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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission File Number: 001-38311

Denali Therapeutics Inc.
(Exact name of registrant as specified in its charter)

Delaware |  | 46-3872213
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
161 Oyster Point Blvd. South San Francisco, CA, 94080
(Address of principal executive offices and zip code)

(650) 866-8547
(Registrant’s telephone number, including area code)
_______________________________________
Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol | Name of each exchange on which registered
Common Stock, par value $0.01 per share | DNLI | Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during t he preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of outstanding shares of the registrant’s common stock as of July 31, 2026 was 159,847,403. This number does not include 28,331,779 shares of common stock issuable upon the exercise of pre-funded warrants outstanding as of July 31, 2026 (which are immediately exercisable at an exercise price of $0.01 per share of common stock, subject to beneficial ownership limitations). See Note 11 — Common Stock to the registrant’s condensed consolidated financial statements.

TABLE OF CONTENTS

| PART I. FINANCIAL INFORMATION | Page
Item 1. | Financial Statements (Unaudited) | 3
| Condensed Consolidated Balance Sheets | 3
| Condensed Consolidated Statements of Operations and Comprehensive Loss | 4
| Condensed Consolidated Statements of Stockholders’ Equity | 5
| Condensed Consolidated Statements of Cash Flows | 6
| Notes to Condensed Consolidated Financial Statements | 7
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 25
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 41
Item 4. | Controls and Procedures | 42
| PART II. OTHER INFORMATION |
Item 1. | Legal Proceedings | 43
Item 1A. | Risk Factors | 43
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 43
Item 3. | Defaults Upon Senior Securities | 44
Item 4. | Mine Safety Disclosures | 44
Item 5. | Other Information | 44
Item 6. | Exhibits | 45
| Signatures | 46

2

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Denali Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)

| June 30, 2026 |  | December 31, 2025
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 201,530 |  |  | $ | 205,326 |
Short-term marketable securities | 508,941 |  |  | 662,553 |
Accounts receivable, net | 3,927 |  |  | — |
Inventory | 4,139 |  |  | — |
Prepaid expenses and other current assets | 35,390 |  |  | 32,779 |
Total current assets | 753,927 |  |  | 900,658 |
Long-term marketable securities | 229,534 |  |  | 98,322 |
Property and equipment, net | 49,926 |  |  | 52,402 |
Finance lease right-of-use asset | 46,700 |  |  | 48,531 |
Operating lease right-of-use asset | 16,793 |  |  | 19,002 |
Intangible asset, net | 35,250 |  |  | — |
Other non-current assets | 25,825 |  |  | 25,939 |
Total assets | $ | 1,157,955 |  |  | $ | 1,144,854 |
Liabilities and stockholders' equity |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 11,807 |  |  | $ | 505 |
Other accrued costs and current liabilities | 78,276 |  |  | 97,846 |
Total current liabilities | 90,083 |  |  | 98,351 |
Operating lease liability, less current portion | 22,026 |  |  | 27,210 |
Finance lease liability, less current portion | 5,479 |  |  | 5,532 |
Liability related to the revenue participation right agreement | 205,189 |  |  | — |
Total liabilities | 322,777 |  |  | 131,093 |
Commitments and contingencies (Note 10) |  |  |
Stockholders' equity: |  |  |
Convertible preferred stock, $0.01 par value; 40,000,000 shares authorized as of June 30, 2026 and December 31, 2025; 0 shares issued and outstanding as of June 30, 2026 and December 31, 2025 | — |  |  | — |
Common stock, $0.01 par value; 400,000,000 shares authorized as of June 30, 2026 and December 31, 2025; 159,755,526 shares and 156,182,177 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively | 1,924 |  |  | 1,888 |
Additional paid-in capital | 3,142,747 |  |  | 3,062,715 |
Accumulated other comprehensive income (loss) | (1,969) |  |  | 682 |
Accumulated deficit | (2,307,524) |  |  | (2,051,524) |
Total stockholders' equity | 835,178 |  |  | 1,013,761 |
Total liabilities and stockholders’ equity | $ | 1,157,955 |  |  | $ | 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 June 30, |  | Six Months Ended June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Revenue: |  |  |  |  |  |  |
Product revenue, net | $ | 3,604 |  |  | $ | — |  |  | $ | 3,604 |  |  | $ | — |
Total revenue | 3,604 |  |  | — |  |  | 3,604 |  |  | — |
Operating expenses: |  |  |  |  |  |  |
Cost of goods sold | 93 |  |  | — |  |  | 93 |  |  | — |
Research and development | 97,019 |  |  | 102,696 |  |  | 200,865 |  |  | 218,923 |
Selling, general and administrative | 36,283 |  |  | 32,267 |  |  | 69,794 |  |  | 61,620 |
Intangible asset amortization | 750 |  |  | — |  |  | 750 |  |  | — |
Total operating expenses | 134,145 |  |  | 134,963 |  |  | 271,502 |  |  | 280,543 |
Loss from operations | (130,541) |  |  | (134,963) |  |  | (267,898) |  |  | (280,543) |
Interest and other income, net | 2,988 |  |  | 10,844 |  |  | 11,898 |  |  | 23,454 |
Net loss | $ | (127,553) |  |  | $ | (124,119) |  |  | $ | (256,000) |  |  | $ | (257,089) |
Other comprehensive loss: |  |  |  |  |  |  |
Net unrealized loss on marketable securities, net of tax | (1,287) |  |  | (1,098) |  |  | (2,651) |  |  | (1,081) |
Comprehensive loss | $ | (128,840) |  |  | $ | (125,217) |  |  | $ | (258,651) |  |  | $ | (258,170) |
Net loss per share, basic and diluted | $ | (0.68) |  |  | $ | (0.72) |  |  | $ | (1.37) |  |  | $ | (1.50) |
Weighted average number of shares outstanding, basic and diluted | 187,314,501 |  | 171,449,847 |  | 186,977,612 |  | 171,336,568

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, 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 |  |  |  |  |  | 1,484,925 |  |  | 14 |  |  | 21,686 |  |  | — |  |  | — |  |  | 21,700 |
Vesting of restricted stock units |  |  |  |  |  | 1,341,956 |  |  | 14 |  |  | (14) |  |  | — |  |  | — |  |  | — |
Stock-based compensation |  |  |  |  |  | — |  |  | — |  |  | 46,002 |  |  | — |  |  | — |  |  | 46,002 |
Net loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (256,000) |  |  | (256,000) |
Other comprehensive loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | (2,651) |  |  | — |  |  | (2,651) |
June 30, 2026 |  |  |  |  |  | 159,755,526 |  |  | $ | 1,924 |  |  | $ | 3,142,747 |  |  | $ | (1,969) |  |  | $ | (2,307,524) |  |  | $ | 835,178 |
Balance at March 31, 2026 |  |  |  |  |  | 158,656,318 |  |  | $ | 1,913 |  |  | $ | 3,104,838 |  |  | $ | (682) |  |  | $ | (2,179,971) |  |  | $ | 926,098 |
Issuances under equity incentive plans |  |  |  |  |  | 948,205 |  |  | 9 |  |  | 14,996 |  |  | — |  |  | — |  |  | 15,005 |
Vesting of restricted stock units |  |  |  |  |  | 151,003 |  |  | 2 |  |  | (2) |  |  | — |  |  | — |  |  | — |
Stock-based compensation |  |  |  |  |  | — |  |  | — |  |  | 22,915 |  |  | — |  |  | — |  |  | 22,915 |
Net loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (127,553) |  |  | (127,553) |
Other comprehensive loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | (1,287) |  |  | — |  |  | (1,287) |
June 30, 2026 |  |  |  |  |  | 159,755,526 |  |  | $ | 1,924 |  |  | $ | 3,142,747 |  |  | $ | (1,969) |  |  | $ | (2,307,524) |  |  | $ | 835,178 |
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 |  |  |  |  |  | 455,335 |  |  | 5 |  |  | 4,647 |  |  | — |  |  | — |  |  | 4,652 |
Vesting of restricted stock units |  |  |  |  |  | 1,009,121 |  |  | 10 |  |  | (10) |  |  | — |  |  | — |  |  | — |
Stock-based compensation |  |  |  |  |  | — |  |  | — |  |  | 50,887 |  |  | — |  |  | — |  |  | 50,887 |
Net loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (257,089) |  |  | (257,089) |
Other comprehensive loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | (1,081) |  |  | — |  |  | (1,081) |
Balance at June 30, 2025 |  |  |  |  |  | 145,685,442 |  |  | $ | 1,783 |  |  | $ | 2,820,404 |  |  | $ | 939 |  |  | $ | (1,796,073) |  |  | $ | 1,027,053 |
Balance at March 31, 2025 |  |  |  |  |  | 145,251,258 |  |  | $ | 1,778 |  |  | $ | 2,790,825 |  |  | $ | 2,037 |  |  | $ | (1,671,954) |  |  | $ | 1,122,686 |
Issuances under equity incentive plans |  |  |  |  |  | 341,543 |  |  | 4 |  |  | 4,053 |  |  | — |  |  | — |  |  | 4,057 |
Vesting of restricted stock units |  |  |  |  |  | 92,641 |  |  | 1 |  |  | (1) |  |  | — |  |  | — |  |  | — |
Stock-based compensation |  |  |  |  |  | — |  |  | — |  |  | 25,527 |  |  | — |  |  | — |  |  | 25,527 |
Net loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (124,119) |  |  | (124,119) |
Other comprehensive loss |  |  |  |  |  | — |  |  | — |  |  | — |  |  | (1,098) |  |  | — |  |  | (1,098) |
Balance at June 30, 2025 |  |  |  |  |  | 145,685,442 |  |  | $ | 1,783 |  |  | $ | 2,820,404 |  |  | $ | 939 |  |  | $ | (1,796,073) |  |  | $ | 1,027,053 |

See accompanying notes to unaudited condensed consolidated financial statements.
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Denali Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

| Six Months Ended June 30,
| 2026 |  | 2025
Operating activities |  |  |
Net loss | $ | (256,000) |  |  | $ | (257,089) |
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
Depreciation and amortization | 6,414 |  |  | 5,370 |
Stock–based compensation expense | 46,002 |  |  | 50,547 |
Net accretion of discounts on marketable securities | (2,704) |  |  | (6,585) |
Non-cash adjustment to operating lease expense | (2,353) |  |  | (2,161) |
Right-of-use asset amortization for finance lease | 1,831 |  |  | 1,798 |
Non-cash interest expense related to revenue participation right liability | 5,941 |  |  | — |
Other non-cash items | (223) |  |  | — |
Changes in operating assets and liabilities: |  |  |
Accounts receivable, net | (3,927) |  |  | — |
Inventory | (4,139) |  |  | — |
Prepaid expenses and other current assets | (2,613) |  |  | (3,650) |
Other non-current assets | (304) |  |  | 3,022 |
Accounts payable | 4,102 |  |  | (43) |
Accruals and other current liabilities | (19,107) |  |  | (14,151) |
Deferred research and development funding liability | (1,126) |  |  | 16,176 |
Net cash used in operating activities | (228,206) |  |  | (206,766) |
Investing activities |  |  |
Purchases of marketable securities | (394,579) |  |  | (137,926) |
Maturities and sales of marketable securities | 417,032 |  |  | 323,965 |
Purchases of property and equipment | (3,271) |  |  | (9,356) |
Cash paid to acquire finite-lived intangible asset | (28,800) |  |  | — |
Net cash provided by (used in) investing activities | (9,618) |  |  | 176,683 |
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 | 21,700 |  |  | 4,652 |
Payments for finance lease right-of-use asset | (38) |  |  | (6,791) |
Net cash provided by (used in) financing activities | 234,028 |  |  | (2,139) |
Net decrease in cash, cash equivalents and restricted cash | (3,796) |  |  | (32,222) |
Cash, cash equivalents and restricted cash at beginning of period | 208,432 |  |  | 176,535 |
Cash, cash equivalents and restricted cash at end of period | $ | 204,636 |  |  | $ | 144,313 |
Supplemental disclosures of cash flow information |  |  |
Payment due on intangible asset acquired | $ | 7,200 |  |  | $ | — |

See accompanying notes to unaudited condensed consolidated financial statements.
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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 six months ended June 30, 2026 the Company added significant accounting policies related to product revenue, accounts receivable, inventory, cost of goods sold, 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.
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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, marketable securities, and accounts receivable. 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 June 30, 2026 and December 31, 2025, the Company had no off-balance sheet concentrations of credit risk.
The Company’s accounts receivable are primarily related to product sales. For the three and six months ended June 30, 2026, one customer accounted for all product revenues. As of June 30, 2026, one customer accounted for all accounts receivable related to product sales. The Company monitors the creditworthiness of its customers and collaboration partners and has not experienced significant credit losses to date.
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.
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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 six months ended June 30, 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 June 30, 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.
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Accounts Receivable
Accounts receivable represents amounts arising from product sales and is recorded net of allowances for credit losses, if required. The Company estimates an allowance for credit losses by considering factors such as credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The Company's payment terms are generally less than 90 days from the invoice date. The Company evaluates the creditworthiness of each counterparty on a regular basis. As of June 30, 2026, the credit profile of the customer was deemed to be in good standing and, as such, an allowance for credit losses was not recorded.
Revenue Recognition
The Company recognizes product revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”).
In March 2026, the U.S. Food and Drug Administration granted accelerated approval of AVLAYAH™ (tividenofusp alfa-eknm), and the Company commenced commercial sales in the United States during the three months ended June 30, 2026. AVLAYAH is the Company’s only commercial product, and all product revenue to date has been generated in the United States.
Under ASC 606, the Company is required to complete the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company sells AVLAYAH to a single specialty distributor ("Distributor”) in the US, which is the Company's sole customer, who delivers to (i) hospitals where patients are administered the medication in a healthcare setting and (ii) to a specialty pharmacy (“SP”) provider where patients are administered by a healthcare professional in either a healthcare professional or home setting.
The Company’s distribution agreements with the Distributor, together with each accepted purchase order, is accounted for as a contract with a single performance obligation — the delivery of AVLAYAH to the Distributor. Revenue is recognized when the Company satisfies a performance obligation by transferring control of the promised goods to the customer.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring AVLAYAH. The Company sells AVLAYAH at a Wholesale Acquisition Cost (“WAC”) and records product revenue at the net selling price (the transaction price) — WAC reduced by variable consideration and by consideration payable to the Distributor and to other parties in the distribution channel that does not represent payment for a distinct good or service. The Company estimates variable consideration using the most-likely-amount method and includes it in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the related uncertainty is resolved. Estimates are reassessed each reporting period, with any change recognized in net product revenue in the period of change. The components of variable consideration are:
•Distributor service fees — fees payable to the Distributor for distribution. These services are not distinct from the sale of AVLAYAH and the related fees, calculated as a contractual percentage of the WAC of product sold, are recorded as a reduction of product revenue when the related sales are recognized.
•Government rebates — amounts owed under the Medicaid Drug Rebate Program and supplemental state Medicaid agreements, refunds under the Medicare Part B discarded-drug provisions, and rebates to the U.S. Department of Veterans Affairs and the Department of Defense (including under the TRICARE program). The Company estimates these amounts using statutory and contractual rebate
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rates and probability-weighted assumptions for the expected payer and channel mix, recorded as a reduction of product revenue with a corresponding current liability.
•Product returns — the product may be returned only in the limited circumstances specified in the distribution agreement, principally product that is damaged or within a defined period of its expiration date. The Company records a reserve for estimated returns as a reduction of product revenue with a corresponding refund liability.
•Other fees and incentives — amounts payable to a specialty pharmacy that dispenses AVLAYAH purchased through the Distributor and co-pay assistance program for eligible patients with commercial insurance in the U.S. The co-pay assistance programs assist commercially insured patients and are intended to reduce each participating patient’s portion of the financial responsibility of the purchase price up to a specified dollar amount of assistance. The Company records funds paid under co-pay assistance program for each patient as a reduction of revenue.
Variable consideration payable to the Distributor, and to parties against which the Distributor has a contractual right of off-set — Distributor service fees, third-party-logistics fees, and government chargebacks processed through the Distributor is presented as a reduction of accounts receivable. Variable consideration payable to parties other than the Distributor is presented within other accrued costs and current liabilities.
Inventory
Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out ("FIFO") basis. Inventory costs consist primarily of raw materials, third-party contract manufacturing organization ("CMO") costs, and other direct production costs, including allocable overhead, related to our commercial product AVLAYAH. Inventory is valued using standard costing methodology, which approximates actual cost.
Prior to FDA approval, all costs incurred in connection with the manufacture of AVLAYAH were recorded as research and development expenses in the consolidated statements of operations in the period incurred. As of June 30, 2026, we had $12.6 million of expensed pre-launch inventory, which we expect to be sold through by January 2027.
The Company expenses costs associated with the manufacture of product candidates prior to regulatory approval. Inventory consists of the Company’s currently approved product, including raw materials and work-in-process.
The Company began capitalizing inventory costs associated with AVLAYAH upon receiving U.S. Food and Drug Administration ("FDA") accelerated approval in March 2026, at which time the inventory was determined to have probable future economic benefit. Additionally, inventory used in research and development activities is expensed to research and development at the time of such designation.
The Company evaluates its inventory on a periodic basis for obsolescence, slow-moving, excess, or otherwise unsalable items, and records a write-down to net realizable value when the carrying value is in excess of net realizable value and there are no alternative future uses for the inventory, or if inventory quantities exceed expected future demand prior to expiration. If the Company determines an adjustment is required to the carrying value of inventory, those adjustments are recognized as Cost of Goods Sold in the Consolidated Statements of Operations and Comprehensive Loss.
Inventory that is not expected to be consumed beyond our normal operating cycle is classified as non-current inventory and included within other non-current assets in the balance sheet.
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Cost of Goods Sold
Cost of Goods Sold consists primarily of direct and indirect costs related to the manufacture of AVLAYAH for commercial sale, including third-party manufacturing costs, raw material and component costs, packaging services, freight, and storage costs.
Prior to the FDA approval of AVLAYAH in March 2026, costs incurred for the manufacture of AVLAYAH were recorded as research and development expenses and therefore will not be included in cost of sales. As a result, the cost of goods sold related to AVLAYAH will initially reflect a lower average per unit cost of materials, as previously expensed inventory is utilized and sold to customers.
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
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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.
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 June 30, 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 11.
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.
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2. Fair Value Measurements
Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands):

| June 30, 2026
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Cash equivalents: |  |  |  |  |  |  |
Money market funds | $ | 148,024 |  |  | $ | — |  |  | $ | — |  |  | $ | 148,024 |
Short-term marketable securities: |  |  |  |  |  |  |
U.S. government treasuries | 408,829 |  |  | — |  |  | — |  |  | 408,829 |
Corporate debt securities | — |  |  | 100,112 |  |  | — |  |  | 100,112 |
Long-term marketable securities: |  |  |  |  |  |  |
U.S. government treasuries | 163,401 |  |  | — |  |  | — |  |  | 163,401 |
Corporate debt securities | — |  |  | 66,133 |  |  | — |  |  | 66,133 |
Total | $ | 720,254 |  |  | $ | 166,245 |  |  | $ | — |  |  | $ | 886,499 |

| 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 six months ended June 30, 2026 or for the year ended December 31, 2025.
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3. Marketable Securities
All marketable securities were considered available-for-sale at June 30, 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):

| June 30, 2026
| Amortized Cost |  | Unrealized Holding Gains |  | Unrealized Holding Losses |  | Aggregate Fair Value
Short-term marketable securities: |  |  |  |  |  |  |
U.S. government treasuries | $ | 409,364 |  |  | $ | 20 |  |  | $ | (555) |  |  | $ | 408,829 |
Corporate debt securities | 100,342 |  |  | 16 |  |  | (246) |  |  | 100,112 |
Total short-term marketable securities | 509,706 |  |  | 36 |  |  | (801) |  |  | 508,941 |
Long-term marketable securities: |  |  |  |  |  |  |
U.S. government treasuries | 164,059 |  |  | — |  |  | (658) |  |  | 163,401 |
Corporate debt securities | 66,328 |  |  | — |  |  | (195) |  |  | 66,133 |
Total long-term marketable securities | 230,387 |  |  | — |  |  | (853) |  |  | 229,534 |
Total | $ | 740,093 |  |  | $ | 36 |  |  | $ | (1,654) |  |  | $ | 738,475 |

| 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 June 30, 2026 and December 31, 2025, some of the Company's marketable securities were in an unrealized loss position. The Company has not recognized an allowance for credit losses as of June 30, 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 June 30, 2026, all of the Company’s marketable securities have an effective maturity of less than two years.
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4. Inventory
Inventory consisted of the following (in thousands):

| June 30, 2026 |  | December 31, 2025 |  |  |  |
Raw materials | $ | — |  |  | $ | — |  |  |  |  |
Work in process | 4,139 |  |  | — |  |  |  |  |
Finished goods | — |  |  | — |  |  |  |  |
Total inventory | $ | 4,139 |  |  | $ | — |  |  |  |  |

No adjustments to the carrying value of inventory were recorded during the three and six months ended June 30, 2026 and 2025, respectively. All inventory as of June 30, 2026 is classified as current.
5. 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 is amortized on a straight-line basis over its estimated useful life. The Company paid $28.8 million of the milestone payment during the three months ended June 30, 2026, and the remaining $7.2 million is included in accounts payable in the Condensed Consolidated Balance Sheet as of June 30, 2026.
The Company recognized amortization expense of $0.7 million for the three and six months ended June 30, 2026. As of June 30, 2026, the accumulated amortization expense was $0.7 million, and the carrying value of the intangible asset was $35.3 million.
Future annual amortization expense for the unamortized intangible assets is as follows (in thousands):

Years Ending December 31: |  | Amount
2026 (six months) |  | $ | 1,500 |
2027 |  | 3,000 |
2028 |  | 3,000 |
2029 |  | 3,000 |
2030 |  | 3,000 |
Thereafter |  | 21,750 |
Total |  | $ | 35,250 |

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.
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6. 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 the third party to provide up to $75.0 million of funding and collaborate with the Company to conduct a global Phase 2a study of 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 received $12.5 million during the three months ended June 30, 2026, resulting in cumulative payments received of $62.5 million as of June 30, 2026. Payments received are recorded as a deferred research and development funding liability and recognized as an offset to research and development expenses as the underlying research and development costs are incurred. The Company recognized an offset to research and development expenses of $7.6 million and $3.8 million for the three months ended June 30, 2026 and 2025, respectively, and $13.6 million and $8.8 million for the six months ended June 30, 2026 and 2025, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company recorded current deferred research and development funding liabilities of $20.0 million and $21.1 million on the Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025, respectively.
7. 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.
In May 2026, the Company and Biogen announced topline results from the Phase 2b LUMA study of BIIB122/DNL151 in individuals with early-stage Parkinson’s disease. The LUMA study did not meet its primary or secondary endpoints. Based on these results, the Company and Biogen discontinued further development of BIIB122 in idiopathic Parkinson's disease. The Company continues to independently conduct the Phase 2a BEACON study evaluating the small molecule inhibitor in carriers of a pathogenic LRRK2 variant.
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 June 30, 2026 or December 31, 2025. As of June 30, 2026, the Company had not recorded milestone revenue or product sales under the Biogen Collaboration Agreement.
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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 June 30, 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 June 30, 2026, the Company had earned milestone payments of $100.0 million and had not 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 PTV:PGRN collaboration agreement in its entirety. As a result, the Company regained full rights to DNL593 and the related intellectual property portfolio. Subsequent to the effective date of the termination, there are no future milestones, cost, or profit sharing obligations related to this agreement. The Company did not recognize any revenue, gain, asset or other material accounting impact in connection with the termination, other than the final cost-sharing settlement. The final cost-sharing settlement related to the PTV:PGRN Collaboration Agreement is reflected in the cost sharing table below.
As of June 30, 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 not recorded any product sales under either agreement.
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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 June 30, |  | Six Months Ended June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Takeda Collaboration Agreement: |  |  |  |  |  |  |
PTV:PGRN cost sharing (reimbursements) | $ | (1,513) |  |  | $ | (1,439) |  |  | $ | (3,130) |  |  | $ | (2,935) |
ATV:TREM2 cost sharing (reimbursements) | — |  |  | (10) |  |  | — |  |  | (147) |
Total Takeda cost sharing (reimbursements)(1) | (1,513) |  |  | (1,449) |  |  | (3,130) |  |  | (3,082) |
Biogen Collaboration Agreement: LRRK2 cost sharing payments(2) | 2,024 |  |  | 4,229 |  |  | 5,887 |  |  | 8,880 |
Net cost sharing payments (reimbursements) | $ | 511 |  |  | $ | 2,780 |  |  | $ | 2,757 |  |  | $ | 5,798 |

_________________________________
(1)Cost sharing reimbursements of $1.5 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 June 30, 2026 and December 31, 2025, respectively.
(2)Cost sharing payments due to Biogen of $2.0 million and $2.8 million were recorded within other accrued costs and current liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025, respectively.
8. Balance Sheet Components
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consists of the following (in thousands):

| As of
| June 30, 2026 |  | December 31, 2025
Accrued compensation | $ | 13,424 |  |  | $ | 32,179 |
Accrued clinical and other research & development costs | 19,871 |  |  | 22,283 |
Accrued manufacturing costs | 10,659 |  |  | 5,336 |
Operating lease liability, current | 10,084 |  |  | 9,463 |
Finance lease liability, current | 97 |  |  | 83 |
Deferred research and development funding liability, current | 19,975 |  |  | 21,101 |
Other accrued costs and current liabilities | 4,166 |  |  | 7,401 |
Total accrued expenses and other current liabilities | $ | 78,276 |  |  | $ | 97,846 |

9. 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 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.
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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.
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 June 30, 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 June 30, 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 June 30, 2026, the Company's estimate of total future royalty payments resulted in an effective annual interest rate of approximately 12% and recorded $5.9 million of non-cash interest expense during the three months ended June 30, 2026. No payments were made during the three and six months ended June 30, 2026.
As of June 30, 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.
10. 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 and six months ended June 30, 2026 or 2025.
The following table summarizes lease costs recognized for the periods presented (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Operating lease cost | $ | 1,821 |  |  | $ | 1,893 |  |  | $ | 3,674 |  |  | $ | 3,786 |
Finance lease cost: |  |  |  |  |  |  |
Amortization of ROU assets | 915 |  |  | 911 |  |  | 1,831 |  |  | 1,798 |
Interest | 178 |  |  | 180 |  |  | 357 |  |  | 361 |
Variable lease cost | 1,792 |  |  | 1,338 |  |  | 2,832 |  |  | 2,691 |
Total lease costs | $ | 4,706 |  |  | $ | 4,322 |  |  | $ | 8,694 |  |  | $ | 8,636 |

Operating cash flows for operating leases were $3.0 million and $2.9 million for the three months ended June 30, 2026 and 2025, respectively, and $6.0 million and $5.8 million for the six months ended June 30, 2026 and 2025, respectively.
Indemnification
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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 $104.7 million as of June 30, 2026, of which $91.9 million related 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.
11. 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 June 30, 2026, 28,331,779 shares of pre-funded warrants remained outstanding, and no pre-funded warrants were exercised during the six months ended June 30, 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.
12. 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.
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Stock Option Activity
The following table summarizes stock option activity for the six months ended June 30, 2026:

| Number of Options |  | Weighted-Average Exercise Price
Balance at December 31, 2025 | 21,326,333 |  |  | $ | 26.39 |
Granted | 2,601,349 |  |  | 16.84 |
Exercised | (992,867) |  |  | 15.81 |
Forfeited | (698,185) |  |  | 21.15 |
Expired | (893,471) |  |  | 34.89 |
Balance at June 30, 2026 | 21,343,159 |  |  | $ | 25.53 |
Vested and expected to vest at June 30, 2026 | 21,343,159 |  |  | $ | 25.53 |
Exercisable at June 30, 2026 | 14,065,727 |  |  | $ | 28.80 |

The estimated fair value of stock options granted to employees were calculated using the Black-Scholes option-pricing model using the following assumptions:

| Six Months Ended June 30,
| 2026 |  | 2025
Expected term (in years) | 5.50 - 6.08 |  | 5.50 - 6.08
Volatility | 61.7% - 66.7% |  | 64.8% - 68.7%
Risk-free interest rate | 3.7% - 4.3% |  | 3.7% - 4.5%
Dividend yield | — |  | —

Restricted Stock Activity
The following table summarizes restricted stock unit ("RSU") activity for the six months ended June 30, 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 | 3,385,121 |  |  | 16.52 |
Vested and released | (1,341,956) |  |  | 23.92 |
Forfeited | (563,254) |  |  | 19.84 |
Unvested and expected to vest at June 30, 2026 | 6,604,540 |  |  | $ | 18.78 |

Stock-Based Compensation Expense
The Company’s results of operations include expenses relating to stock-based compensation as follows (in thousands):

| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Research and development | $ | 13,453 |  |  | $ | 15,188 |  |  | $ | 27,047 |  |  | $ | 30,325 |
General and administrative | 9,462 |  |  | 10,199 |  |  | 18,955 |  |  | 20,222 |
Total | $ | 22,915 |  |  | $ | 25,387 |  |  | $ | 46,002 |  |  | $ | 50,547 |

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13. 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 June 30, |  | Six Months Ended June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Numerator: |  |  |  |  |  |  |
Net loss | $ | (127,553) |  |  | $ | (124,119) |  |  | $ | (256,000) |  |  | $ | (257,089) |
Denominator: |  |  |  |  |  |  |
Weighted average number of: |  |  |  |  |  |  |
Common stock shares outstanding | 158,982,722 |  |  | 145,403,782 |  |  | 158,645,833 |  |  | 145,290,503 |
Pre-funded warrants | 28,331,779 |  |  | 26,046,065 |  |  | 28,331,779 |  |  | 26,046,065 |
Total | 187,314,501 |  |  | 171,449,847 |  |  | 186,977,612 |  |  | 171,336,568 |
Net loss per share | $ | (0.68) |  |  | $ | (0.72) |  |  | $ | (1.37) |  |  | $ | (1.50) |

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 28.5 million and 28.5 million shares as of June 30, 2026 and 2025, respectively.
14. 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 June 30, 2026 and December 31, 2025.
15. 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 and six months ended June 30, 2026 and 2025 (in thousands):
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| Therapeutics Segment
| Three Months Ended June 30, |  | Six Months Ended June 30, |
| 2026 |  | 2025 |  | 2026 |  | 2025 |
Product revenue, net | $ | 3,604 |  |  | $ | — |  |  | $ | 3,604 |  |  | $ | — |  |
Less: |  |  |  |  |  |  |  |
Cost of goods sold | 93 |  |  | — |  |  | 93 |  |  | — |  |
External research and development expenses - TV programs, including cost sharing | 40,419 |  |  | 37,594 |  |  | 78,883 |  |  | 84,052 |  |
Other research and development expenses, including small molecule programs | 16,494 |  |  | 24,847 |  |  | 40,048 |  |  | 54,347 |  |
Personnel related research and development expenses | 40,106 |  |  | 40,255 |  |  | 81,934 |  |  | 80,524 |  |
Total research and development expenses | 97,019 |  |  | 102,696 |  |  | 200,865 |  |  | 218,923 |  |
Personnel related selling, general and administrative expenses | 22,921 |  |  | 20,115 |  |  | 45,485 |  |  | 38,853 |  |
Other selling, general and administrative expenses | 13,362 |  |  | 12,152 |  |  | 24,309 |  |  | 22,767 |  |
Total selling, general and administrative expenses | 36,283 |  |  | 32,267 |  |  | 69,794 |  |  | 61,620 |  |
Intangible asset amortization | $ | 750 |  |  | $ | — |  |  | $ | 750 |  |  | $ | — |  |
Segment operating expenses | 134,145 |  |  | 134,963 |  |  | 271,502 |  |  | 280,543 |  |
Segment loss from operations | (130,541) |  |  | (134,963) |  |  | (267,898) |  |  | (280,543) |  |
Segment interest and other income, net | 2,988 |  |  | 10,844 |  |  | 11,898 |  |  | 23,454 |  |
Segment net loss | $ | (127,553) |  |  | $ | (124,119) |  |  | $ | (256,000) |  |  | $ | (257,089) |  |

There is no difference between the segment net loss and total consolidated net loss for the three and six months ended June 30, 2026 and 2025.
16. Subsequent Event
On June 12, 2026, the Company entered into an asset purchase agreement (the "PRV Transfer Agreement") pursuant to which the Company agreed to sell its Rare Pediatric Disease Priority Review Voucher ("PRV") for gross proceeds of $195.0 million in cash. The Company received the PRV in connection with the FDA accelerated approval of AVLAYAH in March 2026. On July 27, 2026, the Company completed the sale and received gross proceeds of $195.0 million pursuant to the terms of the PRV Transfer Agreement. No proceeds or gain from the sale were recognized in the condensed consolidated financial statements as of and for the three and six months ended June 30, 2026.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans, and expectations related to future events and our future financial performance that involve risks, uncertainties, and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts, and projections. Our actual results and the timing of selected events coul d differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q.
Forward-looking statements include, but are not limited to, statements about:
•the commercial success of AVLAYAH and any other products for which we obtain marketing approval;
•the progress, success, cost, and timing of our development activities, preclinical studies and clinical trials, and in particular the development of our blood-brain barrier (“BBB”) platform technology, programs, and biomarkers, including the initiation and completion of studies or trials and related preparatory work, enrollment in such trials, the timing of when data from clinical trials will become available, the advancement of new molecule entities into clinical development and related timing, and the filing of investigational new drug applications or clinical trial applications;
•the impact of preclinical findings on our ability to achieve exposures of our product candidates that allow us to explore a robust pharmacodynamic range of these candidates in humans;
•the expected potential benefits and potential revenue resulting from strategic collaborations with third parties and our ability to attract collaborators with development, regulatory, and commercialization expertise;
•the timing or likelihood of regulatory filings and approvals;
•our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations, and/or warnings in the label of any approved product candidate;
•the extent to which any dosing limitations that we have been subject to, and/or may be subject to in the future, may affect the success of our product candidates;
•the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;
•the terms and conditions of licenses granted to us and our ability to license and/or acquire additional intellectual property relating to our product candidates and Transport Vehicle TM ("TV");
•our ability to obtain funding for our operations, including funding necessary to develop and commercialize our current and potential future product candidates;
•future agreements with third parties in connection with the commercialization of our product candidates;
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•the size and growth potential of the markets for AVLAYAH and any other product candidates and our ability to serve those markets;
•the rate and degree of market acceptance of our product candidates;
•existing regulations and regulatory developments in the United States and foreign countries;
•potential claims relating to our intellectual property and third-party intellectual property;
•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
•our ability to successfully conduct in-house manufacturing;
•the pricing and reimbursement of AVLAYAH and any other product candidates that receive approval;
•the success of competing products or platform technologies that are or may become available;
•our ability to attract and retain key managerial, scientific, and medical personnel;
•the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;
•our ability to enhance operational, financial, and information management systems;
•the impact of adverse economic conditions such as instability in the financial services sector, rising interest rates, rising inflation and increased labor market competition;
•the impact of increased geopolitical uncertainty and related global economic disruptions and social conditions on our business; and
•our financial performance.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Risk Factors.” In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements reflect our beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report on Form 10-Q and are subject to risks and uncertainties. We discuss many of these risks in greater detail in the section entitled “Risk Factors” included in Part II, Item 1A and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events, or otherwise.
Overview
Key elements of our strategy include:
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1)Discover: Invent a new class of barrier-crossing therapeutics by leveraging our TV platforms and deep expertise in blood-brain barrier ("BBB") biology to enhance the delivery of biotherapeutics to the brain and throughout the body.
2)Develop: Accelerate and expand a broad portfolio of TV-based product candidates to fully unlock the potential of barrier-crossing therapeutics, applying patient-informed development and driving biomarker-guided regulatory approvals.
3)Deliver: Launch initial products targeting rare lysosomal storage diseases as a strategic foundation for expansion into common neurodegenerative conditions and other serious diseases, while building integrated capabilities for long-term growth and profitability.
Commercial Product: AVLAYAH TM
We currently have one approved product. Our commercial product, AVLAYAH TM (tividenofusp alfa-eknm) received accelerated approval from the U.S. Food and Drug Administration ("FDA") on March 24, 2026 and is approved for the treatment of neurologic manifestations in patients with Hunter syndrome or mucopolysaccharidoses II (MPS II) when initiated in presymptomatic or symptomatic pediatric patients weighing at least 5 kg prior to advanced neurologic impairment. AVLAYAH's accelerated approval was based on a surrogate endpoint (reduction in CSF HS), and continued approval is contingent upon confirmation of clinical benefit in the ongoing global Phase 2/3 COMPASS trial, as further described under "Clinical-Stage Programs" below.
We began commercial distribution of AVLAYAH in April 2026. Since launch, our commercial activities have focused on executing our commercialization strategy, including supporting product availability through market access, specialty distribution and patient support services.
In connection with the approval of AVLAYAH, the FDA granted us a Rare Pediatric Disease Priority Review Voucher ("PRV"). In June 2026, we entered into an agreement to sell the PRV for gross proceeds of $195.0 million. The transaction closed and proceeds were received in July 2026.
Clinical-Stage Programs
•Tividenofusp alfa-eknm (ETV:IDS), is an ETV-enabled enzyme replacement therapy designed to systemically deliver iduronate 2-sulfatase (IDS) throughout the body, including the brain for the treatment of neurologic manifestations of Hunter syndrome (MPS II). The ongoing global Phase 2/3 COMPASS study is intended to support generation of confirmatory evidence, expansion of the U.S. label to adult patients and future global regulatory submissions;
•Zafinofusp alfa (DNL126; ETV:SGSH) is an investigational ETV-enabled enzyme replacement therapy designed to systemically deliver N-sulfoglucosamine sulfohydrolase (SGSH) throughout the body, including the brain, for the treatment of Sanfilippo syndrome type A (MPS IIIA);
•DNL593 (PTV:PGRN) is an investigational Protein TransportVehicle (PTV)-enabled protein replacement therapy designed to systemically deliver progranulin (PGRN) across the blood-brain barrier for the treatment of granulin (GRN)-related frontotemporal dementia (FTD-GRN);
•DNL952 (ETV:GAA) is an investigational ETV-enabled enzyme replacement therapy designed to systemically deliver acid alpha-glucosidase (GAA) to muscle tissue and the brain by crossing the blood-brain barrier for the treatment of Pompe disease;
•DNL628 (OTV:MAPT) is an investigational Oligonucleotide TransportVehicle (OTV)-enabled antisense oligonucleotide designed for systemic delivery across the blood-brain barrier to reduce tau by targeting the MAPT gene for the treatment of Alzheimer's disease ("AD");
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•DNL921 (ATV:Abeta) is an investigational Antibody TransportVehicle (ATV)-enabled antibody designed for systemic delivery across the blood-brain barrier to target amyloid plaques for the treatment of Alzheimer's disease. In the first half of 2026, we submitted a clinical trial application ("CTA") to initiate a Phase 1/1b study of DNL921;
•DNL151 is an investigational small molecule inhibitor of leucine-rich repeat kinase 2 (LRRK2) for the treatment of Parkinson's disease. Denali conducts the Phase 2a BEACON study evaluating DNL151 in individuals with Parkinson's disease who are confirmed by genetic testing to be carriers of a pathogenic LRRK2 variant; and
•Eclitasertib (SAR443122/DNL758), a peripheral and non-central nervous system ("CNS") penetrant small molecule RIPK1 inhibitor, is being developed by Sanofi to address peripheral inflammatory diseases such as ulcerative colitis ("UC").
The following table summarizes key information about our ongoing clinical studies for our approved product and clinical-stage programs:

Program |  | Product Candidate |  | Clinical Study(ies) |  | Indication |  | Operational Control
ETV:IDS |  | tividenofusp alfa |  | Ph 1/2 |  | Hunter syndrome (MPS II) |  | Denali
|  | Ph 2/3 |  |
ETV:SGSH |  | zafinofusp alfa |  | Ph 1/2 |  | Sanfilippo syndrome Type A (MPS IIIA) |  | Denali
PTV:PGRN |  | DNL593 |  | Ph 1/2 |  | FTD-GRN |  | Denali
ETV:GAA |  | DNL952 |  | Ph 1 |  | Pompe disease |  | Denali
OTV:MAPT |  | DNL628 |  | Ph 1b |  | Alzheimer’s disease |  | Denali
ATV: Abeta |  | DNL 921 |  | Ph 1/1b |  | Alzheimer’s disease |  | Denali
LRRK2 |  | DNL151 |  | Ph 2a |  | Parkinson's disease |  | Denali
RIPK1 (Peripheral) |  | eclitasertib, or SAR443122/DNL758 |  | Ph 2 |  | UC |  | Sanofi

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Since we commenced operations, we have devoted substantially all of our resources to discovering, acquiring and developing product candidates, building our TV platform, assembling our core capabilities in understanding key neurodegenerative and lysosomal storage disease pathways, operationalizing clinical trials, building manufacturing capabilities and establishing commercial capabilities.
Key operational and financing milestones in 2026 to date include:
•In January 2026, we announced that the FDA has lifted the clinical hold on the IND application for DNL952 (ETV:GAA), and we are enrolling the Phase 1 study;
•In January 2026, we announced that the CTA for DNL628 (OTV:MAPT) to initiate a Phase 1b study in Alzheimer’s disease was approved. In March 2026, the first patient was dosed in the Phase 1b study of DNL628;
•In February 2026, we presented preliminary open-label Phase 1/2 data for our zafinofusp alfa study at the 2026 WORLDSymposium demonstrating that treatment with zafinofusp alfa resulted in substantial reductions in both cerebrospinal fluid (CSF) and urine heparan sulfate (HS), including normalization of CSF HS, with a safety profile generally consistent with established enzyme replacement therapies;
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•In March 2026, we announced the FDA granted accelerated approval for AVLAYAH, the first FDA-approved biologic specifically designed to cross the blood-brain barrier and reach the whole body, including the brain. We began commercial distribution of AVLAYAH in April 2026. In connection with the approval of AVLAYAH, the FDA granted us a Rare Pediatric Disease PRV;
•In March 2026, we received $200.0 million in gross proceeds in connection with the closing of the synthetic royalty funding agreement with Royalty Pharma Investments 2023 ICAV (“Royalty Pharma”);
•In April 2026, we received notification from Takeda of its decision to terminate the collaboration agreement to co-develop and co-commercialize DNL593 (PTV:PGRN) for FTD-GRN. The termination became effective in June 2026, at which time all rights in the DNL593 program reverted to Denali. Takeda’s decision to terminate the collaboration agreement for DNL593 was driven by strategic considerations and not related to efficacy or safety data. We continue to conduct the Phase 1/2 study of DNL593 for FTD-GRN;
•In May 2026, we and Biogen announced topline results from the Phase 2b LUMA study of BIIB122/DNL151 in individuals with early-stage Parkinson's disease. The LUMA study did not meet its primary or secondary endpoints, and we and Biogen decided to discontinue further development of BIIB122/DNL151 in idiopathic Parkinson's disease. We continue to independently conduct the Phase 2a BEACON study evaluating DNL151 in individuals with Parkinson's disease who carry a pathogenic LRRK2 variant;
•In June 2026, we entered into a definitive agreement to sell our Rare Pediatric Disease Priority Review Voucher for gross proceeds of $195.0 million. The transaction closed and proceeds were received in July 2026; and
•In the first half of 2026, we submitted a clinical trial application to initiate a Phase 1/1b study of DNL921 (ATV:Abeta) in healthy volunteers and participants with Alzheimer's disease, and we are conducting the study;
Until March 2026, we had no clinical products approved for commercial sale and thus had not generated any revenue from product candidates that are or were under development. Subsequent to receiving FDA approval for AVLAYAH, we began commercial distribution in April 2026. We expect it to take time to generate sufficient revenue to offset our expenses, and we can provide no assurance as to when, if ever, this will occur. Through June 30, 2026, we have funded our operations primarily from the issuance and sale of convertible preferred stock, the sale of common stock and pre-funded warrants to purchase shares of our common stock in public offerings and private placements, and payments received from our collaboration, synthetic royalty and other funding agreements with Takeda, Sanofi, Biogen, Royalty Pharma and other third parties.
We have incurred significant operating losses to date and expect to continue to incur operating losses for the foreseeable future. We had net losses of $127.6 million and $256.0 million for the three and six months ended June 30, 2026, respectively, and $124.1 million and $257.1 for the three and six months ended June 30, 2025, respectively. As of June 30, 2026, we had an accumulated deficit o f $2.31 billion. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candida tes. We e xpect to continue to incur significant expenses and operating losses as we advance our approved product AVLAYAH to full US and broader global approval; advance our current clinical stage programs through healthy volunteer and patient trials; broaden and improve our TV platform; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel.
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Through 2024, we relied entirely on third-party contract manufacturers to manufacture and supply our preclinical and clinical materials to be used during the development of our product candidates through 2024. In early 2025, we opened our clinical biomanufacturing facility in Salt Lake City, Utah, expanding U.S. manufacturing capabilities and strengthening supply chain control and operational efficiency. Going forward, we plan to use both our SLC facility and third-party contract manufacturers to supply our preclinical and clinical materials. We currently use third-party contract manufacturers to supply commercial product of AVLAYAH, and expect to continue to do so for the foreseeable future.
Components of Operating Results
Product Revenue
Following FDA approval of AVLAYAH in March 2026, we commenced commercial distribution in the United States during the second quarter of 2026. Product revenue consists of sales of AVLAYAH, our only commercial product, and is recognized at the net selling price. Product revenue is reduced by estimates of variable consideration, including distributor service fees, government rebates, product returns and other fees and incentives. Product revenue may fluctuate based on patient demand, reimbursement, payer mix and distributor ordering patterns.
Operating Expenses
Cost of Goods Sold
Cost of goods sold consists primarily of direct and indirect costs related to the manufacture of AVLAYAH for commercial distribution, including third-party manufacturing costs, raw material and component costs, packaging services, freight, and storage costs.
Research and Development
Research and development activities account for a significant portion of our operating expenses. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and TV platform include:
•external research and development expenses, including:
–expenses incurred under arrangements with third parties, such as contract research organizations ("CROs"), preclinical testing organizations, contract development and manufacturing organizations ("CDMOs"), academic and non-profit institutions and consultants;
–expenses to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;
–fees related to our license and collaboration agreements;
•personnel related expenses, including salaries, benefits and stock-based compensation expense; and
•other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.
A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis once a program has commenced late-stage IND-enabling studies.
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Program expenses include expenses associated with our most advanced product candidates and the discovery and development of backup or next-generation molecules. We also track external expenses associated with our TV platform. These expenses include external expenses incurred by us relating to our Takeda Collaboration Agreement and Biogen Collaboration Agreement. Al l external costs associated with earlier stage programs, or that benefit the entire portfolio, are tracked as a group. We also incur personnel and other operating expenses for our research and development programs which are presented in aggregate. These expenses primarily relate to salaries and benefits, stock-based compensation, facility expenses including rent and depreciation, and lab consumables. Where we share costs with our collaboration partners, such as in our Biogen Collaboration Agreement and Takeda Collaboration Agreement, research and development expenses may include cost sharing reimbursements from, or payments to, our collaboration partners. Further, where we receive R&D funding from third parties, this may be recognized as a reduction to research and development expenses.
It is challenging to predict the nature, timing and estimated long-range costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. This is made more challenging by events outside of our control, such as increased geopolitical uncertainty. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:
•our ability to add and retain key research and development and commercial, sales and marketing personnel;
•our ability to establish an appropriate safety profile with IND-enabling toxicology studies;
•our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;
•our successful enrollment in and completion of clinical trials;
•the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;
•our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules;
•our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved;
•the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;
•our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;
•our receipt of marketing approvals from applicable regulatory authorities;
•our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and
•the continued acceptable safety profiles of the product candidates following approval.
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A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase at least over the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
Selling, General and Administrative
Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and stock-based compensation expense, expenses for outside professional services, commercialization activities, and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees, including those associated with our commercial organization. Allocated expenses consist of rent, depreciation and other expenses related to our office and research and development facility not otherwise included in research and development expenses. We have increased our headcount to support the commercialization of AVLAYAH and may continue to increase headcount to support our commercial and research and development activities, which we expect will increase selling, general and administrative expenses.
Intangible Asset Amortization
Intangible asset amortization consists of amortization of our intangible asset, which represents the developed technology recognized in connection with the FDA approval of AVLAYAH in March 2026. We amortize this asset on a straight-line basis over its estimated useful life. We began recognizing intangible asset amortization in the second quarter of 2026 and did not record any such expense prior to that period.
Interest and Other Income, Net
Interest and other income, net, consists pr imarily of interest income, investment income earned on our cash, cash equivalents and marketable securities, and sublease income, as well as an offset for non-cash interest expense related to the revenue participation right liability and interest expense on our finance lease liability.
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Results of Operations
Comparison of the three and six months ended June 30, 2026 and 2025
The following table sets forth the significant components of our results of operations (in thousands):

| Three Months Ended June 30, |  | Change
| 2026 |  | 2025 |  | $ |  | % |
Revenue: |  |  |  |  |  |  |  |
Product revenue, net | $ | 3,604 |  |  | $ | — |  |  | $ | 3,604 |  |  | * | %
Total revenue | 3,604 |  |  | — |  |  | 3,604 |  |  | * |
Operating expenses: |  |  |  |  |  |  |  |
Cost of goods sold | 93 |  |  | — |  |  | 93 |  |  | * |
Research and development | 97,019 |  |  | 102,696 |  |  | (5,677) |  |  | (6) |  |
Selling, general and administrative | 36,283 |  |  | 32,267 |  |  | 4,016 |  |  | 12 |  |
Intangible asset amortization | 750 |  |  | — |  |  | 750 |  |  | * |
Total operating expenses | 134,145 |  |  | 134,963 |  |  | (818) |  |  | (1) |  |
Loss from operations | (130,541) |  |  | (134,963) |  |  | 4,422 |  |  | (3) |  |
Interest and other income, net | 2,988 |  |  | 10,844 |  |  | (7,856) |  |  | (72) |  |
Net loss | $ | (127,553) |  |  | $ | (124,119) |  |  | $ | (3,434) |  |  | 3 |  | %

| Six Months Ended June 30, |  | Change
| 2026 |  | 2025 |  | $ |  | % |
Revenue: |  |  |  |  |  |  |  |
Product revenue, net | $ | 3,604 |  |  | $ | — |  |  | $ | 3,604 |  |  | * | %
Total revenue | 3,604 |  |  | — |  |  | 3,604 |  |  | * |
Operating expenses: |  |  |  |  |  |  |  |
Cost of goods sold | 93 |  |  | — |  |  | 93 |  |  | * |
Research and development | 200,865 |  |  | 218,923 |  |  | (18,058) |  |  | (8) |  |
Selling, general and administrative | 69,794 |  |  | 61,620 |  |  | 8,174 |  |  | 13 |  |
Intangible asset amortization | 750 |  |  | — |  |  | 750 |  |  | * |
Total operating expenses | 271,502 |  |  | 280,543 |  |  | (9,041) |  |  | (3) |  |
Loss from operations | (267,898) |  |  | (280,543) |  |  | 12,645 |  |  | (5) |  |
Interest and other income, net | 11,898 |  |  | 23,454 |  |  | (11,556) |  |  | (49) |  |
Net loss | $ | (256,000) |  |  | $ | (257,089) |  |  | $ | 1,089 |  |  | — |  | %

_____________________________________________
*Percentage is not meaningful.
Product revenue, net
Product revenue was $3.6 million for the three and six months ended June 30, 2026, compared to no product revenue in the prior-year periods. The increase was due to the FDA approval of AVLAYAH in March 2026 and commencement of commercial sales in the United States during the second quarter of 2026. Product revenue reflects sales of AVLAYAH, net of estimates for variable consideration, including distributor service fees, government rebates, product returns and other fees and incentives.
Cost of goods sold
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Cost of goods sold was $0.1 million for the three and six months ended June 30, 2026, compared to no cost of goods sold in the prior-year periods. Because manufacturing costs incurred prior to FDA approval of AVLAYAH were expensed to research and development, cost of goods sold during the initial commercialization period reflects a lower average per-unit cost of materials as previously expensed inventory is sold.
Research and development expen ses
Research and development expenses were $97.0 million and $102.7 million for the three months ended June 30, 2026 and 2025, respectively, and $200.9 million and $218.9 million for the six months ended June 30, 2026 and 2025, respectively.
The following tables provide a breakdown of our research and development expenses by category (in thousands):

| Three Months Ended June 30, |  | Change |
| 2026 |  | 2025 |  | $ |  | % |
External research and development expenses - TV programs, including cost sharing | $ | 40,419 |  |  | $ | 37,594 |  |  | $ | 2,825 |  |  | 8 |  | %
Other research and development expenses, including small molecule programs | 16,494 |  |  | 24,847 |  |  | (8,353) |  |  | (34) |  |
Personnel related expenses(1) | 40,106 |  |  | 40,255 |  |  | (149) |  |  | — |  |
Total research and development expenses | $ | 97,019 |  |  | $ | 102,696 |  |  | $ | (5,677) |  |  | (6) |  | %

__________________________________________________
(1)Personnel related expenses include stock-based compensation expense of $13.5 million and $15.2 million for the three months ended June 30, 2026 and 2025, respectively, reflecting a decrease of $1.7 million.
The decrease in research and development expenses of approximately $5.7 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, was primarily attributable to the following:
•a decrease of $8.4 million in other research and development expenses is driven by lower cost for BIIB122/DNL151 and DNL343; partially offset by increased purchasing of raw materials at our large molecule manufacturing facility in Salt Lake City, Utah;
•an increase of $2.8 million in TV programs external research and development expenses is driven by manufacturing expenses and clinical expenses for zafinofusp alfa; partially offset by lower manufacturing expenses for DNL628, and lower clinical expense for tividenofusp alfa.

| Six Months Ended June 30, |  | Change |
| 2026 |  | 2025 |  | $ |  | % |
External research and development expenses - TV programs, including cost sharing | $ | 78,883 |  |  | $ | 84,052 |  |  | $ | (5,169) |  |  | (6) |  | %
Other research and development expenses | 40,048 |  |  | 54,347 |  |  | (14,299) |  |  | (26) |  |
Personnel related expenses(1) | 81,934 |  |  | 80,524 |  |  | 1,410 |  |  | 2 |  |
Total research and development expenses | $ | 200,865 |  |  | $ | 218,923 |  |  | $ | (18,058) |  |  | (8) |  | %

(1)Personnel related expenses include stock-based compensation expense of $27.0 million and $30.3 million for the six months ended June 30, 2026 and 2025 respectively, reflecting a decrease of $3.3 million.
The decrease in research and development expenses of approximately $18.1 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, was primarily attributable to the following:
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•a decrease of $14.3 million in other research and development expenses is driven by lower clinical expenses for BIIB122/DNL151 and DNL343; partially offset by increased purchasing of raw material at our large molecule manufacturing facility in Salt Lake City, Utah;
•a decrease of $5.2 million in external TV research and development expenses driven by lower external manufacturing expense partially offset by higher clinical expenses for zafinofusp alfa, DNL952 and DNL628, and higher pre-clinical expenses;
•an increase of $1.4 million in personnel-related expenses driven by increased headcount year over year.
Selling general and administrative expenses
Selling, general and administrative expense was $36.3 million and $32.3 million for the three months ended June 30, 2026 and 2025 respectively. The $4.0 million increase was primarily driven by:
•An increase of $2.8 million in personnel expenses driven by increased headcount related to the commercial launch of AVLAYAH
•An increase of $1.2 million in other selling general and administration costs driven by increased South San Francisco site costs
Selling, general and administrative expense was $69.8 million and $61.6 million for the six months ended June 30, 2026, and 2025, respectively. The $8.2 million increase was primarily driven by:
•An increase of $6.6 million in personnel expenses driven by increased headcount related to the commercial launch of AVLAYAH
•An increase of $1.5 million in other selling general and administration costs driven by increased South San Francisco site costs; partially offset by lower IT project expenses
Intangible Asset Amortization
Intangible asset amortization was $0.7 million and zero for both the three and six months ended June 30, 2026 and 2025, respectively. The intangible asset, which consists of developed technology recognized in connection with the FDA approval of AVLAYAH in March 2026, began amortizing in the second quarter of 2026 on a straight-line basis over its estimated useful life.
Interest and other income, net
Interest and other income, net was $3.0 million and $10.8 million for the three months ended June 30, 2026 and 2025, respectively. The decrease of approximately $7.8 million was primarily driven by $5.9 million of non-cash interest expense related to the revenue participation right liability under the Royalty Pharma synthetic royalty funding agreement, which commenced in the second quarter of 2026.
Interest and other income, net was $11.9 million and $23.5 million for the six months ended June 30, 2026 and 2025, respectively. The decrease of approximately $11.6 million was primarily driven by:
•Lower interest income due to lower average cash and investment balances;
•Lower yields on our investment portfolio; and
•$5.9 million of non-cash interest expense related to the revenue participation right liability under the Royalty Pharma funding agreement, which commenced in the second quarter of 2026.
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Liquidity and Capital Resources
Sources of Liquidity
As of June 30, 2026, we had cash, cash equivalents and marketable securities in the amount of $940.0 million. We fund our operations primarily with the proceeds from the sale of common stock and payments received from our collaboration partners, including those received under agreements with Takeda, Sanofi, and Biogen. Following the commercial launch of AVLAYAH, we expect product revenue to contribute to funding our operations, and our liquidity requirements will include working capital to support commercial inventory, patient support programs, market access activities, distribution arrangements, pharmacovigilance obligations and continued investment in commercial infrastructure. Although we expect AVLAYAH product revenue to contribute to funding our operations, we do not expect such revenue to be sufficient to offset our operating expenses in the near term. We have sold common stock and other securities in public offerings, a private placement, and stock purchase agreements with Takeda and Biogen.
Through June 30, 2026, we have obtained aggregate net proceeds of approximately $956.1 million from public offerings of our common stock, including $12.4 million obtained through the sale of 746,468 shares of common stock in January 2026. In March 2026, we received $200.0 million in gross proceeds in connection with the closing of the synthetic royalty funding agreement with Royalty Pharma, triggered by the U.S. Food and Drug and Administration’s accelerated approval of AVLAYAH. Under stock purchase agreements with collaboration partners we have received a further $575.0 million through June 30, 2026.
Further, in February 2024, we received net proceeds of approximately $499.3 million from our private placement through the sale of approximately 3.2 million shares of common stock and pre-funded warrants to purchase a pproximately 26.0 million shares of our common stock.
In February 2025, we established a registered “at-the-market” facility for the potential future sale of up to $400.0 million of shares of common stock from time to time by entering into an equity distribution agreement with Goldman Sachs & Co. LLC and Leerink Partners LLC as sales agents. To date, no shares have been sold under either equity distribution agreement. All sales under the current equity distribution agreement are conditioned upon satisfaction of customary closing conditions.
Through June 30, 2026, we have received $115.0 million, $225.0 million, $565.0 million and $62.5 million, p ursuant to our collaboration and research and development funding agreements with Takeda, Sanofi, Biogen and an unrelated third party, respectively. These payments include upfront, option and milestone payments. Additionally, we have received $58.2 million and $16.2 million in gross cost sharing reimbursements from Takeda and Biogen, respectively, and received $13.7 million in specified reimbursements from Sanofi.
In July 2026, we completed the sale of our Rare Pediatric Disease PRV for gross proceeds of $195.0 million.
Future Funding Requirements and Commitments
Prior to the FDA approval of AVLAYAH, we had not generated any product revenue. Following the FDA approval of AVLAYAH, we commenced commercialization in April 2026 and have begun generating product revenue; however, we expect it to take time to generate sufficient revenue to offset our expenses, and we can provide no assurance as to when, if ever, this will occur. We do not expect to generate any product revenue from our other product candidates unless and until we obtain regulatory approval for those product candidates, and we do not know when, if ever, this will occur.
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We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we expand our research and development activities and continue the development of, and seek regulatory approvals for, our product candidates, and commercialize AVLAYAH and any additional approved products. Further, we expect general and administrative expenses to increase as we continue to incur additional costs associated with supporting our growing operations, including commercialization activities. We are subject to all of the risks typically related to the development of new product candidates, as well as risks associated with the commercialization of an approved product, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.
Until we can generate sufficient revenue from the commercialization of AVLAYAH and any future approved products, or from our existing collaboration agreements, or future agreements with other third parties, if ever, we expect to finance our future cash needs through public or private equity, debt or other alternative financings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates, or our commercial operations. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could significantly harm our business, financial condition and prospects.
Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $2.31 billion as of June 30, 2026. We expect to incur substantial additional losses in the future as we support the commercialization of AVLAYAH and conduct and expand our research and development activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the twelve months following the filing date of this Quarterly Report on Form 10-Q, including our existing commitments as outlined below. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In the longer term, we anticipate that we will need substantial additional resources to fund our operations and meet future commitments.
Our existing commitments primarily relate to our obligations under existing lease agreements, certain commercial product, clinical and manufacturing agreements. As of June 30, 2026, we had total undiscounted lease payment obligations of $47.8 million. We had total non-refundable purchase commitments of $104.7 million as of June 30, 2026. While the lease obligations span multiple years, the majority of the purchase commitments are due within the upcoming twelve months. Further, we may be required to make contingent payments under existing arrangements upon the achievement of defined clinical, regulatory and commercial milestones in certain programs, including contingent consideration payments to former shareholders of F-star under the F-star Gamma license, and milestone and royalty payments to Genentech under the Genentech License Agreement. These commitments are more fully described in Note 10 "Commitments and Contingencies" of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and in Note 4, "Acquisition, License Agreement and Research and Development Funding Collaboration Agreement" and Note 7, "Commitments and Contingencies" to the consolidated financial statements included in Item 8. of our Annual Report on Form 10-K filed on February 26, 2026.
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In March 2026, we received $200.0 million in gross proceeds under the Royalty Agreement with Royalty Pharma, which was initially recorded as a liability related to the revenue participation right on our Condensed Consolidated Balance Sheet in the first quarter of 2026. Under the Royalty Agreement, we may receive an additional $75.0 million upon approval of AVLAYAH by the EMA on or before December 31, 2029. In exchange, Royalty Pharma is entitled to a 9.25% royalty on worldwide net sales of AVLAYAH until cumulative royalty payments reach a cap of 3.0 times the total funding received, or 2.5 times the total funding received if such cap is reached on or before the first quarter of 2039. These obligations are described in this Quarterly Report on Form 10-Q in Note 9, “Liability Related to the Revenue Participation Right”.
Our future funding requirements, including any changes to existing commitments or the establishment of new commitments, will depend on many factors, including:
•our ability to obtain regulatory approval for our product candidates, establish sales and marketing capabilities, and successfully market such approved product candidates, including the successful commercialization of AVLAYAH;
•the timing and progress of preclinical and clinical development activities;
•the number and scope of preclinical and clinical programs we decide to pursue;
•the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements;
•our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements;
•our ability and success in securing manufacturing relationships with third parties or in operating a manufacturing facility;
•the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims;
•the cost and timing of regulatory approvals;
•our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and
•the costs and ongoing investments to in-license and/or acquire additional technologies;
•the rate and degree of market acceptance of AVLAYAH, including physician adoption, persistence and payer coverage;
•the amount and timing of product revenue from AVLAYAH, including the impact of variable consideration, reimbursement timing and distributor ordering patterns;
•the cost of commercialization activities, including sales, marketing, market access, medical affairs, patient support, distribution and pharmacovigilance;
•our ability to maintain adequate commercial supply of AVLAYAH through third-party manufacturers and manage commercial inventory levels.
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A change in the outcome of any of these or other variables with respect to the development and delivery of any of our product candidates could significantly change the costs and timing associated with the development and delivery of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
Cash Flows
The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below (in thousands):

| Six Months Ended June 30,
| 2026 |  | 2025
Net cash used in operating activities | $ | (228,206) |  |  | $ | (206,766) |
Net cash provided by (used in) investing activities | (9,618) |  |  | 176,683 |
Net cash provided by (used in) financing activities | 234,028 |  |  | (2,139) |
Net decrease in cash, cash equivalents and restricted cash | $ | (3,796) |  |  | $ | (32,222) |

Net Cash Used In Operating Activities
During the six months ended June 30, 2026, net cash used in operating activities was $228.2 million, which consisted of a net loss of $256.0 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net accretion of discounts on marketable securities, non-cash interest expense related to revenue participation right liability, and non-cash rent expenses. Cash used in operating activities was also driven by changes in our operating assets and liabilities.
Net Cash Used In Investing Activities
During the six months ended June 30, 2026, net cash used in investing activities was $9.6 million, which consisted of $394.6 million for purchases of marketable securities, $28.8 million in milestone payments related to intangible assets, and $3.3 million in capital expenditures to purchase property and equipment. partially offset by $417.0 million in proceeds from the maturities of marketable securities.
Net Cash Provided By Financing Activities
During the six months ended June 30, 2026, cash provided by financing activities was $234.0 million, which consisted of $200.0 million in gross proceeds related to the sale of the revenue participation right under the synthetic royalty funding agreement with Royalty Pharma, $12.4 million in proceeds from public offerings of our common stock, and $21.7 million in proceeds from the exercise of stock options.
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Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in detail in the notes to our condensed consolidated financial statements included elsewhere in this report. In our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, we described the accounting estimates that we believe involve a significant level of estimation uncertainty which could have a material impact on our financial condition or results of operations. There have been no material changes to these critical accounting estimates during the six months ended June 30, 2026, except as discussed in the notes to our condensed consolidated financial statements with respect to accounting policies adopted upon the commercialization of AVLAYAH.
Recent Accounting Pronouncements
There have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2026, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, that are of significance or potential significance to us.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business, primarily related to interest rate and foreign currency sensitivities.
Interest Rate Sensitivity
We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents and marketable securities of $940.0 million as of June 30, 2026, which consisted primarily of money market funds and marketable securities, largely composed of investment grade, short to intermediate term fixed income securities.
The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in a variety of securities of high credit quality and short-term duration, according to our board-approved investment policy. Our investments are subject to interest rate risk and could fall in value if market interest rates increase. A hypothetical 10% relative change in interest rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.
Foreign Currency Sensitivity
The majority of our transactions occur in U.S. dollars. However, we do have certain transactions that are denominated in currencies other than the U.S. dollar, primarily the Euro, Swiss Franc and British Pound, and we therefore are subject to foreign exchange risk. The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of expenses, assets and liabilities primarily associated with a limited number of preclinical, clinical and manufacturing activities.
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ITEM 4. CONTROLS AND PROCEDURES
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
As of June 30, 2026, management, with the participation of our Chief Executive Officer and Chief Operating and Financial Officer, has performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Operating and Financial Officer, to allow timely decisions regarding required disclosures.
Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Operating and Financial Officer concluded that, as of June 30, 2026, the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
Our management, with the participation of our Chief Executive Officer and Chief Operating and Financial Officer, has evaluated any changes in our internal control over financial reporting during the quarter ended June 30, 2026, to identify any change that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, as required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act. During the quarter ended June 30, 2026, in connection with the commercial launch of AVLAYAH in April 2026, we implemented new processes related to product revenue recognition, accounts receivable, inventory management, and cost of goods sold during the three months ended June 30, 2026. Except for these changes, there were no other changes in our internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management attention and resources and other factors.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 26, 2026, as updated and supplemented by Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, filed with the SEC on May 7, 2026, which are incorporated herein by reference. There have been no material changes to the risk factors previously disclosed in such filings.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
On February 27, 2024, we entered into a securities purchase agreement (the “Purchase Agreement”) with certain existing accredited investors for the private placement of (i) 3,244,689 shares of our common stock at a price of $17.07 per share and (ii) pre-funded warrants to purchase an aggregate of 26,046,065 shares of our common stock (the “Pre-Funded Warrants”) at a purchase price of $17.06 per Pre-Funded Warrant. The private placement closed on February 29, 2024, at which time we received net proceeds of approximately $499.3 million. The Pre-Funded Warrants are exercisable at an exercise price of $0.01 and will be exercisable until exercised in full. The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 4.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise. The holders of Pre-Funded Warrants may increase or decrease such percentage not in excess of 19.99%, in the case of an increase, by providing at least 61 days’ prior notice to the Company. We have also granted a certain investor certain director nomination and additional registration rights, subject to certain exceptions, conditions, and limitations. We intend to use the net proceeds from the private placement to support our ongoing research and development activities, the acceleration and expansion of our proprietary BBB-crossing TV technology, as well as general corporate purposes and working capital. We have invested the funds received in short-term and long-term, interest-bearing investment-grade securities and government securities. We filed a registration statement to register the shares of common stock sold in the private placement (including the shares of common stock underlying the Pre-Funded Warrants) on March 22, 2024.
We are relying on the exemptions from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering, and we expect to file a Form D with respect to the private placement.
Use of Proceeds from Registered Securities
In October 2022, we sold 11,933,962 shares of common stock (inclusive of shares sold pursuant to an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of $26.50 per share for aggregate net proceeds of approximately $296.2 million.
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In December 2025, we sold 9,142,857 shares of common stock, par value $0.01 per share (the “Common Stock”), at a price to the public of $17.50 per share (the “Firm Shares”) and 2,285,714 shares of pre-funded warrants at a price to the public of $17.49 per underlying share, which represents the per share public offering price of each share of common stock less the $0.01 per share exercise price for each pre-funded warrant, through an underwritten public offering for 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.
There have been no material changes in the planned use of the net proceeds from the follow-on public offering as described in the Registration Statement. We have invested the funds received in short-term and long-term, interest-bearing investment-grade securities and government securities.
Issuer Purchases of Equity Securities
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
Our policy governing transactions in our securities by our directors, officers, and employees permits our officers, directors and employees to enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. As disclosed in the table below, during the second quarter of 2026, certain directors adopted a “Rule 10b5-1 trading arrangement”. This plan provides for the sale of our common stock and is intended to satisfy the affirmative defense in Rule 10b5-1(c).

Name |  | Position |  | Date of Plan Adoption |  | Scheduled End Date of Trading Arrangement(1) |  | Maximum Total Shares of Common Stock to be Sold Under the Plan(2)
Nancy Thornberry |  | Director |  | 6/3/2026 |  | 9/2/2027 |  | 35,377 |

__________________________________________________
(1)In each case, the trading arrangement may expire on an earlier date if and when all transactions under the arrangement are completed.
(2)This amount represents the maximum total shares that could be sold under the plan, but the amounts may change for executive officers due to the sale of shares to satisfy tax withholding requirements.
No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated of a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the second quarter ended June 30, 2026.
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ITEM 6. EXHIBITS
EXHIBIT INDEX

|  |  |  | Incorporated by Reference
Exhibit Number |  | Description |  | Form |  | File No. |  | Number |  | Filing Date
10.1 |  | Asset Purchase Agreement, dated June 12, 2026 |  | — |  | — |  | — |  | Filed herewith
31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. |  | — |  | — |  | — |  | Filed herewith
31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. |  | — |  | — |  | — |  | Filed herewith
32.1* |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. |  | — |  | — |  | — |  | Furnished herewith
32.2* |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. |  | — |  | — |  | — |  | Furnished herewith
101.INS |  | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Incline XBRL document |  | — |  | — |  | — |  | Furnished herewith
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document. |  | — |  | — |  | — |  | Furnished herewith
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |  | — |  | — |  | — |  | Furnished herewith
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document. |  | — |  | — |  | — |  | Furnished herewith
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. |  | — |  | — |  | — |  | Furnished herewith
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |  | — |  | — |  | — |  | Furnished herewith
104 |  | The cover page from the Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2026, formatted in Inline XBRL (contained in Exhibit 101) |  | — |  | — |  | — |  | Furnished herewith

* | The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Denali Therapeutics Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  |  | DENALI THERAPEUTICS INC.
Date: | August 6, 2026 |  | By: | /s/ Ryan J. Watts
|  |  |  | Ryan J. Watts, Ph.D.
|  |  |  | President and Chief Executive Officer
|  |  |  | (Principal Executive Officer)
Date: | August 6, 2026 |  | By: | /s/ Alexander O. Schuth
|  |  |  | Alexander O. Schuth, M.D.
|  |  |  | Chief Operating and Financial Officer
|  |  |  | (Principal Financial and Accounting Officer)

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