What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-11 compared with 2025-05-06 · 65 added, 25 removed, 235 unchanged (28% of the section changed)

77 unchanged sentences

• In May 2025, Biogen announced completion of enrollment in the Phase 2b LUMA study for early-stage Parkinson's disease with a readout expected in 2026;

• In July 2025, we announced that the FDA accepted our BLA for tividenofusp alfa for priority review, assigning a Prescription Drug User Fee Act (PDUFA) target action date of January 5, 2026, and we continue to prepare for commercial launch;

• In August 2025, we announced we reached alignment with the FDA that cerebrospinal fluid heparan sulfate (CSF HS) may be considered a reasonably likely surrogate endpoint to predict clinical benefit and may therefore be used to support accelerated approval of DNL126 for MPS IIIA.

Additional 49-week data from the ongoing open-label Phase 1/2 study are consistent with previously announced 25-week data, demonstrating a significant reduction in CSF HS from baseline, including normalization, and a safety profile that supports continued development.

Enrollment in the Phase 1/2 study is nearly complete, and planning is underway for a confirmatory global Phase 3 study.

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

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

We had net losses of $133.0 million and $101.8 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had an accumulated deficit o f $1.67 billion.

We had net losses of $124.1 million and $257.1 million for the three and six months ended June 30, 2025, respectively, and $99.0 million and $200.8 million for the three and six months ended June 30, 2024.

As of June 30, 2025, we had an accumulated deficit o f $1.80 billion.

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

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Results of Operations

Comparison of the three months ended March 31, 2025 and 2024

Comparison of the three and six months ended June 30, 2025 and 2024

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2025 2024 $ %

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134,963 116,593 18,370 16

Loss from operations (134,963) (116,593) (18,370) 16

Interest and other income, net

10,844 17,567 (6,723) (38)

Net loss $ (124,119) $ (99,026) $ (25,093) 25 %

Six Months Ended June 30, 2025 Change

2025 2024 $ %

Operating expenses:

Research and development

$ 218,923 $ 198,415 $ 20,508 10 %

General and administrative

61,620 50,430 11,190 22

Total operating expenses

280,543 248,845 31,698 13

Gain from divestiture of small molecule programs — 14,537 (14,537) *

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Research and development expen ses.

Research and development expenses were $116.2 million and $107.0 million for the three months ended March 31, 2025 and 2024, respectively.

Research and development expenses were $102.7 million and $218.9 million for the three and six months ended June 30, 2025, compared to $91.4 million and $198.4 million for the three and six months ended June 30, 2024, respectively.

The following table provides a breakdown of our research and development expenses by category (in thousands):

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2025 2024 $ %

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__________________________________________________

(1) Personnel related expenses include stock-based compensation expense of $15.1 million and $16.3 million for the three months ended March 31, 2025 and 2024, respectively, reflecting a decrease of $1.2 million.

The increase in research and development expenses of approximately $9.2 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, was primarily attributable to an increase of $6.3 million related to our TV programs, driven by increased spend on both clinical programs such as DNL126 and preclinical programs, such as our OTV franchise, as well as an increase of $9.2 million in other research and development expenses, including lab consumables, consultants and general facilities costs, driven in part by the commencement of operations at our large molecule manufacturing facility in Salt Lake City, Utah.

These increases were partially offset by a $2.1 million decrease in personnel-related expenses, including lower salaries and stock-based compensation, and a reduction in expenses related to small molecule programs.

The decline in small molecule program expenses was primarily due to the Collaboration and Development Funding Agreement entered into with an unrelated third party, under which, starting in the second quarter of 2024, funding earned offsets LRRK2 program expenses.

(1) Personnel related expenses include stock-based compensation expense of $15.2 million and $14.4 million for the three months ended June 30, 2025 and 2024, respectively, reflecting an increase of $0.8 million.

The increase in research and development expenses of approximately $11.3 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, was primarily attributable to the following:

• an increase of $7.3 million in TV program external research and development expenses, primarily attributable to increased spend on multiple preclinical programs;

• an increase of $7.6 million in other research and development expenses, including lab consumables, consultants and general facilities costs, driven by the commencement of operations at our large molecule manufacturing facility in Salt Lake City, Utah;

• an increase of $6.2 million in personnel-related expenses, including salaries and stock-based compensation, primarily driven by higher headcount related to the commencement of operations at our large molecule manufacturing facility in Salt Lake City, Utah.

These increases were partially offset by a $9.8 million decrease in small molecule external research and development expenses, primarily due to the winding down of activities related to the Phase 2/3 HEALEY ALS Platform Trial.

Six Months Ended June 30, 2025 Change

2025 2024 $ %

External research and development expenses - TV programs, including cost sharing

$ 84,052 $ 65,931 $ 18,121 27 %

External research and development expenses - small molecule programs, including cost sharing

11,641 25,717 (14,076) (55)

Other research and development expenses 42,706 30,386 12,320 41

Personnel related expenses (1)

80,524 76,381 4,143 5

Total research and development expenses $ 218,923 $ 198,415 $ 20,508 10 %

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(1) Personnel related expenses include stock-based compensation expense of $30.3 million and $30.7 million for the six months ended June 30, 2025 and 2024, respectively, reflecting a decrease of $0.4 million.

The increase in research and development expenses of approximately $20.5 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, was primarily attributable to the following:

• an increase of $18.1 million in external research and development expenses, primarily attributable to increased spend on multiple preclinical programs.

There was also an increase in expenditure in our clinical stage programs, including a $2.5 million increase in spend on our DNL126 programs;

• an increase of $12.3 million in other research and development expenses, including lab consumables, consultants and general facilities costs, driven by the commencement of operations at our large molecule manufacturing facility in Salt Lake City, Utah;

• an increase of $4.1 million in personnel-related expenses, including salaries and stock-based compensation, primarily driven by higher headcount related to the commencement of operations at our large molecule manufacturing facility in Salt Lake City, Utah.

These increases were partially offset by a $14.1 million decrease in small molecule external research and development expenses primarily attributable to the following:

• a decrease of $8.7 million related to the winding down of activities related to DNL343 including the Phase 2/3 HEALEY ALS Platform Trial;

• a decrease of $3.5 million related to offset R&D funding related to the Collaboration and Development Funding Agreement with an unrelated third party, under which, starting in the second quarter of 2024, funding earned offsets LRRK2 program expenses;

• the divestiture of our preclinical small molecule programs in March 2024.

General and administrative expenses.

General and administrative expense was $29.4 million and $25.2 million for the three months ended March 31, 2025, and 2024, respectively.

The increase of $4.1 million was primarily driven by activities related to the submission of the BLA for tividenofusp alfa, which was completed in May 2025, and preparations for a commercial launch.

General and administrative expense was $32.3 million and $25.2 million for the three months ended June 30, 2025, and 2024, respectively, and $61.6 million and $50.4 million for the six months ended June 30, 2025, and 2024, respectively.

The increases of $7.1 million for the three month period, and $11.2 million for the six month period, were both primarily driven by activities related to preparations for a potential commercial launch for tividenofusp alfa.

Gain from divestiture of small molecule programs.

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Sources of Liquidity

As of March 31, 2025, we had cash, cash equivalents and marketable securities in the amount of $1.05 billion.

As of June 30, 2025, we had cash, cash equivalents and marketable securities in the amount of $977.4 million.

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

We have sold common stock and other securities in public offerings, a private placement, and stock purchase agreements with Takeda and Biogen.

Through March 31, 2025 we have obtained aggregate net proceeds of approximately $754.4 million from public offerings of our common stock, including $296.2 million obtained through the sale of 11.9 million shares of common stock in October 2022.

Under stock purchase agreements with collaboration partners we have received a further $575.0 million through March 31, 2025 .

Through June 30, 2025 we have obtained aggregate net proceeds of approximately $754.4 million from public offerings of our common stock, including $296.2 million obtained through the sale of 11.9 million shares of common stock in October 2022.

Under stock purchase agreements with collaboration partners we have received a further $575.0 million through June 30, 2025 .

Further, in February 2024 we received net proceeds of approximately $499.3 million from our private placement through the sale of approximately 3.2 million shares of common stock and pre-funded warrants to purchase a pproximately 26.0 million shares of our common stock .

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All sales under the current equity distribution agreement are conditioned upon satisfaction of customary closing conditions.

Through March 31, 2025, we have received $115.0 million , $225.0 million, $565.0 million and $25.0 million, p ursuant to our collaboration and research and development funding agreements with Takeda, Sanofi, Biogen and an unrelated third party, respectively.

Through June 30, 2025, we have received $115.0 million , $225.0 million, $565.0 million and $50.0 million, p ursuant to our collaboration and research and development funding agreements with Takeda, Sanofi, Biogen and an unrelated third party, respectively.

These payments include upfront, option and milestone payments.

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

We have an accumulated deficit of $1.67 billion as of March 31, 2025.

We have an accumulated deficit of $1.80 billion as of June 30, 2025.

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

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

As of March 31, 2025, we had total undiscounted lease payment obligations of $66.6 million.

Under the DMSA with Lonza, and certain other clinical and manufacturing agreements, we had total non-refundable purchase commitments as of March 31, 2025 of $68.7 million, with certain amounts subject to cost sharing with Takeda.

As of June 30, 2025, we had total undiscounted lease payment obligations of $61.9 million.

Under the DMSA with Lonza, and certain other clinical and manufacturing agreements, we had total non-refundable purchase commitments as of June 30, 2025 of $66.9 million, with certain amounts subject to cost sharing with Takeda.

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

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities $ (206,766) $ (204,840)

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Net Cash Used In Operating Activities

During the three months ended March 31, 2025, net cash used in operating activities was $131.5 million, which consisted of a net loss of $133.0 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net accretion of discounts on marketable securities, and non-cash rent expenses.

During the six months ended June 30, 2025, net cash used in operating activities was $206.8 million, which consisted of a net loss of $257.1 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net accretion of discounts on marketable securities, and non-cash rent expenses.

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

Net Cash Provided By (Used In) Investing Activities

During the three months ended March 31, 2025, net cash provided by investing activities was $18.7 million, which consisted of $161.8 million in proceeds from the maturities of marketable securities, partially offset by $137.9 million of purchases of marketable securities and $5.1 million capital expenditures to purchase property and equipment.

During the six months ended June 30, 2025, net cash provided by investing activities was $176.7 million, which consisted of $324.0 million in proceeds from the maturities of marketable securities, partially offset by $137.9 million of purchases of marketable securities and $9.4 million capital expenditures to purchase property and equipment.

Net Cash (Used In) Provided By Financing Activities

During the three months ended March 31, 2025, cash used in financing activities was $3.8 million which consisted of the aggregate of $4.4 million of payments related to our finance lease, partially offset by the $0.6 million in proceeds from the exercise of stock options and the Company's ESPP.

During the six months ended June 30, 2025, cash used in financing activities was $2.1 million which consisted of the aggregate of $6.8 million of payments related to our finance lease, partially offset by the $4.7 million in proceeds from the exercise of stock options and the Company's ESPP.

Critical Accounting Estimates

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In our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 27, 2025, we described the accounting estimates that we believe involve a significant level of estimation uncertainty which could have a material impact on our financial condition or results of operations.

There have been no material changes to these critical accounting estimates during the three months ended March 31, 2025.

There have been no material changes to these critical accounting estimates during the six months ended June 30, 2025.

Recent Accounting Pronouncements

There have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended March 31, 2025 , as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 27, 2025, that are of significance or potential significance to us.

There have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2025 , as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 27, 2025, that are of significance or potential significance to us.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis