
Collaboration and Development Funding Agreement
On January 29, 2024, the Company entered into a Collaboration and Development Funding Agreement with an unrelated third party, pursuant to which this third party will provide up to $ 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, the Company received payments totaling $ 25.0 million in 2024, with a further $ 25.0 million triggered and received in March and April 2025, respectively. The remaining $ 25.0 million will trigger upon achievement of operational milestones in the study. After the full $ 75.0 million in consideration has been paid, the third party will be eligible to receive low single-digit royalties from the Company on annual worldwide net sales of LRRK2 inhibitors for the treatment of Parkinson’s disease.
The Company determined that this arrangement is an R&D funding arrangement under ASC 730. As the third party is sharing in the risk associated with research and development activities with the Company, the development funding is recognized as an obligation to perform contractual services. Accordingly, payments received will be recorded as a liability, and recognized by the Company as a reduction to research and development expenses over the estimated Phase 2a study period as the underlying research and development costs are incurred. Under this arrangement, the Company recognized a $ 5.1 million offset to research and development expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2025. The Company recorded current and non-current deferred research and development funding liabilities of $ 17.3 million and $ 16.7 million, respectively, and a receivable of $ 25.0 million on the Condensed Consolidated Balance Sheet as of March 31, 2025. There was no offset to research and development expenses recognized the three months ended March 31, 2024. As of March 31, 2024, a liability of $ 12.5 million was recorded within deferred research funding liability, current on the Condensed Consolidated Balance Sheet.
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5. Collaboration Agreements
Biogen
In October 2020, the Company entered into a Definitive Collaboration and License Agreement (“LRRK2 Agreement”), pursuant to which it granted Biogen a license to co-develop and co-commercialize its small molecule LRRK2 inhibitor program (the “LRRK2 Program”), and a Right of First Negotiation, Option and License Agreement (the “ROFN and Option Agreement”), pursuant to which it granted an option and right of first negotiation to certain of the Company's programs utilizing our TransportVehicle TM ("TV") platform, including its amyloid beta program (collectively the "Biogen Collaboration Agreement"), with Biogen Inc.’s subsidiaries, Biogen MA Inc. (“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”). The details of the Biogen Collaboration Agreement, the August 2023 amendment to the ROFN and Option Agreement, and the payments the Company has received, and is entitled to receive, are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the 2024 Annual Report on Form 10-K.
On July 26, 2024, Denali and Biogen executed a Side Letter to the ROFN and Option Agreement, pursuant to which, effective as of the date of the Side Letter, Biogen terminated its license to the ATV:Abeta program enabled by Denali’s TfR-targeting technology against amyloid beta for the potential treatment of Alzheimer's disease, and granted Denali rights to data generated during the collaboration. The side letter also effected the immediate termination of the ROFN and Option Agreement; as such, the Company expects to receive no future milestone or royalty payments from Biogen related to the ATV:Abeta program. There were no changes to the terms of the LRRK2 Agreement during the three months ended March 31, 2025 or 2024.
The Company has no remaining performance obligations under the Biogen Collaboration Agreement, and therefore no contract liability remained on the Condensed Consolidated Balance Sheets as of March 31, 2025 or December 31, 2024 . As of March 31, 2025, the Company has no t recorded milestone revenue or product sales under the Biogen Collaboration Agreement.
Sanofi
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"). The details of the Sanofi Collaboration Agreement and the payments the Company has received, and is entitled to receive, are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the Company's 2024 Annual Report on Form 10-K. The Company has no remaining performance obligations under the Sanofi Collaboration Agreement, and therefore no contract liability remains on the Condensed Consolidated Balance Sheets as of March 31, 2025 or December 31, 2024 .
On February 24, 2025, Denali and Sanofi executed a side letter terminating Sanofi's license to the central nervous system ("CNS") Products program including SAR443820/DNL788. Subsequent to this side letter, the Company expects to receive no future milestone or royalty payments from Sanofi related to the CNS Products program.
Under the Sanofi Collaboration Agreement, the Company is eligible to receive milestone payments totaling up to approximately $ 495.0 million upon achievement of certain clinical, regulatory and sales milestone events for Peripheral Products, and variable royalties on worldwide net sales. As of March 31, 2025, the Company had earned milestone payments of $ 100.0 million and had no t recorded any product sales under the Sanofi Collaboration Agreement.
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Takeda
In January 2018, the Company entered into a Collaboration and Option Agreement ("Takeda Collaboration Agreement") with Takeda Pharmaceutical Company Limited ("Takeda"). The details of the Takeda Collaboration Agreement are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the Company's 2024 Annual Report on Form 10-K. There are no remaining performance obligations or potential payments remaining under the initial Takeda Option and Collaboration Agreement.
The opt-in by Takeda on the PTV:PGRN and ATV:TREM2 programs represented two new contracts with a customer for accounting purposes (the "PTV:PGRN Collaboration Agreement" and the "ATV:TREM2 Collaboration Agreement"), both of which became effective in December 2021. The details of the PTV:PGRN Collaboration Agreement are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the Company's 2024 Annual Report on Form 10-K.
In February 2025, after mutual agreement to discontinue preclinical activities on ATV:TREM2, Takeda delivered notice of its election to terminate the ATV:TREM2 collaboration program on February 26, 2025, as per the terms of the Takeda Option and Collaboration Agreement. The ATV:TREM2 program termination became effective 60 days following the notice date, and subsequently, there are no future milestones, cost, or profit sharing related to this agreement.
As of March 31, 2025, the Company had earned an aggregate of $ 10.0 million in option fee payments and $ 10.0 million in milestone payments from Takeda under the PTV:PGRN and ATV:TREM2 Collaboration Agreements, and had no t recorded any product sales under either agreement.
Cost Sharing Payments and Reimbursements
Cost sharing payments to collaboration partners recorded as expenses in research and development expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss, and cost sharing reimbursements from collaboration partners recorded as an offset to expense in research and development expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss are as follows (in thousands):
Three Months Ended March 31,
2025 2024
Takeda Collaboration Agreement:
PTV:PGRN cost sharing (reimbursements)
$ ( 1,511 ) $ ( 1,200 )
ATV:TREM2 cost sharing (reimbursements) ( 152 ) ( 513 )
Total Takeda cost sharing (reimbursements) (1)
( 1,663 ) ( 1,713 )
Biogen Collaboration Agreement: LRRK2 cost sharing payments (2)
4,651 4,789
Net cost sharing payments (reimbursements) $ 2,988 $ 3,076
_________________________________
(1) Cost sharing reimbursements of $ 1.7 million and $ 1.5 million were recorded as a receivable within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, respectively.
(2) Cost sharing payments due to Biogen of $ 4.7 million and $ 2.5 million were recorded within accounts payable on the Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, respectively.
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6. Commitments and Contingencies
Lease Obligations
In May 2018, the Company entered into an operating lease for its corporate headquarters in South San Francisco (the "Headquarters Lease"). In April 2023, the Company entered into a finance lease for its clinical manufacturing site in Salt Lake City (the "SLC Lease"). Both leases are further described in Note 7, "Commitments and Contingencies," to the consolidated financial statements in the Company's 2024 Annual Report on Form 10-K. Within the total ROU assets for the SLC Lease, the Company recorded assets of $ 44.3 million and $ 41.6 million as of March 31, 2025 and December 31, 2024, respectively , which were purchased by the Company but are considered to be owned by the landlord. The current finance lease liability is included in other accrued costs and current liabilities in the Condensed Consolidated Balance Sheet as of March 31, 2025 .
There were no changes to the terms of the leases recognized under ASC 842 during the three months ended March 31, 2025 or 2024.
Operating lease costs, excluding variable lease costs, were $ 1.9 million and $ 2.0 million for the three months ended March 31, 2025 and 2024, respectively. Variable lease costs related to the operating lease were $ 1.4 million and $ 0.9 million for the three months ended March 31, 2025 and 2024, respectively. Finance lease costs representing amortization of ROU assets and interest on lease liability were $ 0.9 million and $ 0.2 million, respectively, for the three months ended March 31, 2025. There was no finance lease costs for the three months ended March 31, 2024.
The following tables contain a summary of other information pertaining to the Company’s leases for the periods presented (in thousands):
Three Months Ended March 31,
2025 2024
Operating cash flows from operating lease $ 2,885 $ 2,793
As of March 31,
2025 2024
Weighted-average remaining lease term (in years):
Operating lease
4.1 years 5.1 years
Finance lease
14.0 years —
Weighted-average discount rate applied (%):
Operating lease 9.0 % 9.0 %
Finance lease 13.7 % — %
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The following table reconciles the undiscounted cash flows for the next five years and total of the remaining years to the operating and finance lease liabilities recorded in the Condensed Consolidated Balance Sheet as of March 31, 2025 (in thousands):
Year Ended December 31:
Operating Lease
Finance Lease
2025 (nine months) $ 8,908 $ 3,462
2026 12,182 794
2027 12,584 811
2028 13,001 829
2029 4,381 848
Thereafter — 8,814
Total undiscounted lease payments 51,056 15,558
Less: present value adjustment ( 8,022 ) —
Less: imputed interest — ( 7,021 )
Total future minimum lease payments $ 43,034 $ 8,537
Indemnification
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners, board members, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company, negligence or willful misconduct of the Company, violations of law by the Company, or from intellectual property infringement claims made by third parties. 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 Condensed Consolidated Balance Sheets , Condensed Consolidated Statements of Operations and Comprehensive Loss , or Condensed Consolidated Statements of Cash Flows .
Commitments
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, which is not expected to be before January 2028. As of March 31, 2025 and December 31, 2024, the Company had total non-cancellable purchase commitments under the DMSA of $ 21.9 million and $ 36.7 million, respectively.
During the three months ended March 31, 2025 and 2024, the Company incurred costs of $ 2.6 million and $ 16.4 million, respectively, and made payments of $ 6.0 million and $ 13.5 million, respectively, for the development and manufacturing services rendered under the DMSA.
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 $ 46.8 million and $ 24.1 million, as of March 31, 2025 and December 31, 2024, respectively, with certain amounts subject to cost sharing with Takeda.
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Contingencies
From time to time, the Company may be involved in lawsuits, arbitration, claims, investigations and proceedings consisting of intellectual property, employment and other matters which arise in the ordinary course of business. The Company records accruals for loss contingencies to the extent that the Company concludes that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated.
7. Common Stock
On February 27, 2024, the Company entered into a securities purchase agreement (the "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 (the "Pre-Funded Warrants") 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. The private placement closed on February 29, 2024, at which time the Company received aggregate net proceeds of approximately $ 499.3 million, after deducting issuance costs of approximately $ 0.5 million.
The Pre-Funded Warrants were classified as a component of permanent equity in the Company’s consolidated balance sheet as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its shares and permit the holders to receive a fixed number of shares of common stock upon exercise. All of the Pre-Funded Warrants issued in the private placement were outstanding as of March 31, 2025.
8. Stock-Based Awards
The Company has issued stock-based awards from various equity incentive and stock purchase plans, as more fully described in Note 9, "Stock-Based Awards" to the consolidated financial statements in the Company's 2024 Annual Report on Form 10-K.
Stock Option Activity
The following table summarizes stock option activity for the three months ended March 31, 2025:
Number of Options
Weighted-Average
Exercise Price
Balance at December 31, 2024 18,660,150 $ 25.99
Granted
3,780,107 21.09
Exercised
( 113,792 ) 5.23
Forfeited
( 131,732 ) 26.38
Balance at March 31, 2025 22,194,733 $ 25.26
Vested and expected to vest at March 31, 2025 21,384,862 $ 26.19
Exercisable at March 31, 2025 12,853,171 $ 28.35
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The estimated fair value of stock options granted to employees were calculated using the Black-Scholes option-pricing model using the following assumptions:
Three Months Ended March 31,
2025 2024
Expected term (in years)
6.08 6.08
Volatility
64.8 % - 65.3 %
64.5 % - 64.6 %
Risk-free interest rate
4.0 % - 4.5 %
3.9 % - 4.0 %
Dividend yield
— —
Restricted Stock Activity
The following table summarizes restricted stock unit ("RSU") activity for the three months ended March 31, 2025:
Number of RSU shares Weighted-Average Fair Value at Date of Grant per Share
Unvested at December 31, 2024 4,128,514 $ 27.33
Granted 1,702,450 21.07
Vested and released ( 916,480 ) 33.57
Forfeited ( 65,369 ) 23.43
Unvested and expected to vest at March 31, 2025 4,849,115 $ 24.00
Stock-Based Compensation Expense
The Company’s results of operations include expenses relating to stock-based compensation as follows (in thousands):
Three Months Ended March 31,
2025 2024
Research and development
$ 15,137 $ 16,342
General and administrative
10,023 11,498
Total
$ 25,160 $ 27,840
9. Net Loss Per Share
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. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share amounts):
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Three Months Ended March 31,
2025 2024
Numerator:
Net loss $ ( 132,970 ) $ ( 101,802 )
Denominator:
Weighted average number of:
Common stock shares outstanding
145,175,965 140,245,132
Private placement pre-funded warrants
26,046,065 9,159,056
Total
171,222,030 149,404,188
Net loss per share $ ( 0.78 ) $ ( 0.68 )
Potentially dilutive securities, including options issued and outstanding, Employee Stock Purchase Plan (“ESPP”) shares issuable, and restricted shares subject to future vesting that were not included in the diluted per share calculations for the periods presented because they would be anti-dilutive totaled approximately 27.4 million and 24.4 million shares as of March 31, 2025 and March 31, 2024, respectively.
10. Divestiture of Preclinical Small Molecule Programs
On March 1, 2024, the Company divested certain assets, including specified intellectual property, tangible assets, and equipment used to conduct early stage small molecule drug discovery ("Divested Assets") through an Asset Purchase and License Agreement (the "Asset Purchase Agreement") executed with Tenvie. Additionally, certain of the Company’s employees terminated their employment with the Company and became employees of Tenvie.
In exchange for the Divested Assets, the Company received equity consideration of $ 15.0 million in the form of a simple agreement for future equity (“SAFE”). In December 2024, the SAFE converted into 15.0 million shares of Tenvie's Series A Preferred Stock, par value $ 0.0001 per share, with a fair value of $ 15.0 million. Under the terms of the Asset Purchase Agreement, the Company is eligible to receive certain market valuation, development and sales based milestone payments up to approximately $ 1.2 billion in the form of either cash or equity at the election of Tenvie. The Company will also be entitled to receive future royalties on aggregate net sales of certain products, on a product-by-product and country-by-country basis during the periods of time commencing at the time of the first commercial sale of such product in such country, until the later of (i) the expiration of certain related patents, (ii) the expiration of Regulatory Exclusivity, or (iii) ten years after such first commercial sale.
This divestiture did not meet the criteria for reporting discontinued operations as the sale does not represent a strategic shift in the Company’s business. The Company recognized a gain on divestiture of approximately $ 14.5 million in the Condensed Consolidated Statements of Operations and Comprehensive Loss during the three months ended March 31, 2024, representing the difference between the fair value of the consideration received and the carrying amount of the Divested Assets.
The Company recorded the investment in the shares of Series A Preferred Stock at $ 15.0 million which represents the fair value of the shares on the date of issuance. There have been no subsequent observable price changes in orderly transactions for the identical or similar equity securities of Tenvie, and as such, the measurement of this investment remains unchanged, with the $ 15.0 million included within other non-current assets in the Condensed Consolidated Balance Sheet as of March 31, 2025.
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11. Segment Information
The Company has one operating segment with the goal to discover, develop and commercialize therapeutics (“Therapeutics”). There have been no material changes to the Company's segment structure, the basis of segmentation, or the measurement basis for segment profit or loss or segment assets, compared to those disclosed in Note 14, "Segment Information", to the consolidated financial statements in the Company's 2024 Annual Report on Form 10-K.
The following table presents selected financial information with respect to the Company’s single operating segment for the three months ended March 31, 2025 and 2024 (in thousands):
Therapeutics Segment
Three Months Ended March 31,
2025 2024
Expenses
External research and development expenses - TV programs, including cost sharing $ 41,987 $ 35,684
External research and development expenses - small molecule programs, including cost sharing 8,854 13,121
Other research and development expenses 25,117 15,881
Personnel related research and development expenses
40,269 42,330
Total research and development expenses 116,227 107,016
Personnel related general and administrative expenses
18,738 19,085
Other general and administrative expenses
10,615 6,151
Total general and administrative expenses 29,353 25,236
Segment operating expenses 145,580 132,252
Segment gain from divestiture of small molecule programs — ( 14,537 )
Segment loss from operations ( 145,580 ) ( 117,715 )
Segment interest and other income, net 12,610 15,913
Segment loss before income taxes $ ( 132,970 ) $ ( 101,802 )
There is no difference between the segment loss before income taxes and total consolidated loss before income taxes for the three months ended March 31, 2025 and 2024.
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