Denali Therapeutics Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Denali Therapeutics Inc. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 143 Consolidated Balance Sheets 145 Consolidated Statements of Operations and Comprehensive Loss 146 Consolidated Statements of Stockholders' Equity 147 Consolidated Statements of Cash Flows 148 Notes to Consolidated Financial Statements 149 142 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Denali Therapeutics Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Denali Therapeutics Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss , stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 143 Accrued and prepaid clinical research and development costs Description of the Matter As more fully described in Note 1 to the consolidated financial statements, the Company records accrued and prepaid clinical research and development (R&D) costs based on information obtained from vendors including contract research organizations. Each reporting period, estimation is required to determine the costs for certain services when the Company has either not been invoiced or has not received information from vendors regarding actual costs incurred to determine the clinical research and development expenses incurred during the period, and the accrued and prepaid amounts in relation to payments for those services. As of December 31, 2025, accrued and prepaid clinical research and development costs were $13.7 million and $7.3 million, respectively. The accrued and prepaid clinical research and development costs (“Accrued and Prepaid Clinical R&D Costs”) are based in part on estimates for certain clinical research and developments costs incurred under the Company’s service agreements with vendors including contract research organizations. The Company expenses clinical research and development costs incurred based on several factors, such as information obtained from vendors and estimates of certain costs and services completed by certain vendors. Auditing the Company's accounting for Accrued and Prepaid Clinical R&D Costs was complex due to the estimation of costs for certain services when the Company has either not been invoiced or has not received information regarding actual costs incurred. How We Addressed the Matter in Our Audit We evaluated and tested the design and operating effectiveness of the Company’s internal controls over management’s process to account for Accrued and Prepaid Clinical R&D Costs, including management’s controls over the completeness and accuracy of the data and the process used in determining these costs. To test the Accrued and Prepaid Clinical R&D Costs, our audit procedures included, among others, confirmation directly with vendors of the completeness of the terms and conditions of significant clinical R&D service agreements and the data used by management in the determination of the Company’s clinical costs incurred. Additionally, we tested the completeness and accuracy of the underlying inputs used in the Company’s analyses through verification of significant inputs, such as costs incurred, invoices received prior to and after the balance sheet, and the terms and conditions of the underlying agreements. We evaluated the completeness of services rendered by the vendors, including examination of meeting materials and performing inquiries of R&D personnel outside the accounting department, to evaluate the completeness of clinical R&D service agreements and the costs incurred by the Company. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2015. San Mateo, California February 26, 2026 144 Table of Contents Denali Therapeutics Inc. Consolidated Balance Sheets (In thousands, except share amounts) December 31, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 205,326 $ 174,960 Short-term marketable securities 662,553 657,371 Prepaid expenses and other current assets 32,779 32,105 Total current assets 900,658 864,436 Long-term marketable securities 98,322 359,373 Property and equipment, net 52,402 55,236 Finance lease right-of-use asset 48,531 47,533 Operating lease right-of-use asset 19,002 22,861 Other non-current assets 25,939 24,741 Total assets $ 1,144,854 $ 1,374,180 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 3,330 $ 11,137 Accrued expenses and other current liabilities 95,021 91,071 Total current liabilities 98,351 102,208 Operating lease liability, less current portion 27,210 36,673 Finance lease liability, less current portion 5,532 5,615 Total liabilities 131,093 144,496 Commitments and contingencies (Note 7) Stockholders’ equity: Convertible preferred stock, $ 0.01 par value; 40,000,000 shares authorized as of December 31, 2025 and December 31, 2024; 0 shares issued and outstanding as of December 31, 2025 and December 31, 2024 — — Common stock, $ 0.01 par value; 400,000,000 shares authorized as of December 31, 2025 and December 31, 2024; 156,182,177 and 144,220,986 shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively 1,888 1,768 Additional paid-in capital 3,062,715 2,764,880 Accumulated other comprehensive income 682 2,020 Accumulated deficit ( 2,051,524 ) ( 1,538,984 ) Total stockholders’ equity 1,013,761 1,229,684 Total liabilities and stockholders’ equity $ 1,144,854 $ 1,374,180 See accompanying notes to consolidated financial statements. 145 Table of Contents Denali Therapeutics Inc. Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share amounts) Year Ended December 31, 2025 2024 2023 Collaboration revenue: Collaboration revenue from customers (1) $ — $ — $ 330,531 Total collaboration revenue — — 330,531 Operating expenses: Research and development (2) 418,778 396,440 423,876 General and administration 136,564 105,438 103,354 Total operating expenses 555,342 501,878 527,230 Gain from divestiture of small molecule programs — 14,537 — Loss from operations ( 555,342 ) ( 487,341 ) ( 196,699 ) Interest and other income, net 42,904 64,636 51,505 Loss before income taxes ( 512,438 ) ( 422,705 ) ( 145,194 ) Income tax expense ( 102 ) ( 68 ) ( 30 ) Net loss ( 512,540 ) ( 422,773 ) ( 145,224 ) Other comprehensive income (loss): Net unrealized gain (loss) on marketable securities, net of tax ( 1,338 ) 1,377 7,529 Comprehensive loss $ ( 513,878 ) $ ( 421,396 ) $ ( 137,695 ) Net loss per share, basic and diluted $ ( 2.97 ) $ ( 2.57 ) $ ( 1.06 ) Weighted average number of shares outstanding, basic and diluted 172,649,097 164,473,772 137,370,897 __________________________________________________ (1) Includes related-party collaboration revenue from customers of $ 295.5 million for the year ended December 31, 2023. (2) Includes expense for cost sharing payments to a related party of $ 17.7 million for the year ended December 31, 2023. See accompanying notes to consolidated financial statements. 146 Table of Contents Denali Therapeutics Inc. Consolidated Statements of Stockholders’ Equity (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, 2022 135,965,918 $ 1,686 $ 2,018,617 $ ( 6,886 ) $ ( 970,987 ) $ 1,042,430 Issuances under equity incentive plans 1,232,526 12 17,808 — — 17,820 Vesting of restricted stock units 1,187,054 13 ( 13 ) — — — Stock-based compensation — — 108,399 — — 108,399 Net loss — — — — ( 145,224 ) ( 145,224 ) Other comprehensive income — — — 7,529 — 7,529 Balance at December 31, 2023 138,385,498 $ 1,711 $ 2,144,811 $ 643 $ ( 1,116,211 ) $ 1,030,954 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 1,288,609 13 17,376 — — 17,389 Vesting of restricted stock units 1,302,190 12 ( 12 ) — — — Stock-based compensation — — 103,484 — — 103,484 Net loss — — — — ( 422,773 ) ( 422,773 ) Other comprehensive income — — — 1,377 — 1,377 Balance at December 31, 2024 144,220,986 $ 1,768 $ 2,764,880 $ 2,020 $ ( 1,538,984 ) $ 1,229,684 Issuance of common stock and pre-funded warrants, net of issuance costs of $ 728 9,142,857 91 189,158 — — 189,249 Issuances under equity incentive plans 1,368,573 14 8,445 — — 8,459 Vesting of restricted stock units 1,449,761 15 ( 15 ) — — — Stock-based compensation — — 100,247 — — 100,247 Net loss — — — — ( 512,540 ) ( 512,540 ) Other comprehensive loss — — — ( 1,338 ) — ( 1,338 ) Balance at December 31, 2025 156,182,177 $ 1,888 $ 3,062,715 $ 682 $ ( 2,051,524 ) $ 1,013,761 See accompanying notes to consolidated financial statements. 147 Table of Contents Denali Therapeutics Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2025 2024 2023 Operating activities Net loss $ ( 512,540 ) $ ( 422,773 ) $ ( 145,224 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 11,183 7,795 16,726 Stock-based compensation expense 99,633 102,878 108,102 Net accretion of discounts on marketable securities ( 10,253 ) ( 35,117 ) ( 43,952 ) Non-cash adjustment to operating lease expense ( 4,450 ) ( 4,074 ) ( 3,719 ) Right-of-use asset amortization for finance lease 3,629 1,197 — Non-cash gain from divestiture of small molecule programs — ( 14,537 ) — Other non-cash items 49 — 2 Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 540 ) ( 2,480 ) ( 4,094 ) Other non-current assets 772 603 — Accounts payable ( 7,520 ) 1,437 2,431 Accruals and other current liabilities 465 3,248 2,648 Related party contract liability — — ( 290,532 ) Deferred research and development funding liability 6,972 14,129 — Other non-current liabilities — — ( 379 ) Net cash used in operating activities ( 412,600 ) ( 347,694 ) ( 357,991 ) Investing activities Maturities of marketable securities 706,046 1,157,120 2,075,947 Purchases of marketable securities ( 441,263 ) ( 1,229,964 ) ( 1,813,700 ) Purchases of property and equipment ( 9,502 ) ( 15,912 ) ( 12,939 ) Net cash provided by (used in) investing activities 255,281 ( 88,756 ) 249,308 Financing activities Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs of $ 480 — 499,253 — Proceeds from public offering of common stock and pre-funded warrants, net of issuance costs of $ 728 189,249 — — Proceeds from exercise of awards under equity incentive plans 8,459 17,389 17,820 Payments for finance lease right-of-use asset ( 8,168 ) ( 32,338 ) — Issuance costs related to the royalty financing ( 324 ) — — Net cash provided by financing activities 189,216 484,304 17,820 Net increase (decrease) in cash, cash equivalents and restricted cash 31,897 47,854 ( 90,863 ) Cash, cash equivalents and restricted cash at beginning of year 176,535 128,681 219,544 Cash, cash equivalents and restricted cash at end of year $ 208,432 $ 176,535 $ 128,681 Supplemental disclosures of cash flow information Equity consideration received in the divestiture of small molecule programs (Note 13) $ — $ 15,000 $ — Increase in right-of-use asset due to lessor assets $ — $ 7,051 $ — Right-of-use asset obtained in exchange for new finance lease liabilities $ — $ 9,358 $ — Property and equipment purchases accrued but not yet paid $ — $ 1,192 $ 553 Cash paid for finance lease interest $ 720 $ 302 $ — Issuance costs incurred but not yet paid $ 482 $ — $ — Cash paid during the year for income taxes $ 46 $ — $ 3 See accompanying notes to consolidated financial statements. 148 Table of Contents Denali Therapeutics Inc. Notes to Consolidated Financial Statements 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 These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Principles of Consolidation These 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 Consolidated Statements of Operations and Comprehensive Loss. Reclassification Certain prior period amounts in the Company’s Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation. Specifically, amounts related to the research and development funding liability that were previously included within changes in operating assets and liabilities - accruals and other current liabilities have been reclassified to changes in operating assets and liabilities - deferred research and development funding liability. 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 consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material to the Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive 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. 149 Table of Contents 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 Consolidated Balance Sheets . As of December 31, 2025 and 2024, the Company had no off-balance sheet concentrations of credit risk. The Company is subject to a number of risks similar to other biopharmaceutical companies at our stage, 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 scale internal manufacturing and/or 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, geopolitical instability, war and armed conflicts, inflation, rising interest rates, and recession risks as well as supply chain and labor shortages. Convertible Preferred Stock The Company is authorized to issue 40.0 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company’s shareholders. As of December 31, 2025 and 2024 , the Company had no shares of preferred stock issued or outstanding. 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 the years ended December 31, 2025 and 2024 . 150 Table of Contents Fair Value of Financial Instruments Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following: Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate their fair values due to their short-term nature. 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 Consolidated Statements of Cash Flows is composed of cash and cash equivalents reported in the Consolidated Balance Sheets and restricted cash of $ 3.1 million, $ 1.6 million and $ 1.6 million as of December 31, 2025, 2024 and 2023, respectively, which is included within other non-current assets in the Consolidated Balance Sheets. Restricted cash relates to letters of credit supporting the Company’s headquarters building lease and, as of December 31, 2025, also includes a letter of credit supporting the Company’s credit card program. Marketable Securities The Company generally invests its excess cash in money market funds and investment grade short to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, short-term marketable securities or long-term marketable securities on the Consolidated Balance Sheets, are considered available-for-sale, and are reported at fair value with net unrealized gains and losses included as a component of stockholders’ equity. 151 Table of Contents The Company classifies investments in securities with remaining maturities of less than one year, or where its intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments. The Company classifies investments in securities with remaining maturities of over one year as long-term investments, unless intended to fund current operations. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest and other income, net in the Consolidated Statements of Operations and Comprehensive 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. Accounts Receivable Accounts receivable are included within prepaid expenses and other current assets on the 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. Property and Equipment, Net Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the related estimated useful lives as presented in the table below. Significant additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Asset Estimated useful life Leasehold improvements shorter of life of asset or lease term Computer equipment and purchased software three years Laboratory equipment five years Furniture and fixtures five years Manufacturing equipment eight years Impairment of Long-Lived Assets The Company periodically evaluates property and equipment for impairment whenever events or changes in circumstances indicate that a potential impairment may have occurred. If such events or changes in circumstances arise, the Company compares the carrying amount of the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the long-lived assets. If the estimated aggregate undiscounted cash flows are less than the carrying amount of the long-lived assets, an impairment charge, calculated as the amount by which the carrying amount of the assets exceeds the fair value of the assets, is recorded. The fair value of the long-lived assets is determined based on the estimated discounted cash flows expected to be generated from the long-lived assets. The Company has not recorded any material impairment charges during the years presented. 152 Table of Contents 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. Revenue Recognition License, Option and Collaboration Revenue The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606. The accounting treatment pursuant to Topic 606 is outlined below. Each of these Payments received under license, option and collaboration agreements result in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenue. The Company may also receive reimbursement or make payments to a collaboration partner to satisfy cost sharing requirements. These payments are accounted for pursuant to ASC 808 and are recorded as an offset or increase to research and development expenses, respectively. The Company recognizes revenue as it fulfills its obligations under each of its agreements. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the service promised to the customer. Amounts received prior to satisfying the revenue recognition criteria are recorded as current or non-current contract liabilities in the Company’s Consolidated Balance Sheets, depending on when the performance obligation is expected to be satisfied. Research and Development Expenses Research and development expenses represent costs incurred to conduct research and development activities, including the discovery and development of product candidates. The Company recognizes all research and development costs as they are incurred. The Company’s research and development expenses consist primarily of: 153 Table of Contents • expenses incurred under agreements with collaborators, consultants, third-party contract research organizations (“CROs”), and investigative sites, which conduct a substantial portion of the Company’s preclinical studies and clinical trials; • costs of acquiring laboratory supplies and originator comparator materials, and costs related to the internal and third-party manufacturing of preclinical and clinical trial supplies; • costs associated with internal and third-party manufacturing process development activities, analytical activities and pre-launch inventory manufactured prior to regulatory approval being obtained or deemed to be probable; • salaries and other personnel-related expenses, including stock–based compensation; and • facility costs and other allocated expense, including direct and allocated costs for rent and maintenance of facilities, depreciation and amortization of leasehold improvements, and manufacturing and laboratory equipment. Where the Company shares costs with collaboration partners, such as in the Biogen Collaboration Agreement and the Takeda Collaboration Agreement, research and development expenses may include cost sharing reimbursements from or payments to the collaboration partner, respectively. Where the company has entered into an R&D funding arrangement, payments received will be recorded as a liability, and recognized an offset to research and development expenses as the underlying research and development costs are incurred. Nonrefundable advance payments for goods and services that will be used or received in future research and development activities are deferred and recognized as expense in the period in which the related goods are delivered or services are performed. There can be judgment involved in measuring the research and development expenses to be recognized in a particular period. In some cases, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. The level of judgment varies based on the nature of the services being performed and the underlying support obtained. For some activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. The determination of whether an arrangement meets the definition of an R&D funding arrangement under ASC730 requires judgment, including an assessment of the nature of the arrangement, the funding party’s rights and exposure to research and development risks. Further, the timing of recognition of the funding is also subject to the judgments of the underlying research and development costs. The Company has acquired and may continue to acquire the rights to develop and commercialize new product candidates from third parties. The upfront payments to acquire license, product or rights, as well as any future milestone payments, are immediately recognized as research and development expense provided that there is no alternative future use of the rights in other research and development projects. Stock-Based Compensation The Company’s stock-based compensation programs grant awards that have included stock options, restricted stock units, restricted stock awards, and shares issued under its employee stock purchase plan. Grants are awarded to employees, directors, and non-employee service providers. 154 Table of Contents The Company measures compensation expense for all stock-based awards at the grant date based on the fair value measurement of the award. The expense is recorded on a straight-line basis over the requisite service period, which is generally the vesting period, for the entire award. Expense is adjusted for actual forfeitures of unvested awards as they occur. The Company calculates the fair value measurement of stock options subject solely to service-based vesting requirements using the Black-Scholes valuation model. The Company uses the fair value of its common stock to determine the fair value of restricted stock awards. Income Taxes Income taxes are accounted for using the liability method, under which deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities and consideration is given to net operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be in effect when the differences are expected to reverse. The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized. The calculation of our current provision for income taxes involves the use of estimates, assumptions and judgments while taking into account current tax laws, interpretation of current tax laws and possible outcomes of future tax audits. The Company has established reserves to address potential exposures related to tax positions that could be challenged by tax authorities. Any changes in tax law or interpretation of tax law and the resolutions of potential tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements. 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 December 31, 2025 and 2024 include the pre-funded warrants to purchase shares of common stock. Refer to discussion in Note 8 - "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 Company has adopted this accounting standard update retrospectively on December 31, 2025. Newly required disclosures has been included in Note 11- " Income Taxes". 155 Table of Contents 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): December 31, 2025 Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 149,874 $ — $ — $ 149,874 Commercial paper — 24,899 — 24,899 Short-term marketable securities: U.S. government treasuries 600,084 — — 600,084 Corporate debt securities — 62,469 — 62,469 Long-term marketable securities: U.S. government treasuries 58,545 — — 58,545 Corporate debt securities — 39,777 — 39,777 Total $ 808,503 $ 127,145 $ — $ 935,648 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 did not transfer any assets or liabilities between the fair value measurement levels during the years ended December 31, 2025 or 2024. 156 Table of Contents 3. Marketable Securities All marketable securities were considered available-for-sale at December 31, 2025 and 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): December 31, 2025 Amortized Cost Unrealized Holding Gains Unrealized Holding Losses Aggregate Fair Value Short-term marketable securities: U.S. government treasuries $ 599,200 $ 893 $ ( 9 ) $ 600,084 Corporate debt securities 62,407 71 ( 9 ) 62,469 Total short-term marketable securities 661,607 964 ( 18 ) 662,553 Long-term marketable securities: U.S. government treasuries 58,524 21 — 58,545 Corporate debt securities 39,710 69 ( 2 ) 39,777 Total long-term marketable securities 98,234 90 ( 2 ) 98,322 Total $ 759,841 $ 1,054 $ ( 20 ) $ 760,875 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 1,680 ( 27 ) 657,371 Long-term marketable securities: U.S. government treasuries 334,300 788 ( 196 ) 334,892 Corporate debt securities 24,354 127 — 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 December 31, 2025 and 2024, some of the Company's marketable securities were in an unrealized loss position. The Company had no t recognized an allowance for credit losses as of December 31, 2025 or 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 the Company's investments were held in U.S. government securities, and the remainder were held with investment grade, high credit quality institutions. All marketable securities with unrealized losses as of each balance sheet date had been in a loss position for less than twelve months or the loss is not material. As of December 31, 2025 all of the Company’s marketable securities had an effective maturity of less than two years . 4. Acquisition, License Agreement and Research and Development Funding Collaboration Agreement Acquisition of F-star Gamma 157 Table of Contents In May 2018, the Company exercised an option to acquire all of the outstanding shares of F-star Gamma Limited ("F-star Gamma") pursuant to a prenegotiated buy-out option agreement (the "Acquisition"). As a result of the Acquisition, F-star Gamma became a wholly-owned subsidiary of the Company and the Company changed the entity’s name to Denali BBB Holding Limited. In addition, the Company became a direct licensee of certain intellectual property of F-star Biotechnology Limited (“F-Star Ltd”) by way of the Company’s assumption of F-star Gamma’s license agreement with F-star Ltd, dated August 24, 2016, (the “F-star Gamma License”). The transaction was accounted for as an asset acquisition. The Acquisition obligates the Company to make certain contingent payments to former shareholders and under the F-star Gamma license. In 2023, the Company incurred $ 30.0 million in R&D expenses upon the achievement of a clinical milestone. There was no contingent consideration expense recognized for the years ended December 31, 2025 or 2024. Under this arrangement, the Company may be required to make additional contingent consideration payments of up to $ 210.0 million, consisting of up to $ 60.0 million in regulatory contingent payments, including $ 36.0 million due upon regulatory approval of tividenofusp alfa in the United States, and up to $ 150.0 million in commercial contingent payments. Genentech License Agreement In June 2016, the Company entered into an Exclusive License Agreement with Genentech, Inc. (“Genentech”), giving the Company access to Genentech’s LRRK2 inhibitor small molecule program for Parkinson's disease. The Company may owe Genentech milestone payments upon the achievement of certain development, regulatory, and commercial milestones, up to a maximum of $ 315.0 million in the aggregate, including up to $ 37.5 million in clinical milestone payments, $ 102.5 million in regulatory milestone payments and $ 175.0 million in commercial milestone payments. In addition, the Company may owe royalties on net sales of licensed products ranging from low to high single-digit percentages. The Company has made a total of $ 25.0 million in consideration payments under the Genentech agreement. The Company did not recognize expenses under this agreement in the years ended December 31, 2025, 2024 or 2023. Collaboration and Development Funding Agreement In January 2024, the Company entered into a Collaboration and Development Funding Agreement with an unrelated third party, which obligates this third party to 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 has received payments totaling $ 50.0 million as of December 31, 2025, with the remainder to be paid 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 are 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 an offset to research and development expenses of $ 18.0 million and $ 10.9 million in the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024, respectively. The Company recorded current deferred research and development funding liabilities of $ 21.1 million and $ 14.1 million on the Consolidated Balance Sheets as of December 31, 2025, and 2024, respectively . 158 Table of Contents 5. Collaboration Agreements Biogen In August 2020, the Company entered into a binding Provisional Collaboration and License Agreement (“Provisional Biogen Collaboration Agreement”) with Biogen Inc.’s subsidiaries, Biogen MA Inc. (“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”) pursuant to which the Company granted Biogen a license to co-develop and co-commercialize Denali’s small molecule LRRK2 inhibitor program (the “LRRK2 Program”), an option in respect of each of (i) the Company’s amyloid beta program utilizing the Company's TransportVehicle TM ("TV") technology to cross the blood-brain barrier ("BBB") and (ii) one other unnamed program also utilizing the Company's TV technology platform (the “Option Programs”), and a right of first negotiation with respect to two additional unnamed programs utilizing the Company's TV technology platform (the “ROFN Programs”), should the Company decide to seek a collaboration with a third party for such programs. The Provisional Biogen Collaboration Agreement was a binding agreement, which became effective on the closing of the Common Stock Purchase Agreement in September 2020, pursuant to which the Company sold 13,310,243 shares of common stock (the “Shares”) to BIMA for an aggregate purchase price of $ 465.0 million. The Provisional Biogen Collaboration Agreement expired in October 2020 upon the execution of a Definitive LRRK2 Collaboration and License Agreement (“LRRK2 Agreement”) with Biogen on October 4, 2020 and a Right of First Negotiation, Option and License Agreement (the “ROFN and Option Agreement”) on October 6, 2020 (collectively, the "Biogen Collaboration Agreement"). Biogen made an upfront payment of $ 560.0 million upon execution of the Biogen Collaboration Agreement in October 2020. In August 2023, the Company and Biogen executed an Amendment (the “Biogen Amendment”) to the LRRK2 Agreement and ROFN and Option Agreement, pursuant to which Biogen waived its option to the second option program and its ROFN rights. I n July 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 Company's amyloid beta program utilizing the Company's TV technology platform , 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 ROFN and Option Agreement. LRRK2 Agreement With respect to the LRRK2 Program, Biogen is required to make milestone payments up to approximately $ 1.125 billion upon achievement of certain development and sales milestone events. Such milestone payments include $ 375.0 million in development, $ 375.0 million upon first commercial sale, and $ 375.0 million in net sales-based milestones. Pursuant to the Biogen Amendment, the schedule of potential LRRK2 Agreement milestones was amended, while maintaining the same total value of milestones that Denali is eligible to receive. The Company will share 50 % of the profits and losses with Biogen for LRRK2 Products in the United States, and 40 % of such profits and losses in China. The Company will be entitled to receive royalties in the high teens to low twenties percentages on net sales for LRRK2 Products outside of the United States and China. The Company and Biogen are jointly developing LRRK2 Products pursuant to a clinical development plan set forth within the LRRK2 Agreement. The parties share responsibility and costs for global development of LRRK2 Products pursuant to a mutually agreed development plan and budget ("LRRK2 Development Activities"), with Biogen funding 60 % and the Company funding 40 % of such costs. 159 Table of Contents The Company may opt out of development cost sharing worldwide and upon such election, from any further profit-sharing from the LRRK2 Program. The Company also has the right to opt-out of the profit sharing arrangement for the LRRK2 Program or for only those LRRK2 Products that do not penetrate the BBB (“Peripheral LRRK2 Products”), in each of the United States and China. After such an opt out, the Company will no longer be obligated to share in the development and commercialization costs for, or be entitled to share in the applicable revenues from, such LRRK2 Program (or from the Peripheral LRRK2 Products) for such country, as applicable. If the Company chooses to exercise its opt out rights, the Company will be entitled to receive tiered royalties on net sales of the applicable LRRK2 Program in the relevant country (or countries). The royalty rates for the applicable LRRK2 Program will be a percentage in the high teens to low twenties, but may increase to the mid-twenties if the Company has met certain co-funding thresholds or there has been a first commercial sale at the time of the Company's election. Biogen Collaboration Agreement The Company believes that the Biogen Collaboration Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Arrangements, and that Biogen meets the definition of a customer as defined in ASC 606, Revenue From Contracts With Customers for all of the performance obligations identified at inception except for the LRRK2 Development Activities. Since ASC 808 does not address recognition and measurement, the Company looked to other accounting literature for guidance where the performance obligation does not fall under ASC 606, and determined that for the interim LRRK2 development activities subject to cost sharing provisions, the guidance in ASC 730, Research and Development should be applied. The LRRK2 Development Activities cost sharing reimbursements or expenses are being recognized over time as earned or incurred, since this is believed to directly correlate to the value of the services performed. As of December 31, 2025 , the Company had earned $ 5.0 million in option fee payments, but had no t recorded milestone revenue or product sales under the Biogen Collaboration Agreement. 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") pursuant to which certain small molecule CNS and peripheral receptor interacting serine/threonine protein kinase 1 ("RIPK1") inhibitors contributed by Sanofi and by the Company would be developed and commercialized. When the Sanofi Collaboration Agreement became effective in November 2018, Sanofi paid us $ 125.0 million upfront. Under the Sanofi Collaboration Agreement, Sanofi is required to make milestone payments totaling up to approximately $ 495.0 million upon achievement of certain clinical, regulatory and sales milestone events for the Peripheral Products. Such milestone payments include $ 120.0 million in clinical milestone payments, $ 175.0 million in regulatory milestone payments and $ 200.0 million in commercial milestone payments for Peripheral Products, as defined, that are developed and approved in the United States, Europe and in Japan for three indications. Sanofi has made payments of $ 35.0 million for Peripheral Product clinical milestones through December 31, 2025, and payments of $ 65.0 million for CNS Product clinical milestones through the sale date. On February 24, 2025, Denali and Sanofi executed a side letter terminating Sanofi's license to the 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. The Company will receive variable royalties on net sales for Peripheral Products sold worldwide, each as further described below. Sanofi will be responsible, at its cost, for conducting activities relating to the development and commercialization of all Peripheral Products. Denali will be entitled to receive tiered royalties in the low- to mid- teen percentages on net sales of Peripheral Products. The Company believes that the Sanofi Collaboration Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Arrangements. 160 Table of Contents During the year ended December 31, 2023 , the Company earned a clinical milestone of $ 25.0 million when the associated performance obligation was satisfied , which was recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss. There were no milestones recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss for the years ended December 31, 2025 or 2024 . The Company has no remaining performance obligations under the Sanofi Collaboration Agreement, and no contract liability remains on the Consolidated Balance Sheets as of December 31, 2025 or 2024 . As of December 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. Takeda Takeda Collaboration Agreement In January 2018, the Company entered into a Collaboration and Option Agreement ("Takeda Collaboration Agreement") with Takeda Pharmaceutical Company Limited ("Takeda"), pursuant to which the Company granted Takeda an option to develop and commercialize, jointly with the Company, certain biologic products that are enabled by the Company's BBB delivery technology and intended for the treatment of neurodegenerative disorders, concurrent with a stock purchase agreement under which Takeda purchased 4,214,559 shares of Denali common stock for $ 110.0 million . The programs subject to the Takeda Collaboration Agreement were the Company ’s ATV:BACE1/Tau, ATV:TREM2 and PTV:PGRN programs. The Takeda Collaboration Agreement became effective in February 2018, at which time Takeda paid the Company an upfront payment of $ 40.0 million. In February 2019, the agreem ent was amended to replace the ATV:BACE1/Tau program with the ATV:Tau program, and in March 2022, Takeda and the Company agreed to terminate activity on the ATV:Tau program. Subsequent to the ATV:Tau termination, total preclinical milestone payments that Takeda owed under the Takeda Collaboration Agreement was $ 55.0 million for all three programs, all of which had been earned and received as of December 31, 2022 . Subsequent to Takeda exercising its option with respect to a particular target and collaboration program (i.e., the biologic products directed to the target for which Takeda has exercised its option), Takeda has the right to develop and commercialize, jointly with the Company, a specified number of biologic products enabled by its BBB delivery technology that were developed during the research period and which are directed to the relevant target, and the Company grants to Takeda a co-exclusive license under the intellectual property the Company controls related to those biologic products. The Company did not record any product sales and there are no remaining performance obligations under the initial Takeda Collaboration Agreement. The Takeda Collaboration Agreement was superseded by the PTV:PGRN and ATV:TREM2 Collaboration Agreements subsequent to opt-in for the two programs in November and December 2021, respectively, recognition of all preclinical milestones, and termination of the ATV:Tau program. 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, as per the terms of the Takeda Collaboration Agreement. Subsequent to the effective date of the termination of the ATV:TREM2 Collaboration Agreement, there are no future milestones, cost, or profit sharing related to this agreement. Prior to its termination, the ATV:TREM2 Collaboration Agreement was accounted for consistent with the treatment of the PTV:PGRN Collaboration Agreement, which is discussed in the subsequent section. 161 Table of Contents PTV:PGRN Collaboration Agreement In November 2021, Takeda exercised its options to jointly develop and commercialize the PTV:PGRN program, triggering the option fee of $ 5.0 million, which formed the transaction price at contract inception, all of which was allocated to the underlying Technology License which was delivered on or around the effective date of the Collaboration Agreement. Management determined that the opt-in by Takeda on the PTV:PGRN program represents a new contract with a customer for accounting purposes (the "PTV:PGRN Collaboration Agreement"), effective in December 2021 upon payment of the option fee. From inception of the PTV:PGRN Collaboration Agreement through December 31, 2025, there was no change to the terms of the agreement. The Company believes that the PTV:PGRN Collaboration Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Arrangements. The Company also believes that Takeda meets the definition of a customer as defined in ASC 606, Revenue From Contracts With Customers for the PTV:PGRN Technology License performance obligation delivered in the collaboration agreement. Since ASC 808 does not address recognition and measurement, the Company looked to other accounting literature for the PTV:PGRN Development Activities unit of account, and determined that the guidance in ASC 730, Research and Development should be applied. Under the PTV:PGRN Collaboration Agreement, Takeda may be obligated to pay the Company up to $ 140.0 million upon achievement of certain clinical milestone events and up to $ 100.0 million in regulatory milestone events relating to receipt of regulatory approval in the United States, certain European countries and Japan. Takeda may also be obligated to pay the Company up to $ 75.0 million upon achievement of a certain sales-based milestone. Further, the Company and Takeda share equally the development and commercialization costs, and, if applicable, the profits, for the PTV:PGRN program. A $ 10.0 million milestone was triggered under the PTV:PGRN Collaboration Agreement upon achievement of a specified clinical milestone and recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2023. No product sales have been recorded under the agreement. Collaboration Revenue Revenue disaggregated by collaboration agreement and performance obligation is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Takeda Collaboration Revenue - PTV:PGRN Program — — 10,000 Sanofi Collaboration Revenue - CNS Program — — 25,000 Biogen Collaboration Agreement: ATV:Abeta Program License (1) — — 293,912 Option Research Services (2) — — 1,619 Total Biogen Collaboration Revenue — — 295,531 Total Collaboration Revenue $ — $ — $ 330,531 _________________________________________________ (1) Revenue of $ 288.9 million for the year ended December 31, 2023 was included in the related-party contract liability balance at the beginning of the period. (2) Revenue was included in the contract liability balance at the beginning of the year. 162 Table of Contents Cost Sharing Payments and Reimbursements Cost sharing payments to collaboration partners recorded as expenses in research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss, and cost sharing reimbursements from collaboration partners recorded as an offset to research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Takeda Collaboration Agreement: PTV:PGRN cost sharing (reimbursements) $ ( 6,456 ) $ ( 4,789 ) $ ( 7,065 ) ATV:TREM2 cost sharing (reimbursements) ( 147 ) ( 1,147 ) ( 5,100 ) Total Takeda cost sharing (reimbursements) (1) ( 6,603 ) ( 5,936 ) ( 12,165 ) Biogen Collaboration Agreement: LRRK2 cost sharing payments (2) 15,805 16,742 17,678 Net cost sharing payments (reimbursements) $ 9,202 $ 10,806 $ 5,513 ________________________________________________ (1) Cost sharing reimbursements of $ 1.6 million and $ 1.5 million were recorded as a receivable within prepaid expenses and other current assets on the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively. (2) Cost sharing payments due to Biogen of $ 2.8 million and $ 2.5 million were recorded within accounts payable on the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively. 6. Balance Sheet Components Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consists of the following (in thousands): As of December 31, 2025 2024 Accounts receivable and other receivables $ 2,177 $ 2,171 Prepaid clinical research & development costs 7,280 6,473 Prepaid manufacturing and other research & development costs 10,249 16,196 Other prepaid assets and other current assets 13,073 7,265 Total prepaid expenses and other current assets $ 32,779 $ 32,105 Property and Equipment, Net Property and equipment, net consists of the following (in thousands): As of December 31, 2025 2024 Leasehold improvements $ 47,755 $ 46,905 Laboratory equipment 45,797 40,554 Manufacturing equipment 17,493 15,998 Computer equipment and purchased software 2,203 1,841 Furniture and fixtures 2,049 1,980 Total property and equipment 115,297 107,278 Less: accumulated depreciation ( 62,895 ) ( 52,042 ) Total property and equipment, net $ 52,402 $ 55,236 Depreciation expense was $ 11.2 million , $ 7.8 million and $ 16.7 million for the years ended December 31, 2025, 2024 and 2023, respectively. D epreciation expense for the year ended December 31, 2023 includes $ 7.9 million of accelerated depreciation on leasehold improvements due to the Company terminating the previous SLC Lease in March 2023. 163 Table of Contents Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consists of the following (in thousands): As of December 31, 2025 2024 Accrued compensation $ 32,179 $ 24,728 Accrued clinical and other research & development costs 19,458 22,822 Accrued manufacturing costs 5,336 12,779 Operating lease liability, current 9,463 8,308 Finance lease liability, current 83 3,726 Deferred research and development funding liability, current 21,101 14,129 Other accrued costs and current liabilities 7,401 4,579 Total accrued expenses and other current liabilities $ 95,021 $ 91,071 7. 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"), a 148,020 rentable square feet building in South San Francisco, California (the "Headquarters"). The Headquarters Lease has a contractual term of 10 years which ends on March 31, 2029, after which the Company has an option to extend the lease term for a further ten years . The Company determined that this renewal was not reasonably certain at lease inception. T he accounting lease commencement date was determined to be August 1, 2018. The Headquarters Lease provides for monthly base rent amounts escalating over the term of the lease. In addition, the Headquarters Lease provided a tenant improvement allowance ("TIA") of up to $ 25.9 million, which was fully utilized, of which $ 4.4 million will be repaid to the landlord in the form of additional monthly rent. This is recorded as leasehold improvement assets and an offset to the lease ROU asset on the Consolidated Balance Sheets . The Company is also required to pay the operating expenses for the Headquarters, such as taxes and insurance, which are treated as variable lease payments. In August 2021, the Company entered into an operating lease for laboratory, office and warehouse facilities in Salt Lake City, Utah. In March 2023, the Company terminated this operating lease, which resulted in the recognition of $ 7.9 million of accelerated depreciation on leasehold improvements during the year ended December 31, 2023 . The lease had not commenced for accounting purposes. In April 2023, the Company entered into a finance lease for its clinical manufacturing site in Salt Lake City (the "SLC Lease") for a 59,336 square foot laboratory, office and warehouse premises with a contractual term of approximately 15 years, and undiscounted lease payments of approximately $ 13.4 million, which was subsequently amended in October 2023. The Company has the option to extend the lease term for a period of ten years at the end of the lease term. The accounting lease commencement date was determined to be August 1, 2024, the date the Company was deemed to have obtained control over the property, at which time the lease was determined to be a finance lease and the lease liability and ROU asset were recorded on the Consolidated Balance Sheets. The Finance lease ROU asset includes approximately $ 47.4 million of lessor owned improvements funded by the Company. 164 Table of Contents Management exercised judgment in applying the requirements of ASC 842, including the determination as to whether certain contracts contain a lease, lease classification, the lease consideration, and the commencement date of the leases, and for leases identified under the standard, the discount rate used to determine the measurement of the lease liability. The discount rates of the Company's operating and finance leases are an approximation of the Company's incremental borrowing rate and are dependent upon the term and economics of the agreement. To estimate the incremental borrowing rates, management considered observable debt yields of comparable market instruments, as well as benchmarks within the lease agreement that may be indicative of the rate implicit in the lease. There were no changes to the terms of the leases recognized under ASC 842 during the year ended December 31, 2025. The following table summarizes lease costs recognized for the periods presented (in thousands): Year Ended December 31, 2025 2024 2023 Operating lease cost $ 7,595 $ 7,189 $ 7,983 Finance lease cost: Amortization of ROU assets 3,629 1,197 — Interest 720 302 — Variable lease cost 5,806 5,065 4,458 Total lease costs $ 17,750 $ 13,753 $ 12,441 The following table contains a summary of other information pertaining to the Company’s leases for the periods presented (in thousands): Year Ended December 31, 2025 2024 2023 Operating cash flows from operating lease $ 11,793 $ 11,417 $ 11,345 As of December 31, 2025 2024 2023 Weighted-average remaining lease term (in years): Operating lease 3.3 years 4.3 years 5.3 years Finance lease 13.3 years 14.3 years — Weighted-average discount rate applied (%): Operating lease 9.0 % 9.0 % 9.0 % Finance lease 13.7 % 13.7 % — % 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 Consolidated Balance Sheet as of December 31, 2025 (in thousands): Year Ended December 31: Operating Lease Finance Lease 2026 $ 12,182 $ 794 2027 12,584 811 2028 13,001 829 2029 4,381 848 2030 — 867 Thereafter — 7,947 Total undiscounted lease payments 42,148 12,096 Less: present value adjustment ( 5,475 ) — Less: imputed interest — ( 6,481 ) Total future minimum lease payments $ 36,673 $ 5,615 165 Table of Contents 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 Consolidated Balance Sheets , Consolidated Statements of Operations and Comprehensive Loss, or Consolidated Statements of Cash Flows . Commitments In the normal course of business, the Company enters into firm purchase commitments primarily related to supply of pre-launch commercial product, research, development and manufacturing activities. The Company had contractual obligations under certain commercial product, clinical and manufacturing agreements of $ 44.3 million and $ 60.8 million, as of December 31, 2025 and 2024, respectively. Further, the Company had other commitments of $ 1.5 million and $ 2.2 million as of both December 31, 2025 and 2024, respectively. Royalty Pharma Funding Agreement On December 4, 2025, the Company entered into a royalty funding arrangement (the “Royalty Agreement”) with Royalty Pharma plc (“Royalty Pharma”). Pursuant to the Royalty Agreement, Royalty Pharma agreed to provide up to $ 275.0 million in funding to the Company in exchange for a 9.25 % royalty on worldwide net sales of tividenofusp alfa. The transaction is subject to various closing conditions, including the Company achieving FDA approval of tividenofusp alfa on or before June 30, 2026. At closing, Royalty Pharma will make an initial payment of $ 200.0 million and Royalty Pharma will be obligated to make an additional payment of $ 75.0 million upon European Medicines Agency (the "EMA") approval of tividenofusp alfa on or before December 31, 2029. Royalty payments will cease upon Royalty Pharma receiving a multiple of 3.0 x of the initial investment proceeds, or 2.5 x if achieved by the first quarter of 2039. As of December 31, 2025, the transaction had not closed and no liability related to the Royalty Agreement was recorded in the consolidated financial statements. 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. 8. Common Stock In February 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 the Company's common stock at a price of $ 17.07 per share and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 26,046,065 shares of the Company's common stock at a purchase price of $ 17.06 per pre-funded warrant, which represents the per share price for the common stock less the $ 0.01 exercise price. 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. 166 Table of Contents On December 9, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC as representatives of the several underwriters named therein (collectively, the “Underwriters”), relating to the public offering of (i) 9,142,857 shares of the Company’s common stock, at a public offering price of $ 17.50 per share, and (ii) additional Pre-Funded Warrants to purchase 2,285,714 shares of Common Stock at a public offering price of $ 17.49 per pre-funded warrant, which represents the per share price for the common stock less the $ 0.01 exercise price. The public offering closed on December 11, 2025, at which time the Company received aggregate net proceeds of approximately $ 189.2 million, after deducting issuance costs of approximately $ 0.7 million. In January 2026 , the underwriters exercised their option to purchase an additional 746,468 shares of the Company’s Common Stock, on which date the Company received aggregate net proceeds of approximately $ 12.4 million. All of the Pre-Funded Warrants issued in the aforementioned private placement and the public offering were outstanding as of December 31, 2025, and 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. 9. Stock-Based Awards Equity Incentive Plans The Company's equity incentive plans, the 2017 Equity Incentive Plan (the “2017 Plan”), and previously, the 2015 Stock Incentive Plan (the “2015 Plan”), reserve shares of common stock for the issuance of stock options, restricted stock and other stock awards, to employees, non-employee directors, and consultants under terms and provisions established by the board of directors and approved by the stockholders. Upon adoption of the 2017 Plan, no new awards or grants are permitted under the 2015 Plan. The 2015 Plan continues to govern restricted stock awards and option awards previously granted thereunder. Awards granted under the 2017 Plan and 2015 Plan expire no later than ten years from the date of grant. For stock options, the option price shall not be less than 100 % of the estimated fair value of the Company's common stock on the day of grant. Options granted typically vest over a four - year period but may be granted with different vesting terms. The 2017 Plan provides that the number of shares reserved and available for issuance under the 2017 Plan will automatically increase each January 1, beginning on January 1, 2019, by the lesser of (i) 10.0 million shares, (ii) 5 % of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator of the 2017 Plan. In 2025, common stock available for issuance under the 2017 Plan was increased by approximately 7.2 million shares as a result of this automatic increase provision. As of December 31, 2025 and 2024, there were approxim ately 14.8 million and 14.3 million common shares available for the Company to grant under the 2017 Plan, respectively. 167 Table of Contents Stock Option Activity The following table summarizes option award activity under the 2017 Plan and the 2015 Plan: Number of Options Weighted- Average Exercise Price Weighted- Average remaining contractual life (years) Aggregate Intrinsic Value (in thousands) Balance at December 31, 2024 18,660,150 $ 25.99 5.94 $ 48,266 Granted 5,019,276 19.57 Exercised ( 773,881 ) 1.81 Forfeited ( 734,841 ) 25.16 Expired ( 844,371 ) 0.68 Balance at December 31, 2025 21,326,333 $ 26.39 6.21 $ 10,658 Vested and expected to vest at December 31, 2025 21,326,333 $ 26.39 6.21 $ 10,658 Exercisable at December 31, 2025 13,674,635 $ 29.46 4.84 $ 8,497 Aggregate intrinsic value represents the difference between the fair value of the Company's common stock and the exercise price of outstanding options. The total intrinsic value of options exercised was $ 10.8 million, $ 10.6 million, and $ 12.1 million as of December 31, 2025, 2024 and 2023, respectively. During the years ended December 31, 2025, 2024, and 2023 the weighted-average grant-date fair value of the options vested was $ 16.30 , $ 23.61 , and $ 24.30 per share, respectively. The weighted-average grant date fair value of all options granted during the years ended December 31, 2025, 2024 and 2023 was $ 12.35 , $ 12.99 , and $ 17.95 per share, respectively. Stock Options Granted to Employees with Service-Based Vesting The estimated fair value of stock options granted to employees were calculated using the Black-Scholes option-pricing model, which requires various assumptions, including the fair value of the Company’s common stock, expected term, expected dividend yield, expected volatility, and the risk-free interest rate. The fair value of the Company’s common stock is based on the current market price, unless an adjustment is determined to be required, through discussion with senior management, due to material non-public information known by the Company at the time of grant. The expected volatility used in valuing stock options granted in 2024 and 2025 is based solely on the historical volatility of the Company’s common stock. For 2023, because the Company did not have sufficient trading history to rely exclusively on its own stock price volatility, expected volatility was determined using a combination of the Company’s historical volatility and the historical volatility of comparable publicly traded biotechnology and pharmaceutical companies over a period consistent with the expected term of the awards. Management considers whether the Company is in possession of material non-public information at the time of grants when making certain estimates, including volatility and the fair value of the Company's common stock. The expected term of stock options represents the period that the Company’s stock-options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term). The risk-free interest rate is based on the implied yield currently available on U.S. treasury notes with terms approximately equal to the expected life of the option. The expected dividend rate is zero as the Company currently has no history or expectation of declaring cash dividends on the Company’s common stock. 168 Table of Contents The following assumptions were used in estimating the fair value of grants during the year ended: December 31, 2025 2024 2023 Expected term (in years) 5.50 - 6.08 5.50 - 6.08 5.50 - 6.08 Volatility 64.8 % - 68.7 % 64.5 % - 66.0 % 67.6 % - 69.6 % Risk-free interest rate 3.6 % - 4.5 % 3.7 % - 4.5 % 3.4 % - 4.8 % Dividend yield — — — Restricted Stock Activity We grant restricted stock units ("RSUs") under the 2017 Plan. The fair value of restricted stock underlying the RSUs is determined based on the closing market price of the Company's common stock on the date of grant. Aggregated information regarding RSUs granted under the Plan for the year ended December 31, 2025 is summarized below: Number of Units Weighted-Average Fair Value at Date of Grant per Share Unvested at December 31, 2024 4,128,514 $ 27.33 Granted 2,726,354 18.76 Vested and released ( 1,449,761 ) 32.12 Forfeited ( 280,478 ) 21.49 Unvested and expected to vest at December 31, 2025 5,124,629 $ 21.74 The aggregate intrinsic value of RSUs is calculated as the closing price per share of the Company's common stock on the last trading day of the fiscal period, multiplied by outstanding RSUs as of December 31, 2025 . The total intrinsic value of RSUs expected to vest was $ 84.6 million as of December 31, 2025. During the years ended December 31, 2024 and 2023 the weighted-average grant-date fair value of RSUs granted was $ 21.01 and $ 27.38 , respectively. The total fair value of RSUs that vested during the years ended December 31, 2025, 2024, and 2023 was $ 27.1 million , $ 27.6 million, and $ 31.6 million, respectively. Stock-Based Compensation Expense The Company’s stock-based compensation expense was as follows (in thousands): Year Ended December 31, 2025 2024 2023 Research and development $ 59,490 $ 59,146 $ 62,901 General and administrative 40,143 43,732 45,201 Total $ 99,633 $ 102,878 $ 108,102 As of December 31, 2025, total unamortized stock-based compensation expense was $ 161.0 million . The weighted-average period over which such stock-based compensation expense will be recognized is approximately 2.5 years. There was no tax benefit realized related to awards vested or exercised during the years ended December 31, 2025, 2024 and 2023. There is no deferred tax benefit on total stock-based compensation expense for the years ended December 31, 2025 , 2024 and 2023 since the company has recorded a full valuation allowance on all deferred tax assets. 169 Table of Contents 10. Defined Contribution Plan The Company sponsors a 401(k) retirement savings plan for the benefit of its employees, including Denali's named executive officers, who satisfy certain eligibility requirements. Under the 401(k) plan, eligible employees may elect to defer a portion of their compensation, within the limits prescribed by the Code, on a pre-tax or after-tax (Roth) basis through contributions to the 401(k) plan. The 401(k) plan authorizes employer safe harbor contributions. The Company made contributions to the Plan for eligible participants, and recorded contribution expenses o f $ 3.7 million , $ 3.0 million and $ 3.2 million for the years ended December 31, 2025, 2024, and 2023 respectively. 170 Table of Contents 11. Income Taxes The provision for income taxes consisted of the following (in thousands): Year Ended December 31, 2025 2024 2023 Current: U.S. Federal $ — $ — $ — U.S. State — — — Foreign 102 68 30 Total Current $ 102 $ 68 $ 30 Deferred: U.S. Federal $ — $ — $ — U.S. State — — — Foreign — — — Total deferred $ — $ — $ — Total provision for income taxes $ 102 $ 68 $ 30 The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows: Year Ended December 31, 2025 2024 2023 (In thousands, except percentages) Amount Rate Amount Rate Amount Rate Taxes at the U.S. statutory tax rate of 21% $ ( 107,612 ) 21.0 % $ ( 88,531 ) 21.0 % $ ( 30,490 ) 21.0 % State income taxes, net of federal tax benefit 1,516 ( 0.3 ) — — — — Foreign tax effects 51 — 15 — 27 — Effective of cross-border tax laws 80 — 70 — 908 ( 0.6 ) Change in valuation allowance 124,243 ( 24.2 ) 106,498 ( 25.3 ) 37,886 ( 26.1 ) Tax Credits Research Tax Credit ( 21,990 ) 4.3 ( 24,660 ) 5.9 ( 23,011 ) 15.9 Effect of changes in tax laws or rates enacted in the current period — — — — — — Nontaxable or Nondeductible items Stock-based compensation 6,286 ( 1.2 ) 9,579 ( 2.3 ) 5,777 ( 4.0 ) Nondeductible acquisition - related costs — — — — 5,040 ( 3.5 ) Other 261 ( 0.1 ) ( 2,930 ) 0.7 220 ( 0.2 ) Changes in UTB ( 1,573 ) 0.3 173 — 401 ( 0.3 ) Other ( 1,160 ) 0.2 ( 146 ) — 3,273 ( 2.3 ) Total provision for income taxes $ 102 — % $ 68 — % $ 30 — % On July 4, 2025, the U.S. enacted tax reform legislation through the One Big Beautiful Bill Act (“OBBBA”). Included in this legislation are provisions that allow for the immediate expensing of domestic research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. The legislation has multiple effective dates, with certain provisions effective in the current fiscal period and others in the fiscal year ending December 31, 2026. OBBBA did not have a material impact to the Company’s consolidated financial statements for the year ended December 31, 2025 . 171 Table of Contents Deferred Income Taxes The components of the Company’s net deferred tax assets are as follows (in thousands): December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 229,535 $ 113,397 Tax credit carryforwards 155,334 124,922 Research expense capitalization 161,588 176,094 Lease liabilities 9,819 11,760 Stock-based compensation 67,511 57,766 Fixed assets 8,588 6,671 Accruals and other 14,111 13,447 Gross deferred tax assets 646,486 504,057 Valuation allowance ( 630,806 ) ( 487,714 ) Net deferred tax assets 15,681 16,343 Deferred tax liabilities: Lease right-of-use assets ( 15,681 ) ( 16,343 ) Net deferred tax assets $ — $ — Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. Based upon the weight of available evidence, especially the uncertainties surrounding the realization of deferred tax assets through future taxable income, the Company believes it is not more likely than not that the deferred tax assets will be fully realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets as of December 31, 2025 and 2024. There was an increase in the net valuation allowance of $ 143.1 million during the year ended December 31, 2025. As of December 31, 2025, the Company has federal net operating loss (“NOL”) carryforwards of approximately $ 964.9 million , which are available to reduce future taxable income, and has federal R&D and orphan drug tax credits of approximately $ 73.8 million and $ 75.0 million respectively, both of which may be used to offset future tax liabilities. The federal NOL and federal tax credit carryforwards will begin to expire in 2034. The Company also has state NOL carryforwards of approximately $ 398.4 million , which are available to reduce future taxable income, and has state tax credits of approximately $ 55.1 million which may be used to offset future tax liabilities. The state NOL will begin to expire in 2031 and the state tax credit carryforwards will be carried forward indefinitely. The NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and state tax authorities and may become subject to an annual limitation in the event of certain future cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized. The Company follows the provisions of ASC 740 , Accounting for Income Taxes , and the accounting guidance related to accounting for uncertainty in income taxes. The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be sustained upon examination by the relevant income tax authorities. 172 Table of Contents A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands): December 31, 2025 2024 2023 Unrecognized tax benefits at January 1 $ 33,761 $ 26,175 $ 19,371 Additions for tax positions taken in a prior year 169 162 168 Additions for tax positions taken in the current year 7,475 7,424 6,636 Reductions for tax positions taken in the prior year ( 2,100 ) — — Audit settlements ( 53 ) $ — $ — Unrecognized tax benefits at December 31 $ 39,252 $ 33,761 $ 26,175 If recognized , none of the unrecognized tax benefits would reduce the effective tax rate for the year ended December 31, 2025. The Company will recognize both accrued interest and penalties related to unrecognized benefits in income tax expense. As of December 31, 2025, no liability has been recorded for potential interest or penalties. The Company does no t expect the unrecognized tax benefits to change significantly over the next 12 months. The Company’s 2015 to 2025 tax years remain subject to examination in the United States and California due to tax attributes and statutes of limitations. The Company remains subject to possible examination in various other jurisdictions that are not expected to result in material tax adjustments. 12. Net Loss and Net Loss Per Share The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share data): Year Ended December 31, 2025 2024 2023 Numerator: Net loss $ ( 512,540 ) $ ( 422,773 ) $ ( 145,224 ) Denominator: Weighted average number of: Common stock shares outstanding 146,471,525 142,626,390 137,370,897 Pre-funded warrants 26,177,572 21,847,382 — Total 172,649,097 164,473,772 137,370,897 Net loss per share $ ( 2.97 ) $ ( 2.57 ) $ ( 1.06 ) Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. Potentially dilutive securities, including all options issued and outstanding, ESPP shares issuable, restricted shares subject to future vesting, and shares potentially issuable to the underwriters upon exercise of their option associated with the December 2025 public offering, that were not included in the diluted per share calculations for all periods presented because they would be anti-dilutive totaled approximately 28.8 million, 23.2 million and 20.5 million shares as of December 31, 2025, 2024, and 2023, respectively. 173 Table of Contents 13. Divestiture of Preclinical Small Molecule Programs In March 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 Therapeutics, Inc. ("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 Consolidated Statements of Operations and Comprehensive Loss during the year ended December 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 Consolidated Balance Sheet as of December 31, 2025 and 2024 . 14. Segment Information The Company has one operating segment with the goal to discover, develop and commercialize therapeutics (“Therapeutics”). The Company has not generated any revenue from product sales, and has no marketing or commercial product distribution costs. All revenue to date has been collaboration and license revenue from the Company’s collaboration agreements. The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of allocating resources. The CODM, in alignment with the Company's overall corporate strategy and goals, analyses a variety of data to guide segment resource allocation, including program and portfolio scientific data, product market information and projections, probability of regulatory and commercial success, and the competitive environment. The CODM also reviews certain financial results included in the segment Loss from Operations which is reported on the Consolidated Statements of Operations and Comprehensive Loss as Loss from Operations. The measure of segment assets is reported on the Consolidated Balance Sheets as Total Assets. The accounting policies of the Therapeutics segment are the same as those described in the summary of significant accounting policies. The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2025, 2024, and 2023 (in thousands): 174 Table of Contents Therapeutics Segment Year Ended December 31, 2025 2024 2023 Total collaboration revenue $ — $ — $ 330,531 Expenses External research and development expenses - TV programs, including cost sharing 154,799 138,196 139,064 External research and development expenses - small molecule programs, including cost sharing 8,800 42,623 49,850 Other research and development expenses 86,958 62,715 74,518 Personnel related research and development expenses 168,221 152,906 160,444 Total research and development expenses 418,778 396,440 423,876 Personnel related general and administrative expenses 86,234 73,505 73,668 Other general and administrative expenses 50,330 31,933 29,686 Total general and administrative expenses 136,564 105,438 103,354 Segment operating expenses 555,342 501,878 527,230 Segment gain from divestiture of small molecule programs — 14,537 — Segment loss from operations ( 555,342 ) ( 487,341 ) ( 196,699 ) Segment interest and other income, net 42,904 64,636 51,505 Segment loss before income taxes $ ( 512,438 ) $ ( 422,705 ) $ ( 145,194 ) There is no difference between the segment loss before income taxes and total consolidated loss before income taxes for the years ended December 31, 2025, 2024 and 2023. 175 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.