What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-11 · 47 added, 41 removed, 259 unchanged (25% of the section changed)

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• 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");

• DNL628 (OTV:MAPT), composed of an antisense oligonucleotide ("ASO") against MAPT fused to TV, designed to suppress gene expression of MAPT encoding the tau protein with the goal of treating Alzheimer's disease ("AD");

• DNL952 (ETV:GAA), composed of a cid alpha-glucosidase ("GAA") fused to TV and engineered to replace GAA in all tissues, with the goal of treating Pompe disease.

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

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RIPK1 (Peripheral) eclitasertib, or SAR443122/DNL758

DNL628* Ph 1b planned Alzheimer’s disease

Pompe disease

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* Regulatory application has been submitted to begin clinical testing

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.

Key operational and financing milestones in 2025 to date include:

Key operational 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.

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• 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 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;

• 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.

• In September 2025, we completed enrollment in the ongoing Phase 1/2 study of DNL126 to support an accelerated approval pathway in MPS IIIA, and a global Phase 3 confirmatory study is being planned;

• In October 2025, we announced that the FDA has extended its review timeline of the BLA seeking accelerated approval of tividenofusp alfa.

The PDUFA target date has been extended from January 5, 2026, to April 5, 2026.

We continue to prepare for commercial launch;

• In October 2025, we submitted a Clinical Trial Application ("CTA") for DNL628 (OTV:MAPT) to initiate clinical studies in Alzheimer’s disease;

• In October 2025, we submitted an Investigational New Drug ("IND") application for DNL952 (ETV:GAA) to begin clinical studies in Pompe disease.

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 $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.

We had net losses of $126.9 million and $384.0 million for the three and nine months ended September 30, 2025, respectively, and $107.2 million and $308.0 million for the three and nine months ended September 30, 2024.

As of September 30, 2025, we had an accumulated deficit o f $1.92 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 and six months ended June 30, 2025 and 2024

Comparison of the three and nine months ended September 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

Three Months Ended September 30, Change

2025 2024 $ %

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Net loss $ (126,902) $ (107,192) $ (19,710) 18 %

Six Months Ended June 30, 2025 Change

Nine Months Ended September 30, 2025 Change

2025 2024 $ %

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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

Research and development expenses were $102.0 million and $320.9 million for the three and nine months ended September 30, 2025, compared to $98.2 million and $296.7 million for the three and nine months ended September 30, 2024, respectively.

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

Three Months Ended September 30, Change

2025 2024 $ %

External research and development expenses - TV programs, including cost sharing $ 35,157 $ 35,436 $ (279) (1) %

$ 37,594 $ 30,247 $ 7,347 24 %

External research and development expenses - small molecule programs, including cost sharing 2,048 12,227 (10,179) (83)

2,787 12,596 (9,809) (78)

Other research and development expenses 23,008 15,257 7,751 51

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__________________________________________________

(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;

(1) Personnel related expenses include stock-based compensation expense of $15.2 million and $14.1 million for the three months ended September 30, 2025 and 2024, respectively, reflecting an increase of $1.1 million.

The increase in research and development expenses of approximately $3.7 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, was primarily attributable to the following:

• an increase of $7.8 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 $6.4 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

These increases were partially offset by a $10.2 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 in 2025.

Nine Months Ended September 30, 2025 Change

2025 2024 $ %

External research and development expenses - TV programs, including cost sharing $ 119,209 $ 101,367 $ 17,842 18 %

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

External research and development expenses - small molecule programs, including cost sharing 13,689 37,944 (24,255) (64)

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

Other research and development expenses 65,714 45,643 20,071 44

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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;

(1) Personnel related expenses include stock-based compensation expense of $45.5 million and $44.8 million for the nine months ended September 30, 2025 and 2024, respectively, reflecting an increase of $0.7 million.

The increase in research and development expenses of approximately $24.2 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, was primarily attributable to the following:

• an increase of $17.8 million in TV program external research and development expenses, primarily attributable to increased spend on multiple preclinical programs including OTV:MAPT and ETV:GAA, as well as an increase in expenses of $4.9 million on our DNL126 program.

These increases were partially offset by a decrease in expenses related to our DNL310 program of $6.5 million;

• an increase of $20.1 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;

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These increases were partially offset by a $24.3 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;

• a decrease of $16.3 million related to the winding down of activities related to our DNL343 program including the Phase 2/3 HEALEY ALS Platform Trial in 2025;

• a decrease of $7.8 million for our LRRK2 program related to the R&D funding from our Collaboration and Development Funding Agreement with an unrelated third party, under which, starting in the second quarter of 2024, program expenses were offset;

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

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.

General and administrative expense was $35.5 million and $24.9 million for the three months ended September 30, 2025, and 2024, respectively, and $97.1 million and $75.4 million for the nine months ended September 30, 2025, and 2024, respectively.

The increases of $10.6 million for the three month period, and $21.7 million for the nine months ended , 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 June 30, 2025, we had cash, cash equivalents and marketable securities in the amount of $977.4 million.

As of September 30, 2025, we had cash, cash equivalents and marketable securities in the amount of $872.9 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 .

Through September 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 September 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 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.

Through September 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 $1.80 billion as of June 30, 2025.

We have an accumulated deficit of $1.92 billion as of September 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 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.

As of September 30, 2025, we had total undiscounted lease payment obligations of $57.4 million.

Under the DMSA with Lonza, and certain other clinical and manufacturing agreements, we had total non-refundable purchase commitments as of September 30, 2025 of $39.4 million.

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):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities $ (314,062) $ (263,979)

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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.

During the nine months ended September 30, 2025, net cash used in operating activities was $314.1 million, which consisted of a net loss of $384.0 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.

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 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.

During the nine months ended September 30, 2025, net cash provided by investing activities was $234.5 million, which consisted of $431.0 million in proceeds from the maturities of marketable securities, partially offset by $188.6 million of purchases of marketable securities and $8.0 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.

During the nine months ended September 30, 2025, cash used in financing activities was $2.9 million which consisted of the aggregate of $8.2 million of payments related to our finance lease, partially offset by the $5.2 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 six months ended June 30, 2025.

There have been no material changes to these critical accounting estimates during the nine months ended September 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.

There have been no new accounting pronouncements or changes to accounting pronouncements during the nine months ended September 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