Denali Therapeutics Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q . This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans, and expectations related to future events and our future financial performance that involve risks, uncertainties, and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts, and projections. Our actual results and the timing of selected events coul d differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q. Forward-looking statements include, but are not limited to, statements about: • the progress, success, cost, and timing of our development activities, preclinical studies, and clinical trials, and in particular the development of our blood-brain barrier (“BBB”) platform, programs, and biomarkers, including the initiation and completion of studies or trials and related preparatory work, enrollment in such trials, the timing of when data from clinical trials will become available, the advancement of new molecule entities into clinical development and related timing, and the filing of investigational new drug applications or clinical trial applications; • the impact of preclinical findings on our ability to achieve exposures of our product candidates that allow us to explore a robust pharmacodynamic range of these candidates in humans; • the expected potential benefits and potential revenue resulting from strategic collaborations with third parties and our ability to attract collaborators with development, regulatory, and commercialization expertise; • the timing or likelihood of regulatory filings and approvals; • our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations, and/or warnings in the label of any approved product candidate; • the extent to which any dosing limitations that we have been subject to, and/or may be subject to in the future, may affect the success of our product candidates; • the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology; • the terms and conditions of licenses granted to us and our ability to license and/or acquire additional intellectual property relating to our product candidates and Transport Vehicle ("TV"); • our ability to obtain funding for our operations, including funding necessary to develop and commercialize our current and potential future product candidates; • our plans and ability to establish sales, marketing, manufacturing, and distribution infrastructure to commercialize any product candidates for which we obtain approval; • future agreements with third parties in connection with the commercialization of our product candidates; • the size and growth potential of the markets for our product candidates, if approved for commercial use, and our ability to serve those markets; 22 Table of Contents • the rate and degree of market acceptance of our product candidates; • existing regulations and regulatory developments in the United States and foreign countries; • potential claims relating to our intellectual property and third-party intellectual property; • our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately; • our plans and ability to develop our own manufacturing facilities; • the pricing and reimbursement of our product candidates, if approved and commercialized; • the success of competing products or platform technologies that are or may become available; • our ability to attract and retain key managerial, scientific, and medical personnel; • the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing; • our ability to enhance operational, financial, and information management systems; • the impact of adverse economic conditions such as instability in the financial services sector, rising interest rates, rising inflation, changes in currency exchange rates and currency controls, and increased labor market competition; • the impact of increased geopolitical uncertainty, the global pandemic, tariffs and trade barriers, and related global economic disruptions and social conditions on our business; and • our financial performance. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Risk Factors.” In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements reflect our beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report on Form 10-Q and are subject to risks and uncertainties. We discuss many of these risks in greater detail in the section entitled “Risk Factors” included in Part II, Item 1A and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events, or otherwise. Overview Key elements of our strategy include: 23 Table of Contents 1) Discover and develop a new class of barrier-crossing therapeutics by leveraging our TransportVehicle TM ("TV") platforms and deep expertise in the blood-brain barrier ("BBB") biology to enhance the delivery of biotherapeutics to the brain and throughout the body. 2) Accelerate and expand a broad portfolio of TV-based product candidates to fully unlock the potential of barrier-crossing therapeutics, applying patient-informed development and driving biomarker-guided regulatory approvals. 3) Launch initial products targeting rare lysosomal storage diseases as a strategic foundation for expansion into common neurodegenerative conditions and other serious diseases, while building integrated capabilities for long-term growth and profitability. Ou r clinical programs are as follows: • Tividenofusp alfa (DNL310, ETV:IDS), composed of iduronate-2-sulfatase ("IDS") fused to TV, is designed to deliver IDS into cells and tissues throughout the body, including the brain by crossing the BBB, with the goal of addressing the behavioral, cognitive, and physical manifestations of MPS II (Hunter syndrome) ; • DNL126 (ETV:SGSH), composed of N-sulfoglucosamine sulfohydrolase ("SGSH") fused to TV, is designed to deliver SGSH into cells and tissues throughout the body, including the brain by crossing the BBB, with the goal of treating MPS IIIA (Sanfilippo syndrome); • TAK-594/DNL593 (PTV:PGRN), composed of PGRN fused to TV, is designed to restore PGRN levels in the brain with the goal of treating frontotemporal dementia ("FTD") associated with a mutation in the granulin ("GRN") gene and is being developed in collaboration with Takeda; • BIIB122/DNL151, a small molecule LRRK2 inhibitor, is being developed in collaboration with Biogen for the potential treatment of Parkinson's disease ("PD"); and • Eclitasertib (SAR443122/DNL758), a peripheral and non-central nervous system ("CNS") penetrant small molecule RIPK1 inhibitor, is being developed by Sanofi to address peripheral inflammatory diseases such as ulcerative colitis ("UC"). The following table summarizes key information about our clinical stage programs: Program Product Candidate Clinical Study(ies) Indication Operational Control ETV:IDS tividenofusp alfa, or DNL310 Ph 1/2 Hunter syndrome (MPS II) Denali Ph 2/3 ETV:SGSH DNL126 Ph 1/2 Sanfilippo syndrome Type A (MPS IIIA) Denali PTV:PGRN TAK-594/DNL593 Ph 1/2 FTD-GRN Joint with Takeda LRRK2 BIIB122/DNL151 Ph 2a Parkinson's disease Denali Ph 2b Joint with Biogen RIPK1 (Peripheral) eclitasertib, or SAR443122/DNL758 Ph 2 UC Sanofi Since we commenced operations, we have devoted substantially all of our resources to discovering, acquiring and developing product candidates, building our TV platform, assembling our core capabilities in understanding key neurodegenerative and lysosomal storage disease pathways, operationalizing clinical trials, building manufacturing capabilities and establishing commercial capabilities. 24 Table of Contents Key operational and financing milestones in 2025 to date include: • In January 2025, we announced topline results that the primary endpoint was not met in Regimen G of the Phase 2/3 HEALEY ALS Platform Trial evaluating DNL343 in the treatment of ALS. In March 2025, we provided an update that additional analyses did not demonstrate a treatment effect on neurofilament light ("NfL"), a biomarker of neuronal damage, over the 24-week, double-blind period and in a subset of participants that completed an additional 28 weeks in the open-label active treatment extension. Based on these outcomes, the active treatment extension in Regimen G was discontinued. Overall, DNL343 was found to be generally well tolerated; • In January 2025, we announced that the U.S. Food and Drug Administration ("FDA") granted Breakthrough Therapy Designation for tividenofusp alfa (DNL310) for the treatment of individuals with MPS II. In February 2025, at the WORLD Symposium conference, we presented the primary analysis of the Phase 1/2 study in 47 participants with Hunter syndrome in the 24-week treatment period and additional long-term follow-up. In May 2025, we completed a rolling submission of a Biologics License Application ("BLA") for tividenofusp alfa under the accelerated approval pathway; • In February 2025, we and Sanofi executed a side letter terminating Sanofi's license to the CNS Products program including SAR443820/DNL788; • In February 2025, after mutual agreement to discontinue preclinical activities on ATV:TREM2, Takeda delivered notice of its election to terminate the ATV:TREM2 program on February 26, 2025, as per the terms of the Takeda Collaboration Agreement. The ATV:TREM2 program termination became effective in April 2025; • In March 2025, we officially opened our clinical biomanufacturing facility in Salt Lake City, Utah, expanding U.S. manufacturing capabilities and strengthening supply chain control and operational efficiency; • In April 2025, we announced productive collaboration and discussions with the FDA under the START program (“Support for clinical Trials Advancing Rare Disease Therapeutics”) around the potential for an accelerated development and approval path for DNL126 in the treatment of Sanfilippo syndrome; • 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; and • 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. We have funded our operations primarily from the issuance and sale of convertible preferred stock, the sale of common stock and pre-funded warrants to purchase shares of our common stock in public offerings and private placements, and payments received from our collaboration and funding agreements with Takeda, Sanofi, Biogen and other third parties. 25 Table of Contents 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 $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. We e xpect to continue to incur significant expenses and operating losses as we advance our current clinical stage programs through healthy volunteer and patient trials; broaden and improve our TV platform; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. Components of Operating Results Operating Expenses Research and Development Research and development activities account for a significant portion of our operating expenses. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and TV platform include: • external research and development expenses, including: – expenses incurred under arrangements with third parties, such as contract research organizations ("CROs"), preclinical testing organizations, contract development and manufacturing organizations ("CDMOs"), academic and non-profit institutions and consultants; – expenses to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; – fees related to our license and collaboration agreements; • personnel related expenses, including salaries, benefits and stock-based compensation expense; and • other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis once a program has commenced late-stage IND-enabling studies. Program expenses include expenses associated with our most advanced product candidates and the discovery and development of backup or next-generation molecules. We also track external expenses associated with our TV platform. These expenses include external expenses incurred by us relating to our Takeda Collaboration Agreement and Biogen Collaboration Agreement. Al l external costs associated with earlier stage programs, or that benefit the entire portfolio, are tracked as a group. We also incur personnel and other operating expenses for our research and development programs which are presented in aggregate. These expenses primarily relate to salaries and benefits, stock-based compensation, facility expenses including rent and depreciation, and lab consumables. Where we share costs with our collaboration partners, such as in our Biogen Collaboration Agreement and Takeda Collaboration Agreement , research and development expenses may include cost sharing reimbursements from, or payments to, our collaboration partners. Further, where we receive R&D funding from third parties, this may be recognized as a reduction to research and development expenses. 26 Table of Contents It is challenging to predict the nature, timing and estimated long-range costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. This is made more challenging by events outside of our control, such as global pandemics and increased geopolitical uncertainty. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of: • our ability to add and retain key research and development and commercial, sales and marketing personnel; • our ability to establish an appropriate safety profile with IND-enabling toxicology studies; • our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates; • our successful enrollment in and completion of clinical trials; • the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations; • our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules; • our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved; • the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; • our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved; • our receipt of marketing approvals from applicable regulatory authorities; • our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and • the continued acceptable safety profiles of the product candidates following approval. A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase at least over the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. 27 Table of Contents General and Administrative General and administrative expenses include personnel related expenses, such as salaries, benefits, travel and stock-based compensation expense, expenses for outside professional services, pre-commercialization activities, and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent, depreciation and other expenses related to our office and research and development facility not otherwise included in research and development expenses. We expect to increase our administrative headcount as we prepare for commercialization of Tividenofusp alfa (DNL310, ETV:IDS) and advance our other product candidates through clinical development, which will increase our general and administrative expenses. Gain from divestiture of small molecule programs The gain from the divestiture of small molecule programs consists entirely of the non-cash gain associated with the divestiture of assets associated with select preclinical small molecule programs, including specified intellectual property, tangible assets and equipment used to conduct early-stage small molecule drug discovery from the Company, in exchange for equity consideration. Interest and Other Income, Net Interest and other income, net , consists pr imarily of interest income, investment income earned on our cash, cash equivalents, and marketable securities, and sublease income, as well as an offset for interest expense on our finance lease liability. 28 Table of Contents Results of Operations 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 June 30, Change 2025 2024 $ % Operating expenses: Research and development $ 102,696 $ 91,399 $ 11,297 12 % General and administrative 32,267 25,194 7,073 28 Total operating expenses 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) * Loss from operations (280,543) (234,308) (46,235) 20 Interest and other income, net 23,454 33,480 (10,026) (30) Net loss $ (257,089) $ (200,828) $ (56,261) 28 % __________________________________________________ * Percentage is not meaningful. Research and development expen ses. 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 June 30, Change 2025 2024 $ % External research and development expenses - TV programs, including cost sharing $ 37,594 $ 30,247 $ 7,347 24 % External research and development expenses - small molecule programs, including cost sharing 2,787 12,596 (9,809) (78) Other research and development expenses 22,060 14,504 7,556 52 Personnel related expenses (1) 40,255 34,052 6,203 18 Total research and development expenses $ 102,696 $ 91,399 $ 11,297 12 % __________________________________________________ (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: 29 Table of Contents • 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; and • 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 % __________________________________________________ (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; and • 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; and • the divestiture of our preclinical small molecule programs in March 2024. 30 Table of Contents General and administrative expenses. 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. For a full description, see Item 2. Components of Operating Results included in this Quarterly Report on Form 10-Q. Liquidity and Capital Resources Sources of Liquidity 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 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 . In February 2025, we established a registered “at-the-market” facility for the potential future sale of up to $400.0 million of shares of common stock from time to time by entering into an equity distribution agreement with Goldman Sachs & Co. LLC and Leerink Partners LLC as sales agents. The previous equity distribution agreement and related “at-the-market” facility entered into in February 2022 was terminated in February 2025. To date, no shares have been sold under either equity distribution agreement. All sales under the current equity distribution agreement are conditioned upon satisfaction of customary closing conditions. 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. Additionally, we have received $51.7 million and $16.2 million in gross cost sharing reimbursements from Takeda and Biogen, respectively, and received $13.7 million in specified reimbursements from Sanofi. Future Funding Requirements and Commitments To date, we have not generated any product revenue. We do not expect to generate any product revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, either will occur. 31 Table of Contents We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we expand our research and development activities and continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. Further, we expect general and administrative expenses to increase as we continue to incur additional costs associated with supporting our growing operations. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates or from our existing collaboration agreements, or future agreements with other third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could significantly harm our business, financial condition and prospects. Since our inception, we have incurred significant losses and negative cash flows from operations. 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. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the twelve months following the filing date of this Quarterly Report on Form 10-Q, including our existing commitments as outlined below. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In the longer term, we anticipate that we will need substantial additional resources to fund our operations and meet future commitments. Our existing commitments primarily relate to our obligations under existing lease agreements, and certain clinical and manufacturing agreements, including the DMSA with Lonza Sales AG ("Lonza") for the development and manufacture of biologic products. 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. Further, we may be required to make contingent payments under existing arrangements upon the achievement of defined clinical, regulatory and commercial milestones in certain programs, including contingent consideration payments to former shareholders of F-star under the F-star Gamma license, and milestone and royalty payments to Genentech under the Genentech License Agreement. These commitments are more fully described in Note 6 "Commitments and Contingencies" of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and in Note 4, "Acquisition, License Agreement and Research and Development Funding Collaboration Agreement" and Note 7, "Commitments and Contingencies" to the consolidated financial statements included in Item 8. of our Annual Report on Form 10-K filed on February 27, 2025 . 32 Table of Contents Our future funding requirements, including changes to and new commitments, will depend on many factors, including: • our ability to obtain regulatory approval for our product candidates, establish sales and marketing capabilities, and successfully market such approved product candidates; • the timing and progress of preclinical and clinical development activities; • the number and scope of preclinical and clinical programs we decide to pursue; • the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements; • our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements; • our ability and success in securing manufacturing relationships with third parties or in operating a manufacturing facility; • the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims; • the cost and timing of regulatory approvals; • our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and • the costs and ongoing investments to in-license and/or acquire additional technologies. A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. Cash Flows The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below (in thousands): Six Months Ended June 30, 2025 2024 Net cash used in operating activities $ (206,766) $ (204,840) Net cash provided by (used in) investing activities 176,683 (354,618) Net cash (used in) provided by financing activities (2,139) 507,031 Net decrease in cash, cash equivalents and restricted cash $ (32,222) $ (52,427) Net Cash Used In Operating Activities 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. 33 Table of Contents Net Cash Provided By (Used In) Investing Activities 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 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 This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in detail in the notes to our consolidated financial statements included elsewhere in this report. 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 six months ended June 30, 2025. Recent Accounting Pronouncements 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. 34 Table of Contents