Denali Therapeutics Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Denali Therapeutics Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share amounts) March 31, 2026 December 31, 2025 Assets Current assets: Cash and cash equivalents $ 387,626 $ 205,326 Short-term marketable securities 600,058 662,553 Prepaid expenses and other current assets 35,068 32,779 Total current assets 1,022,752 900,658 Long-term marketable securities 63,785 98,322 Property and equipment, net 51,728 52,402 Finance lease right-of-use asset 47,616 48,531 Operating lease right-of-use asset 17,922 19,002 Intangible asset, net 36,000 — Other non-current assets 26,220 25,939 Total assets $ 1,266,023 $ 1,144,854 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 40,380 $ 505 Other accrued costs and current liabilities 69,776 97,846 Total current liabilities 110,156 98,351 Operating lease liability, less current portion 24,680 27,210 Finance lease liability, less current portion 5,508 5,532 Liability related to the revenue participation right agreement 199,581 — Total liabilities 339,925 131,093 Commitments and contingencies (Note 9) Stockholders' equity: Convertible preferred stock, $ 0.01 par value; 40,000,000 shares authorized as of March 31, 2026 and December 31, 2025; 0 shares issued and outstanding as of March 31, 2026 and December 31, 2025 — — Common stock, $ 0.01 par value; 400,000,000 shares authorized as of March 31, 2026 and December 31, 2025; 158,656,318 shares and 156,182,177 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 1,913 1,888 Additional paid-in capital 3,104,838 3,062,715 Accumulated other comprehensive income (loss) ( 682 ) 682 Accumulated deficit ( 2,179,971 ) ( 2,051,524 ) Total stockholders' equity 926,098 1,013,761 Total liabilities and stockholders’ equity $ 1,266,023 $ 1,144,854 See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents Denali Therapeutics Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share amounts) Three Months Ended March 31, 2026 2025 Operating expenses: Research and development $ 103,846 $ 116,227 General and administration 33,511 29,353 Total operating expenses 137,357 145,580 Loss from operations ( 137,357 ) ( 145,580 ) Interest and other income, net 8,910 12,610 Net loss $ ( 128,447 ) $ ( 132,970 ) Other comprehensive income (loss): Net unrealized gain (loss) on marketable securities, net of tax ( 1,364 ) 17 Comprehensive loss $ ( 129,811 ) $ ( 132,953 ) Net loss per share, basic and diluted $ ( 0.69 ) $ ( 0.78 ) Weighted average number of shares outstanding, basic and diluted 186,636,978 171,222,030 See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents Denali Therapeutics Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share amounts) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Shares Amount Balance at December 31, 2024 144,220,986 $ 1,768 $ 2,764,880 $ 2,020 $ ( 1,538,984 ) $ 1,229,684 Issuances under equity incentive plans 113,792 1 594 — — 595 Vesting of restricted stock units 916,480 9 ( 9 ) — — — Stock-based compensation — — 25,360 — — 25,360 Net loss — — — — ( 132,970 ) ( 132,970 ) Other comprehensive income — — — 17 — 17 Balance at March 31, 2025 145,251,258 $ 1,778 $ 2,790,825 $ 2,037 $ ( 1,671,954 ) $ 1,122,686 Balance at December 31, 2025 156,182,177 $ 1,888 $ 3,062,715 $ 682 $ ( 2,051,524 ) $ 1,013,761 Issuance of common stock, net of issuance cost of $ 45 746,468 8 12,358 — — 12,366 Issuances under equity incentive plans 536,720 5 6,690 — — 6,695 Vesting of restricted stock units 1,190,953 12 ( 12 ) — — — Stock-based compensation — — 23,087 — — 23,087 Net loss — — — — ( 128,447 ) ( 128,447 ) Other comprehensive loss — — — ( 1,364 ) — ( 1,364 ) Balance at March 31, 2026 158,656,318 $ 1,913 $ 3,104,838 $ ( 682 ) $ ( 2,179,971 ) $ 926,098 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents Denali Therapeutics Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three Months Ended March 31, 2026 2025 Operating activities Net loss $ ( 128,447 ) $ ( 132,970 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,845 2,325 Stock–based compensation expense 23,087 25,160 Net accretion of discounts on marketable securities ( 1,259 ) ( 3,888 ) Non-cash adjustment to operating lease expense ( 1,144 ) ( 1,049 ) Right-of-use asset amortization for finance lease 916 887 Other non-cash items 294 — Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 2,291 ) ( 28,607 ) Other non-current assets ( 700 ) ( 943 ) Accounts payable 3,875 ( 2,639 ) Accruals and other current liabilities ( 22,395 ) ( 9,686 ) Deferred research and development funding liability ( 5,985 ) 19,942 Net cash used in operating activities ( 131,204 ) ( 131,468 ) Investing activities Purchases of marketable securities ( 123,074 ) ( 137,926 ) Maturities and sales of marketable securities 220,000 161,752 Purchases of property and equipment ( 2,466 ) ( 5,078 ) Net cash provided by investing activities 94,460 18,748 Financing activities Proceeds from underwriter exercising option to purchase common stock, net of issuance costs 12,366 — Proceeds from sale of revenue participation right 200,000 — Proceeds from exercise of awards under equity incentive plans 6,695 595 Payments for finance lease right-of-use asset ( 17 ) ( 4,357 ) Net cash provided by (used in) financing activities 219,044 ( 3,762 ) Net increase (decrease) in cash, cash equivalents and restricted cash 182,300 ( 116,482 ) Cash, cash equivalents and restricted cash at beginning of period 208,432 176,535 Cash, cash equivalents and restricted cash at end of period $ 390,732 $ 60,053 Supplemental disclosures of cash flow information Payment due on intangible asset acquired $ 36,000 $ — See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents Denali Therapeutics Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Significant Accounting Policies Organization and Description of Business Denali Therapeutics Inc. ("Denali" or the “Company”) is a biopharmaceutical company, incorporated in Delaware, that discovers and develops therapeutics to defeat neurodegenerative diseases and lysosomal storage diseases. The Company is headquartered in South San Francisco, California. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of the Securities and Exchange Commission ("SEC") Regulation S-X for interim financial information. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026 (the "2025 Annual Report on Form 10-K"). The Condensed Consolidated Balance Sheet as of December 31, 2025 was derived from the audited annual consolidated financial statements as of and for the period then ended. Certain information and footnote disclosures typically included in the Company's annual consolidated financial statements have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All such adjustments are of a normal recurring nature except for the impacts of adopting new accounting standards, if any, discussed below. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period. During the three months ended March 31, 2026 the Company added significant accounting policies related to intangible assets and the liability related to the revenue participation right. Aside from these new accounting policies, there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2025 Annual Report on Form 10-K. For further information with regard to the Company’s Significant Accounting Policies, please refer to Note 1, "Significant Accounting Policies," to the Company’s Consolidated Financial Statements included in the 2025 Annual Report on Form 10-K. Principles of Consolidation These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. For the Company and its subsidiaries, the functional currency has been determined to be U.S. dollars. Monetary assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates, non-monetary assets and liabilities denominated in foreign currencies are remeasured at historical rates, and transactions in foreign currencies are remeasured at average exchange rates. Foreign currency gains and losses resulting from remeasurement are recognized in interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss. 7 Table of Contents Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material to the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and Comprehensive Loss. Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and marketable securities. Substantially all of the Company’s cash and cash equivalents are deposited in accounts with financial institutions that management believes are of high credit quality. Such deposits have and will continue to exceed federally insured limits. The Company maintains its cash with accredited financial institutions and accordingly, such funds are subject to minimal credit risk. The Company’s investment policy limits investments to certain types of securities issued by the U.S. government and its agencies, as well as institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the Condensed Consolidated Balance Sheets. As of March 31, 2026 and December 31, 2025, the Company had no off-balance sheet concentrations of credit risk. The Company is subject to a number of risks similar to other early commercial-stage biopharmaceutical companies, including, but not limited to, the risk that its approved product, AVLAYAH TM (tividenofusp alfa-eknm), may not achieve expected levels of market acceptance or commercial success; the need to obtain adequate additional funding to continue as a going concern; its history of significant losses and expectation of continued losses; possible failure or delay of current or future preclinical testing or clinical trials; its reliance on third parties to conduct its clinical trials, manufacture product, and support commercialization; the need to successfully develop, commercialize, and gain market acceptance of its product candidates; competitors developing new technological innovations; its rights to develop and commercialize its product candidates pursuant to the terms and conditions of licenses granted to the Company; protection of proprietary technology; the ability to make milestone, royalty or other payments due under license or collaboration agreements; the need to enforce its intellectual property rights; 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 AVLAYAH or its other product candidates, it may be unable to generate sufficient product revenue or achieve profitability. Further, the Company is also subject to broad market risks and uncertainties, 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. 8 Table of Contents Investments The Company holds an equity investment in a venture-backed privately held company. 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 three months ended March 31, 2026 and 2025. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with original maturities of 90 days or less at the date of purchase to be cash and cash equivalents. Cash equivalents are reported at fair value. Cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Statements of Cash Flows is composed of cash and cash equivalents reported in the Condensed Consolidated Balance Sheets and restricted cash of $ 3.1 million as of March 31, 2026 and December 31, 2025, which is included within other non-current assets in the Condensed Consolidated Balance Sheets. Restricted cash relates to letters of credit supporting the Company’s headquarters building lease and 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 Condensed Consolidated Balance Sheets, are considered available-for-sale, and are reported at fair value with net unrealized gains and losses included as a component of stockholders’ equity. The Company classifies investments in securities with remaining maturities of less than one year, or where its intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments. The Company classifies investments in securities with remaining maturities of over one year as long-term investments, unless intended to fund current operations. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Realized gains and losses and declines in value determined to be due to credit losses on marketable securities, if any, are included in interest and other income, net. The Company periodically evaluates the need for an allowance for credit losses. This evaluation includes consideration of several qualitative and quantitative factors, including whether it has plans to sell the security, whether it is more likely than not it will be required to sell any marketable securities before recovery of its amortized cost basis, and if the entity has the ability and intent to hold the security to maturity, and the portion of any unrealized loss that is the result of a credit loss. Factors considered in making these evaluations include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, expected cash flows from securities, other publicly available information that may affect the value of the marketable security, duration and severity of the decline in value, and the Company's strategy and intentions for holding the marketable security. 9 Table of Contents Accounts Receivable Accounts receivable are included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. The accounts receivable balance represents amounts receivable from the Company's collaboration partners net of an allowance for credit losses, if required. Intangible Assets Milestone payments made to acquire or maintain rights to intellectual property associated with an approved product are capitalized when the related contingency is resolved and the payment becomes probable and payable. Amounts capitalized are recorded as intangible assets and generally amortized on a straight-line basis over the estimated useful life of the underlying intellectual property. The Company evaluates such intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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. Liability Related to the Revenue Participation Right The Company accounts for the synthetic royalty funding agreement with Royalty Pharma Investments 2023 ICAV ("Royalty Pharma") pursuant to which 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 AVLAYAH as a debt financing under ASC Topic 470, Debt (ASC 470). The $ 200.0 million of proceeds received in March 2026 are recorded as a liability on the Company's Condensed Consolidated Balance Sheets, net of transaction costs. The liability will be amortized under the effective interest method based on the Company's estimates of future royalty payments to Royalty Pharma over the life of the agreement. The resulting non-cash interest expense is recognized in Interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The liability related to the revenue participation right and related interest expense are based on current estimates of the amount and timing of projected royalty payments, which are based on estimates of future AVLAYAH net sales. The Company periodically assesses the forecasted net sales and to the extent the amount or timing of estimated royalty payments are materially different than previous estimates, the Company will account for any such change by adjusting the liability related to the sale of future revenues and prospectively recognizing the related non-cash interest expense. 10 Table of Contents The Company classifies the portion of the liability related to the revenue participation right that is expected to be amortized or settled within twelve months of the reporting date as current, with the remainder classified as non-current. Classification is based on forecasted royalty payments and the related recognition of interest and principal under the effective interest method. Comprehensive Loss Comprehensive loss is composed of net loss and certain changes in stockholders’ equity that are excluded from net loss, primarily unrealized gains or losses on the Company’s marketable securities. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented. The weighted-average common shares outstanding as of March 31, 2026 include the pre-funded warrants to purchase shares of common stock that were issued in connection with the February 2024 private placement and December 2025 public offering, as discussed further in Note 10. Recently Issued Accounting Pronouncements 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. 11 Table of Contents 2. Fair Value Measurements Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands): March 31, 2026 Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 81,146 $ — $ — $ 81,146 Short-term marketable securities: U.S. government treasuries 522,391 — — 522,391 Corporate debt securities — 77,667 — 77,667 Long-term marketable securities: U.S. government treasuries 40,308 — — 40,308 Corporate debt securities — 23,477 — 23,477 Total $ 643,845 $ 101,144 $ — $ 744,989 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 The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly. The Company has not transferred any assets or liabilities between the fair value measurement levels for the three months ended March 31, 2026 or for the year ended December 31, 2025. 12 Table of Contents 3. Marketable Securities All marketable securities were considered available-for-sale at March 31, 2026 and December 31, 2025. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs as discussed in Note 2, "Fair Value Measurements". The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands): March 31, 2026 Amortized Cost Unrealized Holding Gains Unrealized Holding Losses Aggregate Fair Value Short-term marketable securities: U.S. government treasuries $ 522,445 $ 200 $ ( 254 ) $ 522,391 Corporate debt securities 77,725 36 ( 94 ) 77,667 Total short-term marketable securities 600,170 236 ( 348 ) 600,058 Long-term marketable securities: U.S. government treasuries 40,396 — ( 88 ) 40,308 Corporate debt securities 23,607 — ( 130 ) 23,477 Total long-term marketable securities 64,003 — ( 218 ) 63,785 Total $ 664,173 $ 236 $ ( 566 ) $ 663,843 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 As of March 31, 2026 and December 31, 2025, some of the Company's marketable securities were in an unrealized loss position. The Company has no t recognized an allowance for credit losses as of March 31, 2026 or December 31, 2025. The Company determined that it had the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery. Further, a majority of these marketable securities are held in U.S. government securities, and the remainder were initially, and continue to be, held with investment grade, high credit quality institutions. All marketable securities with unrealized losses as of each balance sheet date have been in a loss position for less than twelve months or the loss is not material. As of March 31, 2026, all of the Company’s marketable securities have an effective maturity of less than two years . 13 Table of Contents 4. Intangible Asset In connection with the May 2018 acquisition of F-star Gamma Limited ("F-star Gamma") and related license arrangements, the Company is obligated to make contingent payments upon the achievement of specified preclinical, clinical, regulatory and commercial milestones. Additional information regarding these arrangements is included in Note 4, “Acquisition, License Agreement and Research and Development Funding Collaboration Agreement,” to the consolidated financial statements included in the Company’s 2025 Annual Report on Form 10-K. In March 2026, following the U.S. Food and Drug Administration’s accelerated approval of AVLAYAH, a $ 36.0 million milestone payment became due under this arrangement. The amount was capitalized as an intangible asset and will be amortized on a straight-line basis over its estimated useful life. The amount is included in accounts payable in the Condensed Consolidated Balance Sheet as of March 31, 2026, and is expected to be fully paid by Q3 2026. In addition to the U.S. regulatory milestone described above, the Company may be required to make additional contingent consideration payments of up to $ 174.0 million, composed of $ 24.0 million due upon regulatory approval of AVLAYAH in the European Union, and up to $ 150.0 million in commercial contingent payments. 5. Research and Development Funding Collaboration Agreement In January 2024, the Company entered into a Collaboration and Development Funding Agreement with an unrelated third party, which obligates 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. This arrangement is further described in Note 4, " Acquisition, License Agreement and Research and Development Funding Collaboration Agreement", to the consolidated financial statements in the 2025 Annual Report on Form 10-K. Under this arrangement, the Company recognized an offset to research and development expenses of $ 6.0 million and $ 5.1 million in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2026 and 2025, respectively. The Company recorded current deferred research and development funding liabilities of $ 15.1 million and $ 21.1 million on the Condensed Consolidated Balance Sheet as of March 31, 2026 and December 31, 2025, respectively. 6. Collaboration Agreements Biogen In October 2020, the Company entered into a Definitive Collaboration and License Agreement (“LRRK2 Agreement”), pursuant to which it granted Biogen a license to co-develop and co-commercialize its small molecule LRRK2 inhibitor program (the “LRRK2 Program”), and a Right of First Negotiation, Option and License Agreement (the “ROFN and Option Agreement”), pursuant to which it granted an option and right of first negotiation to certain of the Company's programs utilizing our TransportVehicle TM ("TV") platform, including its amyloid beta program (collectively the "Biogen Collaboration Agreement"), with Biogen Inc.’s subsidiaries, Biogen MA Inc. (“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”). The details of the Biogen Collaboration Agreement, the August 2023 amendment and July 2024 side letter to the ROFN and Option Agreement, and the payments the Company has received, and is entitled to receive, are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the 2025 Annual Report on Form 10-K. The Company has no remaining performance obligations under the Biogen Collaboration Agreement, and therefore no contract liability remained on the Condensed Consolidated Balance Sheets as of March 31, 2026 or December 31, 2025 . As of March 31, 2026, the Company had no t recorded milestone revenue or product sales under the Biogen Collaboration Agreement. 14 Table of Contents Sanofi In October 2018, the Company entered into a Collaboration and License Agreement ("Sanofi Collaboration Agreement") with Genzyme Corporation, a wholly-owned subsidiary of Sanofi S.A. ("Sanofi"). The details of the Sanofi Collaboration Agreement, the February 2025 side letter, and the payments the Company has received, and is entitled to receive, are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the Company's 2025 Annual Report on Form 10-K. The Company has no remaining performance obligations under the Sanofi Collaboration Agreement, and therefore no contract liability remains on the Condensed Consolidated Balance Sheets as of March 31, 2026 or December 31, 2025 . Under the Sanofi Collaboration Agreement, the Company is eligible to receive milestone payments totaling up to approximately $ 495.0 million upon achievement of certain clinical, regulatory and sales milestone events for Peripheral Products, and variable royalties on worldwide net sales. As of March 31, 2026, the Company had earned milestone payments of $ 100.0 million and had no t recorded any product sales under the Sanofi Collaboration Agreement. Takeda In January 2018, the Company entered into a Collaboration and Option Agreement ("Takeda Collaboration Agreement") with Takeda Pharmaceutical Company Limited ("Takeda"). The details of the Takeda Collaboration Agreement are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the Company's 2025 Annual Report on Form 10-K. There are no remaining performance obligations or potential payments remaining under the initial Takeda Option and Collaboration Agreement. The opt-in by Takeda on the PTV:PGRN and ATV:TREM2 programs represented two new contracts with a customer for accounting purposes (the "PTV:PGRN Collaboration Agreement" and the "ATV:TREM2 Collaboration Agreement"), both of which became effective in December 2021. The February 2025 ATV:TREM2 discontinuation and the PTV:PGRN Collaboration Agreement are further described in Note 5, "Collaboration Agreements", to the consolidated financial statements in the Company's 2025 Annual Report on Form 10-K. In April 2026, Takeda notified the Company of its decision to terminate the collaboration agreement related to PTV:PGRN. As a result, the Company will regain full rights to DNL593 and the related intellectual property portfolio. Subsequent to the effective date of the termination of the PTV:PGRN Collaboration Agreement, there are no future milestones, cost, or profit sharing related to this agreement. As of March 31, 2026, the Company had earned an aggregate of $ 10.0 million in option fee payments and $ 10.0 million in milestone payments from Takeda under the PTV:PGRN and ATV:TREM2 Collaboration Agreements, and had no t recorded any product sales under either agreement. 15 Table of Contents Cost Sharing Payments and Reimbursements Cost sharing payments to collaboration partners recorded as expenses in research and development expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss, and cost sharing reimbursements from collaboration partners recorded as an offset to expense in research and development expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss are as follows (in thousands): Three Months Ended March 31, 2026 2025 Takeda Collaboration Agreement: PTV:PGRN cost sharing (reimbursements) $ ( 1,617 ) $ ( 1,511 ) ATV:TREM2 cost sharing (reimbursements) — ( 152 ) Total Takeda cost sharing (reimbursements) (1) ( 1,617 ) ( 1,663 ) Biogen Collaboration Agreement: LRRK2 cost sharing payments (2) 3,863 4,651 Net cost sharing payments (reimbursements) $ 2,246 $ 2,988 _________________________________ (1) Cost sharing reimbursements of $ 1.6 million and $ 1.6 million were recorded as a receivable within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025, respectively. (2) Cost sharing payments due to Biogen of $ 3.9 million and $ 2.8 million were recorded within other accrued costs and current liabilities on the Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025, respectively. 7. Balance Sheet Components Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consists of the following (in thousands): As of March 31, 2026 December 31, 2025 Accrued compensation $ 9,218 $ 32,179 Accrued clinical and other research & development costs 21,475 22,283 Accrued manufacturing costs 9,031 5,336 Operating lease liability, current 9,769 9,463 Finance lease liability, current 90 83 Deferred research and development funding liability, current 15,116 21,101 Other accrued costs and current liabilities 5,077 7,401 Total accrued expenses and other current liabilities $ 69,776 $ 97,846 8. Liability Related to the Revenue Participation Right In December 2025, the Company entered into a synthetic royalty funding agreement (the “Royalty Agreement”) with 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 AVLAYAH ("Revenue Participation Right"). The Company received $ 200.0 million in gross proceeds in March 2026 triggered by the U.S. Food and Drug and Administration’s accelerated approval of AVLAYAH. The Company is entitled to receive an additional $ 75.0 million upon approval of AVLAYAH by the European Medicines Agency ("EMA") on or before December 31, 2029. The Company retains all worldwide development and commercialization rights to AVLAYAH. The royalty obligation to Royalty Pharma will cease upon cumulative royalty payments reaching a cap of 3.0 times the total funding received, or 2.5 times the funding received if such cap is reached in respect of sales that occur on or before the end of the first quarter of 2039. 16 Table of Contents The $ 200.0 million, net of transaction costs of approximately $ 0.4 million, is recorded as a non-current liability on the Company's Condensed Consolidated Balance Sheet as of March 31, 2026 based on the estimated timing of future royalty payments. The royalty payments to Royalty Pharma will be recorded as a reduction of the liability. The additional $ 75.0 million contingent upon EMA approval of AVLAYAH has not been recognized as a liability as of March 31, 2026, as the receipt is contingent upon a future regulatory event. Upon receipt, the additional proceeds will be recorded as an increase to the liability, net of any incremental transaction costs, and the effective interest rate will be adjusted prospectively. As of March 31, 2026, the Company's estimate of total future royalty payments resulted in an effective annual interest rate of approximately 11 %. No royalty payments and non-cash interest expense were recognized during the three months ended March 31, 2026. As of March 31, 2026, the carrying value of the liability approximates its estimated fair value. The Company’s projections of future royalty payments are subject to estimation uncertainty and are based on various assumptions underlying projected net product sales over the term of the agreement. These inputs are considered to be Level 3 inputs in the fair value hierarchy, as they involve unobservable inputs and judgment. Changes in these assumptions could have a material impact on the effective interest rate. 9. 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"), and in April 2023, the Company entered into a finance lease for its clinical manufacturing site in Salt Lake City (the "SLC Lease"). Both leases are further described in Note 7, "Commitments and Contingencies," to the consolidated financial statements in the Company's 2025 Annual Report on Form 10-K. There were no changes to the terms of the leases recognized under ASC 842 during the three months ended March 31, 2026 or 2025. The following table summarizes lease costs recognized for the periods presented (in thousands): Three Months Ended March 31, 2026 2025 Operating lease cost $ 1,853 $ 1,893 Finance lease cost: Amortization of ROU assets 916 887 Interest 179 181 Variable lease cost 1,040 1,353 Total lease costs $ 3,988 $ 4,314 Operating cash flows for operating leases were $ 3.0 million and $ 2.9 million for the three months ended March 31, 2026 and 2025, respectively. Indemnification 17 Table of Contents In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners, board members, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company, negligence or willful misconduct of the Company, violations of law by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s Condensed Consolidated Balance Sheets , Condensed Consolidated Statements of Operations and Comprehensive Loss , or Condensed Consolidated Statements of Cash Flows . Commitments In the normal course of business, the Company enters into firm purchase commitments primarily related to supply of commercial product, certain research and development services, and clinical manufacturing activities. The Company had contractual obligations of $ 109.1 million as of March 31, 2026, of which $ 91.8 million relates to supply of commercial product, and $ 44.3 million as of December 31, 2025. 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. 10. Common Stock In December 2025, the Company entered into a public offering of 9,142,857 shares of the Company’s common stock and Pre-Funded Warrants to purchase 2,285,714 shares of Common Stock. This public offering and the Pre-Funded Warrants are both further described in Note 8, "Common Stock," to the consolidated financial statements in the Company's 2025 Annual Report on Form 10-K. In January 2026, the underwriters of the Company’s December 2025 public offering exercised their option to purchase an additional 746,468 shares of common stock, resulting in aggregate net proceeds to the Company of approximately $ 12.4 million. As of March 31, 2026, 28,331,779 shares of pre-funded warrants remained outstanding, and no pre-funded warrants were exercised during the three months ended March 31, 2026. These warrants are classified as permanent equity because 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. 11. Stock-Based Awards The Company has issued stock-based awards from various equity incentive and stock purchase plans, as more fully described in Note 9, "Stock-Based Awards" to the consolidated financial statements in the Company's 2025 Annual Report on Form 10-K. 18 Table of Contents Stock Option Activity The following table summarizes stock option activity for the three months ended March 31, 2026: Number of Options Weighted-Average Exercise Price Balance at December 31, 2025 21,326,333 $ 26.39 Granted 2,336,591 16.55 Exercised ( 536,720 ) 12.47 Forfeited ( 476,118 ) 21.30 Expired ( 102,577 ) 33.05 Balance at March 31, 2026 22,547,509 $ 25.77 Vested and expected to vest at March 31, 2026 22,547,509 $ 25.77 Exercisable at March 31, 2026 14,509,636 $ 29.32 The estimated fair value of stock options granted to employees were calculated using the Black-Scholes option-pricing model using the following assumptions: Three Months Ended March 31, 2026 2025 Expected term (in years) 6.08 6.08 Volatility 65.3 % - 66.7 % 64.8 % - 65.3 % Risk-free interest rate 3.7 % - 4.1 % 4.0 % - 4.5 % Dividend yield — — Restricted Stock Activity The following table summarizes restricted stock unit ("RSU") activity for the three months ended March 31, 2026: Number of RSU shares Weighted-Average Fair Value at Date of Grant per Share Unvested at December 31, 2025 5,124,629 $ 21.74 Granted 3,270,382 16.42 Vested and released ( 1,190,953 ) 24.84 Forfeited ( 328,049 ) 20.26 Unvested and expected to vest at March 31, 2026 6,876,009 $ 18.74 Stock-Based Compensation Expense The Company’s results of operations include expenses relating to stock-based compensation as follows (in thousands): Three Months Ended March 31, 2026 2025 Research and development $ 13,594 $ 15,137 General and administrative 9,493 10,023 Total $ 23,087 $ 25,160 19 Table of Contents 12. Net Loss Per Share The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share amounts): Three Months Ended March 31, 2026 2025 Numerator: Net loss $ ( 128,447 ) $ ( 132,970 ) Denominator: Weighted average number of: Common stock shares outstanding 158,305,199 145,175,965 Pre-funded warrants 28,331,779 26,046,065 Total 186,636,978 171,222,030 Net loss per share $ ( 0.69 ) $ ( 0.78 ) 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 options issued and outstanding, Employee Stock Purchase Plan (“ESPP”) shares issuable, and restricted shares subject to future vesting that were not included in the diluted per share calculations for the periods presented because they would be anti-dilutive totaled approximately 30.0 million and 27.4 million shares as of March 31, 2026 and 2025, respectively. 13. Non-Marketable Equity Investment 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"). This arrangement is further described in Note 13, "Divestiture of Preclinical Small Molecule Programs", to the consolidated financial statements in the 2025 Annual Report on Form 10-K. The Company recorded the investment in the shares of Series A Preferred Stock at $ 15.0 million which represents the fair value of the shares on the date of issuance. There have been no subsequent observable price changes in orderly transactions for the identical or similar equity securities of Tenvie, and as such, the measurement of this investment remains unchanged, with the $ 15.0 million included within other non-current assets in the Condensed Consolidated Balance Sheets as of both March 31, 2026 and December 31, 2025. 14. Segment Information The Company has one operating segment with the goal to discover, develop and commercialize therapeutics (“Therapeutics”). There have been no material changes to the Company's segment structure, the basis of segmentation, or the measurement basis for segment profit or loss or segment assets, compared to those disclosed in Note 14, "Segment Information", to the consolidated financial statements in the Company's 2025 Annual Report on Form 10-K. The following table presents selected financial information with respect to the Company’s single operating segment for the three months ended March 31, 2026 and 2025 (in thousands): 20 Table of Contents Therapeutics Segment Three Months Ended March 31, 2026 2025 Expenses External research and development expenses - TV programs, including cost sharing $ 38,464 $ 41,987 Other research and development expenses, including small molecule programs $ 23,554 $ 33,971 Personnel related research and development expenses 41,828 40,269 Total research and development expenses 103,846 116,227 Personnel related general and administrative expenses 22,564 18,738 Other general and administrative expenses 10,947 10,615 Total general and administrative expenses 33,511 29,353 Segment operating expenses 137,357 145,580 Segment loss from operations ( 137,357 ) ( 145,580 ) Segment interest and other income, net 8,910 12,610 Segment net loss $ ( 128,447 ) $ ( 132,970 ) There is no difference between the segment net loss and total consolidated net loss for the three months ended March 31, 2026 and 2025. 21 Table of Contents