ITEM 7. 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 consolidated financial statements and the related notes to those statements included elsewhere in this report. 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 could 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” and elsewhere in this report.
Overview
Key elements of our strategy include:
1)Discover: Invent a new class of barrier-crossing therapeutics by leveraging our TV platforms and deep expertise in blood-brain barrier 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.
Our clinicalprograms are as follows:
•Tividenofusp alfa (DNL310, ETV:IDS), composed of IDS fused to TV, is designed to deliver IDS into cells and tissues throughout the body, including the brain by crossing the BBB, with the goal of addressing the behavioral, cognitive, and physical manifestations of MPS II (Hunter syndrome);
•DNL126 (ETV:SGSH), composed of SGSH fused to TV, is designed to deliver SGSH into cells and tissues throughout the body, including the brain by crossing the BBB, with the goal of treating MPS IIIA (Sanfilippo syndrome type A);
•TAK-594/DNL593 (PTV:PGRN), composed of PGRN fused to TV, is designed to restore PGRN levels in the brain with the goal of treating FTD-GRN and is being developed in collaboration with Takeda;
•DNL952 (ETV:GAA), composed of acid alpha-glucosidase ("GAA") fused to TV and engineered to replace GAA in all tissues, with the goal of treating Pompe disease;
•DNL628 (OTV:MAPT), composed of an antisense oligonucleotide ("ASO") against MAPT fused to TV, designed to suppress gene expression of MAPT encoding the tau protein with the goal of treating Alzheimer's disease;
•BIIB122/DNL151, a small molecule LRRK2 inhibitor, is being developed in collaboration with Biogen for the potential treatment of Parkinson's disease; and
•Eclitasertib (SAR443122/DNL758), a peripheral and non-CNS penetrant small molecule RIPK1 inhibitor, is being developed by Sanofi, to address peripheral inflammatory diseases such as ulcerative colitis ("UC").
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The following table summarizes key information about our clinical stage programs:
Program Product Candidate Clinical Study(ies) Indication Operational Control
ETV:IDS tividenofusp alfa, or DNL310 Ph 1/2 Hunter syndrome (MPS II) Denali
ETV:SGSH DNL126 Ph 1/2 Sanfilippo syndrome Type A (MPS IIIA) Denali
PTV:PGRN TAK-594/DNL593 Ph 1/2 FTD-GRN Joint with Takeda
ETV:GAA DNL952* Ph 1 (planned) Pompe disease Denali
OTV:MAPT DNL628* Ph 1b (planned) Alzheimer’s disease Denali
LRRK2 BIIB122/DNL151 Ph 2a Parkinson's disease Denali
Ph 2b Joint with Biogen
RIPK1 (Peripheral) eclitasertib, or SAR443122/DNL758 Ph 2 UC Sanofi
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*Regulatory application to begin clinical testing has been approved by Health Authorities.
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 for the year ended December 31, 2025 and in 2026 to date include:
•Tividenofusp alfa DNL310 (ETV:IDS)
◦In January 2025, we announced that the U.S. Food and Drug Administration ("FDA") granted Breakthrough Therapy Designation for tividenofusp alfa (DNL310) for the treatment of individuals with MPS II.
◦In February 2025, at the WORLD Symposium conference, we presented the primary analysis of the Phase 1/2 study in 47 participants with Hunter syndrome in the 24-week treatment period and additional long-term follow-up.
◦In May 2025, we completed a rolling submission of a Biologics License Application ("BLA") for tividenofusp alfa under the accelerated approval pathway;
◦In July 2025, we announced that the FDA accepted our BLA for tividenofusp alfa for priority review, assigning a Prescription Drug User Fee Act (PDUFA) target action date of January 5, 2026; In October 2025, we announced that the FDA extended its review timeline of the BLA seeking accelerated approval of tividenofusp alfa from January 5, 2026, to April 5, 2026;
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◦In December 2025, we entered into a synthetic royalty funding agreement with Royalty Pharma plc (“Royalty Pharma”), pursuant to which Royalty Pharma has agreed to provide us with up to $275.0 million in funding in exchange for a 9.25% royalty on future worldwide net sales of tividenofusp alfa, which will cease upon reaching a multiple of 3.0x, or 2.5x if achieved by the first quarter of 2039. The agreement is subject to various closing conditions, including Denali achieving U.S. FDA accelerated approval of tividenofusp alfa on or before June 30, 2026. At the closing, Royalty Pharma will make an initial payment of $200.0 million. Denali will be receive an additional payment of $75.0 million upon approval of tividenofusp alfa by the EMA on or before December 31, 2029. Denali will retain all worldwide development and commercialization rights to tividenofusp alfa;
◦In December 2025, we announced that we are in ongoing dialogue with the FDA related to the eligibility of tividenofusp alfa to receive a Rare Pediatric Disease Priority Review Voucher (“PRV”) upon approval. Because we submitted a filing of our intent to request a PRV after the initial BLA submission, based on discussions with the FDA, we may not be eligible to receive the PRV. Therefore, we are not including any potential future proceeds from the sale of a PRV in our financial planning. We continue to work with the FDA and the FDA will determine whether to award a PRV upon approval of tividenofusp alfa. We also announced that a Late Cycle Meeting with the FDA was completed and labeling discussions were underway;
◦In December 2025, we announced that The New England Journal of Medicine published the Phase 1/2 study results; and
◦In January 2026, we announced that we are is preparing for commercial launch in anticipation of a regulatory decision on the BLA for tividenofusp alfa under the FDA accelerated approval pathway with a PDUFA target action date of April 5, 2026, and that enrollment in Cohort A (neuronopathic participants) was completed in the ongoing global Phase 2/3 COMPASS study in December 2025.
•DNL126 (ETV:SGSH)
◦In April 2025, we announced productive collaboration and discussions with the FDA under the START program (“Support for clinical Trials Advancing Rare Disease Therapeutics”) around the potential for an accelerated development and approval path for DNL126 in the treatment of Sanfilippo syndrome;
◦In August 2025, we announced we reached alignment with the FDA that cerebrospinal fluid heparan sulfate (CSF HS) may be considered a reasonably likely surrogate endpoint to predict clinical benefit and may therefore be used to support accelerated approval of DNL126 for MPS IIIA. We also announced that additional 49-week data from the ongoing open-label Phase 1/2 study were consistent with previously announced 25-week data, demonstrating a significant reduction in CSF HS from baseline, including normalization, and a safety profile that supports continued development; and
◦In September 2025, we completed enrollment in the ongoing Phase 1/2 study, and in December 2025 we announced that the Phase 1/2 study remains on track for completion in 2026, supporting a potential accelerated approval pathway and commercial launch by the second half of 2027, with planning for a global Phase 3 confirmatory study underway; and
◦In February 2026, we presented preliminary open-label Phase 1/2 data at the 2026 WORLD Symposium demonstrating substantial reductions in CSF HS, including normalization from baseline, and in urine HS with a safety profile consistent with other enzyme replacement therapies.
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•DNL 952 (ETV:GAA)
◦In October 2025, we submitted an Investigational New Drug ("IND") application for DNL952 (ETV:GAA) to initiate a Phase 1 study, and in December 2025 we announced that the IND had been placed on clinical hold. In January 2026 we announced that the FDA has lifted the clinical hold on the IND application for DNL952, and we are proceeding with the Phase 1 study.
•DNL 628 (OTV:MAPT)
◦In January 2026, we announced that the Clinical Trial Application ("CTA") for DNL628 (OTV:MAPT) to initiate a Phase 1b study in Alzheimer’s disease was approved and study start-up activities are underway.
•BIIB122/DNL151 (LRRK2)
◦In May 2025, Biogen announced completion of enrollment in the Phase 2b LUMA study for early-stage Parkinson's disease with a readout expected in 2026.
•Other
◦In January 2025, we announced topline results that the primary endpoint was not met in Regimen G of the Phase 2/3 HEALEY ALS Platform Trial evaluating DNL343 in the treatment of ALS. In March 2025, we provided an update that additional analyses did not demonstrate a treatment effect on neurofilament light ("NfL"), a biomarker of neuronal damage, over the 24-week, double-blind period and in a subset of participants that completed an additional 28 weeks in the open-label active treatment extension. Based on these outcomes, the active treatment extension in Regimen G was discontinued. Overall, DNL343 was found to be generally well tolerated;
◦In February 2025, we and Sanofi executed a side letter terminating Sanofi's license to the CNS Products program including SAR443820/DNL788;
◦In February 2025, after mutual agreement to discontinue preclinical activities on ATV:TREM2, Takeda delivered notice of its election to terminate the ATV:TREM2 program on February 26, 2025, as per the terms of the Takeda Collaboration Agreement. The ATV:TREM2 program termination became effective in April 2025; and
◦In December 2025, we sold 9,142,857 shares of common stock through an underwritten public offering at a price of $17.50 per share, and issued pre-funded warrants to purchase 2,285,714 shares of common stock at a price of $17.49, for aggregate net proceeds of $189.2 million. The pre-funded warrants have an exercise price of $0.01 per share of common stock, and are immediately exercisable and will remain exercisable until exercised in full. In January 2026, the underwriters partially exercised their option to purchase additional shares, and we issued 746,468 shares of common shares for net proceeds of $12.4 million.
We do not have any products approved for sale and have not generated any product revenue since our inception. We have funded our operations primarily from the issuance and sale of convertible preferred stock, the sale of common stock and pre-funded warrants to purchase shares of our common stock in public offerings and private placements, and payments received from our collaboration and funding agreements with Takeda, Sanofi, Biogen and other third parties.
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We have incurred significant operating losses to date and expect to continue to incur operating losses for the foreseeable future. We had net losses of $512.5 million, $422.8 million, and $145.2 million for the years ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, we had an accumulated deficit of $2.05 billion. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates. We expect to continue to incur significant expenses and operating losses as we advance our current clinical stage programs through healthy volunteer and patient trials; broaden and improve our TV platform; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel.
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. If tividenofusp alfa is approved for the treatment of Hunter syndrome, we expect to use third-party contract manufacturers to supply commercial product.
License and Collaboration Agreements
Collaborations and partnering are central components of our strategy to build, develop and commercialize our portfolio of product candidates. We have numerous arrangements with biopharmaceutical companies, technology companies, academic institutions, foundations, and patient-focused data companies.
Biogen
In October 2020, we entered into the LRRK2 Agreement with Biogen pursuant to which we granted Biogen a license to co-develop and co-commercialize our small molecule LRRK2 Program, in addition to the ROFN and Option Agreement pursuant to which we granted an option and a right of first negotiation to certain of our programs utilizing our TV technology platform; collectively the "Biogen Collaboration Agreement." In connection with our collaboration with Biogen, we also entered into a common stock purchase agreement pursuant to which we sold 13,310,243 shares of our common stock to BIMA for an aggregate purchase price of $465.0 million. Under the terms of the Biogen Collaboration Agreement, we received $560.0 million in upfront payments in October 2020.
In April 2023, Biogen exercised its option to license our ATV:Abeta program and we received additional consideration of $5.0 million for an option exercise fee. In August 2023, we executed an Amendment (the “Biogen Amendment”) to the LRRK2 Agreement and ROFN and Option Agreement with Biogen. Pursuant to the Biogen Amendment, the schedule of potential LRRK2 Agreement milestones was amended, while maintaining the same total value of milestones that Denali is eligible to receive. In addition, Biogen waived its option right to the second option program and waived its rights of first negotiation for two other TV-enabled programs under the ROFN and Option Agreement. In July 2024, Denali and Biogen executed a Side Letter to the ROFN and Option Agreement, pursuant to which, effective as of the date of the Side Letter, Biogen terminated its license to the ATV:Abeta program enabled by Denali’s TfR-targeting technology against amyloid beta for the potential treatment of Alzheimer's disease, and granted Denali rights to data generated during the collaboration. The side letter also effected the immediate termination of the ROFN and Option Agreement; as such, the Company expects to receive no future milestone or royalty payments from Biogen related to the ATV:Abeta program.There were no changes to the terms of the LRRK2 Agreement in the year ended December 31, 2025. Further details regarding the terms of the agreements between us and Biogen are included in this Annual Report on Form 10-K in the section titled "Business - Licenses and Collaborations."
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We did not recognize any collaboration revenue under the Biogen Collaboration Agreement in the years ended December 31, 2025 and 2024, and we recognized related party collaboration revenue of $295.5 million in the year ended December 31, 2023. Further, we recognized research and development expense of $15.8 million, $16.7 million and $17.7 million related to cost sharing payments we made to Biogen in the years ended December 31, 2025, 2024 and 2023, respectively. We have recorded cost sharing payables of $2.8 million and $2.5 million on the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively. Through December 31, 2025, we have earned $5.0 million in option fee payments but have not recorded any milestone revenue or product sales under the Biogen Collaboration Agreement.
Sanofi
In October 2018, we entered into the Sanofi Collaboration Agreement with Sanofi pursuant to which certain small molecule CNS and peripheral RIPK1 inhibitors contributed by Sanofi and by us are being, or will be developed and commercialized. On February 24, 2025, we and Sanofi executed a side letter terminating Sanofi's license to the CNS Products program including SAR443820/DNL788, though Sanofi continues to develop eclitasertib (SAR443122/DNL758). Further details regarding the terms of the agreement between us and Sanofi, and historic payments between the parties under the agreement, are included in this Annual Report on Form 10-K in the section titled "Business - Licenses and Collaborations."
We recognized no collaboration revenue associated with the Sanofi Collaboration Agreement in the years ended December 31, 2025 and 2024, and we recognized collaboration revenue of $25.0 million in the year ended December 31, 2023. No receivable from Sanofi was recorded on the Consolidated Balance Sheets as of December 31, 2025 and 2024. Through December 31, 2025, we had received milestone payments of $100.0 million and we have not recorded any product sales under the Sanofi Collaboration Agreement. Subsequent to the February 24, 2025 side letter, we expect to receive no future milestone or royalty payments from Sanofi related to the CNS Products program.
Takeda
In January 2018, we entered into the Takeda Collaboration Agreement pursuant to which we granted Takeda an option to develop and commercialize, jointly with us, our ATV:TREM2, PTV:PGRN and ATV:BACE1/Tau programs, the latter of which was later replaced with our ATV:Tau program. Pursuant to the terms of the Takeda Collaboration Agreement, we also entered into the Purchase Agreement with Takeda in January 2018, pursuant to which we sold 4,214,559 shares of our common stock to Takeda for an aggregate purchase price of $110.0 million.
In November 2021 and December 2021, Takeda exercised its options for the PTV:PGRN and ATV:TREM2 programs, respectively, subsequent to which we have shared equally in the development costs for the programs. In February 2025, after mutual agreement to discontinue preclinical activities on ATV:TREM2, Takeda delivered notice of its election to terminate the ATV:TREM2 program, and the ATV:TREM2 program termination became effective 60 days following the notice date. Further details regarding the terms of the agreement between us and Takeda, and historic payments between the parties under the agreements, are included in this Annual Report on Form 10-K in the section titled "Business - Licenses and Collaborations."
We did not recognize collaboration revenue under the Takeda Collaboration Agreement in the years ended December 31, 2025 and 2024, and we recognized collaboration revenue of $10.0 million in the year ended December 31, 2023. Further, we offset research and development expense due to cost sharing reimbursements received from Takeda of $6.6 million, $5.9 million and $12.2 million in the years ended December 31, 2025, 2024, and 2023, respectively. We recorded receivables of $1.6 million and $1.5 million from Takeda on the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively. Through December 31, 2025, we have received $65.0 million in milestone payments and $10.0 million of option exercise fees from Takeda, and we have not recorded any product sales under the Takeda Collaboration Agreement.
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F-star
In August 2016, we entered into the F-star Collaboration Agreement with the F-star entities. The goal of the collaboration was the development of Fcabs to enhance delivery of therapeutics across the BBB into the brain. In connection with the entry into the F-star Collaboration Agreement, we also purchased an option to acquire all of the outstanding shares of F-star Gamma pursuant to a pre-negotiated buy-out option agreement. In May 2018, we exercised such buy-out option and entered into the F-star Purchase Agreement with the shareholders of F-star Gamma and Shareholder Representative Services LLC, pursuant to which we acquired all of the outstanding shares of F-star Gamma. As a result of the Acquisition, F-star Gamma became our wholly-owned subsidiary and the entity's name was changed to Denali BBB Holding Limited. In addition, we became a direct licensee of certain intellectual property of F-star Ltd by way of our assumption of F-star Gamma’s license agreement with F-star Ltd, dated August 24, 2016. Further details regarding the terms of the arrangements between us and the F-star entities, and historic payments between the parties under the agreements, are included in this Annual Report on Form 10-K in the section titled "Business - Licenses and Collaborations."
Through December 31, 2025 we have recognized consideration paid under the F-star Purchase Agreement of $49.8 million as research and development expenses consisting of upfront, preclinical and clinical contingent consideration payments, including a $30.0 million contingent consideration payment triggered in March 2023 upon the achievement of a specified clinical milestone in the ETV:IDS program. We did not recognize contingent consideration in the years ended December 31, 2025 or 2024.
Genentech
In June 2016, we entered into an exclusive license agreement with Genentech. The agreement gives us access to Genentech’s LRRK2 inhibitor program. Our collaboration partner in the LRRK2 program, Biogen, is responsible for 50% of any payment obligation to Genentech under the Biogen Collaboration Agreement.
We have made a total of $25.0 million in consideration payments under the Genentech agreement, and we have recognized $18.8 million of associated research and development expense, net of cost sharing reimbursements from Biogen. We did not recognize expenses under this agreement in the years ended December 31, 2025, 2024 and 2023.
Royalty Pharma Funding Agreement
In December 2025, we entered into a synthetic royalty funding agreement (the “Royalty Agreement”) with Royalty Pharma plc (“Royalty Pharma”). Pursuant to the Royalty Agreement, Royalty Pharma has agreed to provide us with up to $275.0 million in funding in exchange for a 9.25% royalty on future net sales of tividenofusp alfa. The transaction is subject to various closing conditions, including our achieving U.S. Food and Drug and Administration (FDA) accelerated approval of tividenofusp alfa on or before June 30, 2026. At the closing, Royalty Pharma will make an initial payment of $200.0 million. We will receive an additional payment of $75.0 million upon approval of tividenofusp alfa by the European Medicines Agency (EMA) on or before December 31, 2029. The royalty payments to Royalty Pharma will cease upon reaching a multiple of 3.0x, or 2.5x if achieved by the first quarter of 2039. We will retain all worldwide development and commercialization rights to tividenofusp alfa.
Components of Operating Results
Collaboration Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. All revenue recognized to date has been collaboration and license revenue from our collaboration agreements with Takeda, Sanofi and Biogen.
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Future revenue may be recognized from the Takeda Collaboration Agreement, Sanofi Collaboration Agreement, and Biogen Collaboration Agreement, and may be generated from product sales or milestone payments, royalties and profit sharing reimbursement from other collaboration agreements, strategic alliances and licensing arrangements. We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing and amount of license fees, option exercise fees, milestone payments, profit sharing reimbursement, other payments and product sales, to the extent any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
Operating Expenses
Research and Development
Research and development activities account for a significant portion of our operating expenses. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and TV platform include:
• external research and development expenses, including:
–expenses incurred under arrangements with third parties, such as contract research organizations ("CROs"), preclinical testing organizations, contract development and manufacturing organizations ("CDMOs"), academic and non-profit institutions and consultants;
–expenses to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;
–fees related to our license and collaboration agreements;
•personnel related expenses, including salaries, benefits and stock-based compensation expense; and
•other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.
A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis once a program has commenced late-stage IND-enabling studies.
Program expenses include expenses associated with our most advanced product candidates and the discovery and development of backup or next-generation molecules. We also track external expenses associated with our TV platform. These expenses include external expenses incurred by us relating to our Takeda Collaboration Agreement and Biogen Collaboration Agreement. All 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.
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It is challenging to predict the nature, timing and estimated long-range costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. This is made more challenging by events outside of our control, such as global pandemics and increased geopolitical uncertainty. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:
•our ability to add and retain key research and development and commercial, sales and marketing personnel;
•our ability to establish an appropriate safety profile with IND-enabling toxicology studies;
•our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;
•our successful enrollment in and completion of clinical trials;
•the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;
•our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules;
•our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved;
•the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;
•our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;
•our receipt of marketing approvals from applicable regulatory authorities;
•our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and
•the continued acceptable safety profiles of the product candidates following approval.
A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase at least over the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
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General and Administrative
General and administrative expenses include personnel related expenses, such as salaries, benefits, travel and stock-based compensation expense, expenses for outside professional services, pre-commercialization activities, and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent, depreciation and other expenses related to our office and research and development facility not otherwise included in research and development expenses. We expect to increase our administrative headcount as we prepare for commercialization of Tividenofusp alfa (DNL310, ETV:IDS) and advance our other product candidates through clinical development, which will increase our general and administrative expenses.
Gain from divestiture of small molecule programs
The gain from the divestiture of small molecule programs consists entirely of the non-cash gain associated with the divestiture of assets associated with select preclinical small molecule programs, including specified intellectual property, tangible assets and equipment used to conduct early-stage small molecule drug discovery from the Company, in exchange for equity consideration.
Interest and Other Income, Net
Interest and other income, net, consists primarily of interest income, investment income earned on our cash, cash equivalents and marketable securities, and sublease income, as well as an offset for interest expense on our finance lease liability.
Results of Operations
Comparison of the years ended December 31, 2025 and 2024
The following table sets forth the significant components of our results of operations (in thousands):
Year Ended December 31, Change
Operating expenses:
Gain from divestiture of small molecule programs — 14,537 (14,537) *
__________________________________________________
*Percentage is not meaningful.
Research and development expenses. Research and development expenses were $418.8 millionfor the year ended December 31, 2025 compared to $396.4 million for the year ended December 31, 2024.
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The following table provides a breakdown of our research and development expenses by category (in thousands):
Year Ended December 31, Change
_________________________________________________
(1)Personnel-related expenses include stock-based compensation expense of $59.5 million and $59.1 millionfor the years ended December 31, 2025 and 2024, respectively, reflecting an increase of $0.4 million.
The increase in research and development expenses of $22.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily attributable to the following:
•an increase of $16.6 million in external research and development expenses for our TV programs driven by increased spend on multiple preclinical and clinical programs including DNL126, DNL628 and DNL952, partially offset by a decrease in expenses related to our DNL310 program;
•an increase of $24.2 million in other research and development expenses, including lab consumables, consultants and general facilities costs, primarily driven by the commencement of operations at our large molecule manufacturing facility in Salt Lake City, Utah; and
•an increase of $15.3 million in personnel-related expenses, including salaries and stock-based compensation, primarily driven by higher headcount related to the commencement of operations at our large molecule manufacturing facility in Salt Lake City, Utah.
These increases were partially offset by a $33.8 million decrease in external research and development expenses for our small molecule programs, primarily due to the wind-down of activities related to our DNL343 program in 2025.
General and administrative expenses. General and administrative expenses were $136.6 million for the year ended December 31, 2025 compared to $105.4 million for the year ended December 31, 2024. The increase of $31.2 million was primarily driven by headcount increases and other activities associated with preparing for the potential commercial launch for tividenofusp alfa.
Comparison of the years ended December 31, 2024 and 2023
Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in our 2024 Annual Report on Form 10-K for a discussion of the results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Liquidity and Capital Resources
Sources of Liquidity
As of December 31, 2025, we had cash, cash equivalents and marketable securities in the amount of $966.2 million. We fund our operations primarily with the proceeds from the sale of common stock and payments received from our collaboration partners, including those received under agreements with Takeda, Sanofi, and Biogen. We have sold common stock and other securities in public offerings, a private placement, and stock purchase agreements with Takeda and Biogen.
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Through December 31, 2025 we have obtained aggregate net proceeds of approximately $943.6 million from public offerings of our common stock, including $189.2 millionobtained through the sale of 9.1 million shares of common stock and the issuance of pre-funded warrants to purchase 2.3 million shares of common stock in December 2025, and $296.2 million obtained through the sale of 11.9 million shares of common stock in October 2022. Under stock purchase agreements with collaboration partners we have received a further $575.0 million through December 31, 2025.
Further, in February 2024 we received net proceeds of approximately $499.3 million from our private placement through the sale of approximately 3.2 million shares of common stock andpre-funded warrants to purchase approximately 26.0 million shares of our common stock.
In February 2025, we established a registered “at-the-market” facility for the potential future sale of up to $400.0 million of shares of common stock from time to time by entering into an equity distribution agreement with Goldman Sachs & Co. LLC and Leerink Partners LLC as sales agents. The previous equity distribution agreement and related “at-the-market” facility entered into in February 2022 was terminated in February 2025. To date, no shares have been sold under either equity distribution agreement. All sales under the current equity distribution agreement are conditioned upon satisfaction of customary closing conditions.
Through December 31, 2025, we have received $115.0 million, $225.0 million, $565.0 million and $50.0 million, pursuant 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 $55.0 million and $16.2 million in gross cost sharing reimbursements from Takeda and Biogen, respectively, and received $13.7 million in specified reimbursements from Sanofi.
Future Funding Requirements and Commitments
To date, we have not generated any product revenue. We do not expect to generate any product revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, either will occur.
We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we expand our research and development activities and continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. Further, we expect general and administrative expenses to increase as we continue to incur additional costs associated with supporting our growing operations. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.
Until we can generate a sufficient amount of revenue from the commercialization of our product candidates or from our existing collaboration agreements, or future agreements with other third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could significantly harm our business, financial condition and prospects.
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Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $2.05 billion as of December 31, 2025. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the twelve months following the filing date of this Annual Report on Form 10-K, 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 pre-launch commercial product, clinical and manufacturing agreements. As of December 31, 2025, we had total undiscounted lease payment obligations of $54.2 million. We had total non-refundable purchase commitments of $45.8 million as of December 31, 2025. 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 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 this Annual Report on Form 10-K.
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;
•the timing and progress of preclinical and clinical development activities;
•the number and scope of preclinical and clinical programs we decide to pursue;
•the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements;
•our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements;
•our ability and success in securing manufacturing relationships with third parties or in operating a manufacturing facility;
•the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims;
•the cost and timing of regulatory approvals;
•our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and
•the costs and ongoing investments to in-license and/or acquire additional technologies.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
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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):
Year Ended December 31,
Net Cash Used In Operating Activities
During the year ended December 31, 2025, net cash used in operating activities was $412.6 million, which consisted of a net loss of $512.5 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net accretion of discounts on marketable securities, and non-cash rent expenses. Cash used in operating activities was also driven by changes in our operating assets and liabilities.
Net Cash Provided By (Used In) Investing Activities
During the year ended December 31, 2025, net cash provided by investing activities was $255.3 million, which consisted of $706.0 million of proceeds from the maturities of marketable securities, partially offset by $441.3 million of purchases of marketable securities, and $9.4 million capital expenditures to purchase property and equipment.
Net Cash Provided By Financing Activities
During the year ended December 31, 2025, net cash provided by financing activities was $189.2 million, which consisted of $189.2 million of net proceeds from public offerings of our common stock and pre-funded warrants in December 2025, and $8.5 million of proceeds from the exercise of stock options and the Company's ESPP, partially offset by an aggregate of $8.2 million of payments related to our finance lease, and $0.3 million issuance costs related to the royalty financing.
Years ended December 31, 2024 and 2023
Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our 2024 Annual Report on Form 10-K for a discussion of the cash flows for the years ended December 31, 2024 and 2023.
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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 consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in detail in the notes to our consolidated financial statements included elsewhere in this report. We believe that the following accounting estimates involve a significant level of estimation uncertainty which could have a material impact on our financial condition or results of operations.
Revenue Recognition
We recognize revenue associated with our collaboration arrangements, which may require us to exercise considerable judgment in estimating revenue to be recognized, including judgments made on day one accounting and judgments associated with the amount of revenue to be recognized over time as performance obligations are satisfied.
Significant judgment is required to apply the authoritative accounting guidance at the outset of a collaboration arrangement, and over time, and the determinations including judgment are highly subjective and can differ between arrangement based on specific contractual terms. To date, there have been no material true ups to revenue as a result of changes in the key judgments detailed below.
The key areas of judgment identified are: (1) Identification of performance obligations at the outset of a collaboration arrangement (identifying the promised goods or services and determining whether these are distinct in the context of the contract); (2) Measurement of the transaction price at the outset of a collaboration arrangement and at each reporting period (estimating valuation of share premium payments, constraint of future variable consideration); (3) Allocation of the transaction price to the performance obligations at the outset of a collaboration arrangement (estimating the standalone selling price of identified performance obligations); and (4) Recognition of revenue when (or as) we satisfy each performance obligation, assessed at each reporting period (when the performance obligation has been satisfied for point-in time recognition, the extent of satisfaction of an obligation for recognition over time).
Research and Development Expenses
A significant portion of our research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss are external costs. These research and development expenses include the conduct of preclinical studies and clinical trials, contract manufacturing activities and consulting services. The measurement of these research and development expenses can impact the measurement of research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss, and of prepaid assets and accrued liabilities on the Consolidated Balance Sheets.
The level of judgment required to estimate research and development expenses varies based on the nature of the services being performed and the underlying support obtained. We estimate the amount of work completed based on information received from internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, incomplete or inaccurate data from vendors could impact our understanding of the status and timing of services performed which could result in us reporting expenses that are too high or too low in any particular period.
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In some cases, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. For other activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. To date, there have been no material true ups from estimated to actual external research and development expenses. However, we expect that the level of judgment in estimating research and development expenses may increase over time as we are entering later stage, more extensive, clinical trials.
Research and development expenses also include reimbursements owed or owing to a collaboration partner to satisfy cost sharing requirements. These reimbursement amounts are estimated based, in part, on data received from our collaboration partner, which may include a certain level of estimation or judgments made by that partner. They also reflect our estimates of research and development expense as discussed above. As such, a change in estimates or judgments by either our partner or us can result in a change to a reimbursement amount. To date, there have been no material true ups from estimated to actual reimbursements owed or owing.
Where the company has entered into an R&D funding arrangement, payments received will be recorded as a liability, and recognized an offset to research and development expenses as the underlying research and development costs are incurred. The determination of whether an arrangement meets the definition of an R&D funding arrangement under ASC730 requires judgment, including an assessment of the nature of the arrangement, the funding party’s rights and exposure to research and development risks. Further, the timing of recognition of the funding is also subject to the judgments of the underlying research and development costs. To date, there have been no material true ups to R&D funding recognition.
Recent Accounting Pronouncements
See Note 1 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business.
ITEM 7A. 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 $966.2 million as of December 31, 2025, which consisted primarily of money market funds and marketable securities, largely composed of investment grade, short and 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 consolidated financial statements.
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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 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Denali Therapeutics Inc.
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 143
Consolidated Balance Sheets 145
Consolidated Statements of Operations and Comprehensive Loss 146
Consolidated Statements of Stockholders' Equity 147
Consolidated Statements of Cash Flows 148
Notes to Consolidated Financial Statements 149
142
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Denali Therapeutics Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Denali Therapeutics Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosuresto which it relates.
143
Accrued and prepaid clinical research and development costs
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
San Mateo, California
February 26, 2026
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Denali Therapeutics Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
Assets
Current assets:
Prepaid expenses and other current assets 32,779 32,105
Liabilities and stockholders’ equity
Current liabilities:
Accrued expenses and other current liabilities 95,021 91,071
Operating lease liability, less current portion 27,210 36,673
Finance lease liability, less current portion 5,532 5,615
Commitments and contingencies (Note 7)
Stockholders’ equity:
Accumulated other comprehensive income 682 2,020
See accompanying notes to consolidated financial statements.
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Denali Therapeutics Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Year Ended December 31,
Collaboration revenue:
Collaboration revenue from customers(1) $ — $ — $ 330,531
Total collaboration revenue — — 330,531
Operating expenses:
Gain from divestiture of small molecule programs — 14,537 —
Other comprehensive income (loss):
Net loss per share, basic and diluted $ (2.97) $ (2.57) $ (1.06)
__________________________________________________
(1)Includes related-party collaboration revenue from customers of $295.5 million for the year ended December 31, 2023.
(2)Includes expense for cost sharing payments to a related party of $17.7 million for the year ended December 31, 2023.
See accompanying notes to consolidated financial statements.
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Denali Therapeutics Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share amounts)
Shares Amount
Vesting of restricted stock units 1,187,054 13 (13) — — —
Other comprehensive income — — — 7,529 — 7,529
Vesting of restricted stock units 1,302,190 12 (12) — — —
Other comprehensive income — — — 1,377 — 1,377
Vesting of restricted stock units 1,449,761 15 (15) — — —
Other comprehensive loss — — — (1,338) — (1,338)
See accompanying notes to consolidated financial statements.
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Denali Therapeutics Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
Operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Net accretion of discounts on marketable securities (10,253) (35,117) (43,952)
Non-cash adjustment to operating lease expense (4,450) (4,074) (3,719)
Right-of-use asset amortization for finance lease 3,629 1,197 —
Non-cash gain from divestiture of small molecule programs — (14,537) —
Other non-cash items 49 — 2
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (540) (2,480) (4,094)
Other non-current assets 772 603 —
Related party contract liability — — (290,532)
Deferred research and development funding liability 6,972 14,129 —
Other non-current liabilities — — (379)
Investing activities
Financing activities
Payments for finance lease right-of-use asset (8,168) (32,338) —
Issuance costs related to the royalty financing (324) — —
Supplemental disclosures of cash flow information
Increase in right-of-use asset due to lessor assets $ — $ 7,051 $ —
Property and equipment purchases accrued but not yet paid $ — $ 1,192 $ 553
Cash paid for finance lease interest $ 720 $ 302 $ —
Issuance costs incurred but not yet paid $ 482 $ — $ —
Cash paid during the year for income taxes $ 46 $ — $ 3
See accompanying notes to consolidated financial statements.
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Denali Therapeutics Inc.
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Organization and Description of Business
Denali Therapeutics Inc. ("Denali" or the “Company”) is a biopharmaceutical company, incorporated in Delaware, that discovers and develops therapeutics to defeat neurodegenerative diseases and lysosomal storage diseases. The Company is headquartered in South San Francisco, California.
Basis of Presentation
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. For the Company and its subsidiaries, the functional currency has been determined to be U.S. dollars. Monetary assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates, non-monetary assets and liabilities denominated in foreign currencies are remeasured at historical rates, and transactions in foreign currencies are remeasured at average exchange rates. Foreign currency gains and losses resulting from remeasurement are recognized in interest and other income, net in the Consolidated Statements of Operations and Comprehensive Loss.
Reclassification
Certain prior period amounts in the Company’s Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation. Specifically, amounts related to the research and development funding liability that were previously included within changes in operating assets and liabilities - accruals and other current liabilities have been reclassified to changes in operating assets and liabilities - deferred research and development funding liability.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material to the Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. Substantially all of the Company’s cash and cash equivalents are deposited in accounts with financial institutions that management believes are of high credit quality. Such deposits have and will continue to exceed federally insured limits. The Company maintains its cash with accredited financial institutions and accordingly, such funds are subject to minimal credit risk.
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The Company’s investment policy limits investments to certain types of securities issued by the U.S. government and its agencies, as well as institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the Consolidated Balance Sheets. As of December 31, 2025 and 2024, the Company had no off-balance sheet concentrations of credit risk.
The Company is subject to a number of risks similar to other biopharmaceutical companies at our stage, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under any license or collaboration agreements, and the need to scale internal manufacturing and/or secure and maintain adequate manufacturing arrangements with third parties. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability. Further, the company is also subject to broad market risks and uncertainties resulting from recent events, such as bank failures or instability in the financial services sector, geopolitical instability, war and armed conflicts, inflation, rising interest rates, and recession risks as well as supply chain and labor shortages.
Convertible Preferred Stock
The Company is authorized to issue 40.0 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company’s shareholders. As of December 31, 2025 and 2024, the Company had no shares of preferred stock issued or outstanding.
Investments
The Company holds an equity investment in a venture-backed privately held company, Tenvie Therapeutics, Inc. ("Tenvie"). The privately held company is a Variable Interest Entity ("VIE"), but the Company is not the primary beneficiary. The Company does not have the power to direct the activities that most significantly impact the economic performance of the investee. The Company’s maximum exposure to loss from this VIE is limited to the value of the equity investment. The equity investment held by the Company lacks a readily determinable fair value and therefore the securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar equity securities of the same issuer. The Company reviews the carrying value of its equity investment for impairment whenever events or changes in business circumstances indicate the carrying amount of such asset may not be fully recoverable. Impairments, if any, are based on the excess of the carrying amount over the recoverable amount of the asset. There were no impairments during the years ended December 31, 2025 and 2024.
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Fair Value of Financial Instruments
Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:
Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.
The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate their fair values due to their short-term nature.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of 90 days or less at the date of purchase to be cash and cash equivalents. Cash equivalents are reported at fair value.
Cash, cash equivalents and restricted cash reported within the Consolidated Statements of Cash Flows is composed of cash and cash equivalents reported in the Consolidated Balance Sheets and restricted cash of $3.1 million, $1.6 million and $1.6 million as of December 31, 2025, 2024 and 2023, respectively, which is included within other non-current assets in the Consolidated Balance Sheets. Restricted cash relates to letters of credit supporting the Company’s headquarters building lease and, as of December 31, 2025, also includes a letter of credit supporting the Company’s credit card program.
Marketable Securities
The Company generally invests its excess cash in money market funds and investment grade short to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, short-term marketable securities or long-term marketable securities on the Consolidated Balance Sheets, are considered available-for-sale, and are reported at fair value with net unrealized gains and losses included as a component of stockholders’ equity.
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The Company classifies investments in securities with remaining maturities of less than one year, or where its intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments. The Company classifies investments in securities with remaining maturities of over one year as long-term investments, unless intended to fund current operations. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest and other income, net in the Consolidated Statements of Operations and Comprehensive Loss. Realized gains and losses and declines in value determined to be due to credit losses on marketable securities, if any, are included in interest and other income, net.
The Company periodically evaluates the need for an allowance for credit losses. This evaluation includes consideration of several qualitative and quantitative factors, including whether it has plans to sell the security, whether it is more likely than not it will be required to sell any marketable securities before recovery of its amortized cost basis, and if the entity has the ability and intent to hold the security to maturity, and the portion of any unrealized loss that is the result of a credit loss. Factors considered in making these evaluations include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, expected cash flows from securities, other publicly available information that may affect the value of the marketable security, duration and severity of the decline in value, and the Company's strategy and intentions for holding the marketable security.
Accounts Receivable
Accounts receivable are included within prepaid expenses and other current assets on the Consolidated Balance Sheets. The accounts receivable balance represents amounts receivable from the Company's collaboration partners net of an allowance for credit losses, if required.
Property and Equipment, Net
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the related estimated useful lives as presented in the table below. Significant additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred.
Asset Estimated useful life
Leasehold improvements shorter of life of asset or lease term
Computer equipment and purchased software three years
Laboratory equipment five years
Furniture and fixtures five years
Manufacturing equipment eight years
Impairment of Long-Lived Assets
The Company periodically evaluates property and equipment for impairment whenever events or changes in circumstances indicate that a potential impairment may have occurred. If such events or changes in circumstances arise, the Company compares the carrying amount of the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the long-lived assets. If the estimated aggregate undiscounted cash flows are less than the carrying amount of the long-lived assets, an impairment charge, calculated as the amount by which the carrying amount of the assets exceeds the fair value of the assets, is recorded. The fair value of the long-lived assets is determined based on the estimated discounted cash flows expected to be generated from the long-lived assets. The Company has not recorded any material impairment charges during the years presented.
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Leases
The Company leases real estate and certain equipment for use in its operations. A determination is made as to whether an arrangement is a lease at inception. The Company recognizes finance and operating lease right-of-use ("ROU") assets, and finance and operating lease liabilities based on the present value of the future minimum lease payments at the commencement date. The Company adjusts ROU assets as needed for any lease incentives it receives and for assets it purchases that are regarded as landlord-owned. When determining the present value of lease payments, the Company uses its incremental borrowing rate on the date of lease commencement, or the rate implicit in the lease, if known. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed by management to be reasonably certain at lease inception.
The Company recognizes amortization of the ROU assets and interest on the lease liabilities for its finance lease. Finance lease ROU assets are amortized on a straight-line basis from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. Operating lease expense is recognized on a straight-line basis over the lease term.
Leases with an initial term of twelve months or less are not recorded on the balance sheet, unless they include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company has leases with lease and non-lease components, which the Company has elected to account for as a single lease component.
Revenue Recognition
License, Option and Collaboration Revenue
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606. The accounting treatment pursuant to Topic 606 is outlined below.
Each of these Payments received under license, option and collaboration agreements result in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenue. The Company may also receive reimbursement or make payments to a collaboration partner to satisfy cost sharing requirements. These payments are accounted for pursuant to ASC 808 and are recorded as an offset or increase to research and development expenses, respectively.
The Company recognizes revenue as it fulfills its obligations under each of its agreements. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the service promised to the customer. Amounts received prior to satisfying the revenue recognition criteria are recorded as current or non-current contract liabilities in the Company’s Consolidated Balance Sheets, depending on when the performance obligation is expected to be satisfied.
Research and Development Expenses
Research and development expenses represent costs incurred to conduct research and development activities, including the discovery and development of product candidates. The Company recognizes all research and development costs as they are incurred. The Company’s research and development expenses consist primarily of:
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•expenses incurred under agreements with collaborators, consultants, third-party contract research organizations (“CROs”), and investigative sites, which conduct a substantial portion of the Company’s preclinical studies and clinical trials;
•costs of acquiring laboratory supplies and originator comparator materials, and costs related to the internal and third-party manufacturing of preclinical and clinical trial supplies;
•costs associated with internal and third-party manufacturing process development activities, analytical activities and pre-launch inventory manufactured prior to regulatory approval being obtained or deemed to be probable;
•salaries and other personnel-related expenses, including stock–based compensation; and
•facility costs and other allocated expense, including direct and allocated costs for rent and maintenance of facilities, depreciation and amortization of leasehold improvements, and manufacturing and laboratory equipment.
Where the Company shares costs with collaboration partners, such as in the Biogen Collaboration Agreement and the Takeda Collaboration Agreement, research and development expenses may include cost sharing reimbursements from or payments to the collaboration partner, respectively. Where the company has entered into an R&D funding arrangement, payments received will be recorded as a liability, and recognized an offset to research and development expenses as the underlying research and development costs are incurred.
Nonrefundable advance payments for goods and services that will be used or received in future research and development activities are deferred and recognized as expense in the period in which the related goods are delivered or services are performed. There can be judgment involved in measuring the research and development expenses to be recognized in a particular period. In some cases, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. The level of judgment varies based on the nature of the services being performed and the underlying support obtained. For some activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. The determination of whether an arrangement meets the definition of an R&D funding arrangement under ASC730 requires judgment, including an assessment of the nature of the arrangement, the funding party’s rights and exposure to research and development risks. Further, the timing of recognition of the funding is also subject to the judgments of the underlying research and development costs.
The Company has acquired and may continue to acquire the rights to develop and commercialize new product candidates from third parties. The upfront payments to acquire license, product or rights, as well as any future milestone payments, are immediately recognized as research and development expense provided that there is no alternative future use of the rights in other research and development projects.
Stock-Based Compensation
The Company’s stock-based compensation programs grant awards that have included stock options, restricted stock units, restricted stock awards, and shares issued under its employee stock purchase plan. Grants are awarded to employees, directors, and non-employee service providers.
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The Company measures compensation expense for all stock-based awards at the grant date based on the fair value measurement of the award. The expense is recorded on a straight-line basis over the requisite service period, which is generally the vesting period, for the entire award. Expense is adjusted for actual forfeitures of unvested awards as they occur. The Company calculates the fair value measurement of stock options subject solely to service-based vesting requirements using the Black-Scholes valuation model. The Company uses the fair value of its common stock to determine the fair value of restricted stock awards.
Income Taxes
Income taxes are accounted for using the liability method, under which deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities and consideration is given to net operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be in effect when the differences are expected to reverse.
The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized.
The calculation of our current provision for income taxes involves the use of estimates, assumptions and judgments while taking into account current tax laws, interpretation of current tax laws and possible outcomes of future tax audits. The Company has established reserves to address potential exposures related to tax positions that could be challenged by tax authorities. Any changes in tax law or interpretation of tax law and the resolutions of potential tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.
Comprehensive Loss
Comprehensive loss is composed of net loss and certain changes in stockholders’ equity that are excluded from net loss, primarily unrealized gains or losses on the Company’s marketable securities.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented. The weighted-average common shares outstanding as of December 31, 2025 and 2024 include the pre-funded warrants to purchase shares of common stock. Refer to discussion in Note 8 - "Common Stock".
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The Company has adopted this accounting standard update retrospectively on December 31, 2025. Newly required disclosures has been included in Note 11- "Income Taxes".
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In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments can be applied either prospectively or retrospectively. The Company has not early adopted this update, and is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.
2. Fair Value Measurements
Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands):
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents:
Short-term marketable securities:
Long-term marketable securities:
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents
Short-term marketable securities:
Long-term marketable securities:
The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly.
The Company did not transfer any assets or liabilities between the fair value measurement levels during the years ended December 31, 2025 or 2024.
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3. Marketable Securities
All marketable securities were considered available-for-sale at December 31, 2025 and 2024. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs as discussed in Note 2, "Fair Value Measurements". The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):
Short-term marketable securities:
Long-term marketable securities:
Short-term marketable securities:
Long-term marketable securities:
As of December 31, 2025 and 2024, some of the Company's marketable securities were in an unrealized loss position. The Company had not recognized an allowance for credit losses as of December 31, 2025 or 2024. The Company determined that it had the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery. Further, a majority of the Company's investments were held in U.S. government securities, and the remainder were held with investment grade, high credit quality institutions. All marketable securities with unrealized losses as of each balance sheet date had been in a loss position for less than twelve months or the loss is not material.
As of December 31, 2025 all of the Company’s marketable securities had an effective maturity of less than two years.
4. Acquisition, License Agreement and Research and Development Funding Collaboration Agreement
Acquisition of F-star Gamma
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In May 2018, the Company exercised an option to acquire all of the outstanding shares of F-star Gamma Limited ("F-star Gamma") pursuant to a prenegotiated buy-out option agreement (the "Acquisition"). As a result of the Acquisition, F-star Gamma became a wholly-owned subsidiary of the Company and the Company changed the entity’s name to Denali BBB Holding Limited. In addition, the Company became a direct licensee of certain intellectual property of F-star Biotechnology Limited (“F-Star Ltd”) by way of the Company’s assumption of F-star Gamma’s license agreement with F-star Ltd, dated August 24, 2016, (the “F-star Gamma License”). The transaction was accounted for as an asset acquisition.
The Acquisition obligates the Company to make certain contingent payments to former shareholders and under the F-star Gamma license. In 2023, the Company incurred $30.0 million in R&D expenses upon the achievement of a clinical milestone. There was no contingent consideration expense recognized for the years ended December 31, 2025 or 2024. Under this arrangement, the Company may be required to make additional contingent consideration payments of up to $210.0 million, consisting of up to $60.0 million in regulatory contingent payments, including $36.0 million due upon regulatory approval of tividenofusp alfa in the United States, and up to $150.0 million in commercial contingent payments.
Genentech License Agreement
In June 2016, the Company entered into an Exclusive License Agreement with Genentech, Inc. (“Genentech”), giving the Company access to Genentech’s LRRK2 inhibitor small molecule program for Parkinson's disease. The Company may owe Genentech milestone payments upon the achievement of certain development, regulatory, and commercial milestones, up to a maximum of $315.0 million in the aggregate, including up to $37.5 million in clinical milestone payments, $102.5 million in regulatory milestone payments and $175.0 million in commercial milestone payments. In addition, the Company may owe royalties on net sales of licensed products ranging from low to high single-digit percentages.
The Company has made a total of $25.0 million in consideration payments under the Genentech agreement. The Company did not recognize expenses under this agreement in the years ended December 31, 2025, 2024 or 2023.
Collaboration and Development Funding Agreement
In January 2024, the Company entered into a Collaboration and Development Funding Agreement with an unrelated third party, which obligates this third party to provide up to $75.0 million of funding and collaborate with the Company to conduct a global Phase 2a study of BIIB122/DNL151 in patients with Parkinson’s disease and confirmed pathogenic variants of LRRK2.
Pursuant to this agreement, the Company has received payments totaling $50.0 million as of December 31, 2025, with the remainder to be paid upon achievement of operational milestones in the study. After the full $75.0 million in consideration has been paid, the third party will be eligible to receive low single-digit royalties from the Company on annual worldwide net sales of LRRK2 inhibitors for the treatment of Parkinson’s disease.
The Company determined that this arrangement is an R&D funding arrangement under ASC 730. As the third party is sharing in the risk associated with research and development activities with the Company, the development funding is recognized as an obligation to perform contractual services. Accordingly, payments received are recorded as a liability, and recognized by the Company as a reduction to research and development expenses over the estimated Phase 2a study period as the underlying research and development costs are incurred. Under this arrangement, the Company recognized an offset to research and development expenses of $18.0 million and $10.9 million in the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024, respectively. The Company recorded current deferred research and development funding liabilities of $21.1 million and $14.1 million on the Consolidated Balance Sheets as of December 31, 2025, and 2024, respectively.
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5. Collaboration Agreements
Biogen
In August 2020, the Company entered into a binding Provisional Collaboration and License Agreement (“Provisional Biogen Collaboration Agreement”) with Biogen Inc.’s subsidiaries, Biogen MA Inc. (“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”) pursuant to which the Company granted Biogen a license to co-develop and co-commercialize Denali’s small molecule LRRK2 inhibitor program (the “LRRK2 Program”), an option in respect of each of (i) the Company’s amyloid beta program utilizing the Company's TransportVehicleTM ("TV") technology to cross the blood-brain barrier ("BBB") and (ii) one other unnamed program also utilizing the Company's TV technology platform (the “Option Programs”), and a right of first negotiation with respect to two additional unnamed programs utilizing the Company's TV technology platform (the “ROFN Programs”), should the Company decide to seek a collaboration with a third party for such programs. The Provisional Biogen Collaboration Agreement was a binding agreement, which became effective on the closing of the Common Stock Purchase Agreement in September 2020, pursuant to which the Company sold 13,310,243 shares of common stock (the “Shares”) to BIMA for an aggregate purchase price of $465.0 million. The Provisional Biogen Collaboration Agreement expired in October 2020 upon the execution of a Definitive LRRK2 Collaboration and License Agreement (“LRRK2 Agreement”) with Biogen on October 4, 2020 and a Right of First Negotiation, Option and License Agreement (the “ROFN and Option Agreement”) on October 6, 2020 (collectively, the "Biogen Collaboration Agreement"). Biogen made an upfront payment of $560.0 million upon execution of the Biogen Collaboration Agreement in October 2020.
In August 2023, the Company and Biogen executed an Amendment (the “Biogen Amendment”) to the LRRK2 Agreement and ROFN and Option Agreement, pursuant to which Biogen waived its option to the second option program and its ROFN rights. In July 2024, Denali and Biogen executed a Side Letter to the ROFN and Option Agreement, pursuant to which, effective as of the date of the Side Letter, Biogen terminated its license to the Company's amyloid beta program utilizing the Company's TV technology platform, and granted Denali rights to data generated during the collaboration. The side letter also effected the immediate termination of the ROFN and Option Agreement; as such, the Company expects to receive no future milestone or royalty payments from Biogen related to the ROFN and Option Agreement.
LRRK2 Agreement
With respect to the LRRK2 Program, Biogen is required to make milestone payments up to approximately $1.125 billion upon achievement of certain development and sales milestone events. Such milestone payments include $375.0 million in development, $375.0 million upon first commercial sale, and $375.0 million in net sales-based milestones. Pursuant to the Biogen Amendment, the schedule of potential LRRK2 Agreement milestones was amended, while maintaining the same total value of milestones that Denali is eligible to receive. The Company will share 50% of the profits and losses with Biogen for LRRK2 Products in the United States, and 40% of such profits and losses in China. The Company will be entitled to receive royalties in the high teens to low twenties percentages on net sales for LRRK2 Products outside of the United States and China.
The Company and Biogen are jointly developing LRRK2 Products pursuant to a clinical development plan set forth within the LRRK2 Agreement. The parties share responsibility and costs for global development of LRRK2 Products pursuant to a mutually agreed development plan and budget ("LRRK2 Development Activities"), with Biogen funding 60% and the Company funding 40% of such costs.
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The Company may opt out of development cost sharing worldwide and upon such election, from any further profit-sharing from the LRRK2 Program. The Company also has the right to opt-out of the profit sharing arrangement for the LRRK2 Program or for only those LRRK2 Products that do not penetrate the BBB (“Peripheral LRRK2 Products”), in each of the United States and China. After such an opt out, the Company will no longer be obligated to share in the development and commercialization costs for, or be entitled to share in the applicable revenues from, such LRRK2 Program (or from the Peripheral LRRK2 Products) for such country, as applicable. If the Company chooses to exercise its opt out rights, the Company will be entitled to receive tiered royalties on net sales of the applicable LRRK2 Program in the relevant country (or countries). The royalty rates for the applicable LRRK2 Program will be a percentage in the high teens to low twenties, but may increase to the mid-twenties if the Company has met certain co-funding thresholds or there has been a first commercial sale at the time of the Company's election.
Biogen Collaboration Agreement
The Company believes that the Biogen Collaboration Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Arrangements, and that Biogen meets the definition of a customer as defined in ASC 606, Revenue From Contracts With Customers for all of the performance obligations identified at inception except for the LRRK2 Development Activities. Since ASC 808 does not address recognition and measurement, the Company looked to other accounting literature for guidance where the performance obligation does not fall under ASC 606, and determined that for the interim LRRK2 development activities subject to cost sharing provisions, the guidance in ASC 730, Research and Development should be applied. The LRRK2 Development Activities cost sharing reimbursements or expenses are being recognized over time as earned or incurred, since this is believed to directly correlate to the value of the services performed.
As of December 31, 2025, the Company had earned $5.0 million in option fee payments, but had not recorded milestone revenue or product sales under the Biogen Collaboration Agreement.
Sanofi
In October 2018, the Company entered into a Collaboration and License Agreement ("Sanofi Collaboration Agreement") with Genzyme Corporation, a wholly owned subsidiary of Sanofi S.A. ("Sanofi") pursuant to which certain small molecule CNS and peripheral receptor interacting serine/threonine protein kinase 1 ("RIPK1") inhibitors contributed by Sanofi and by the Company would be developed and commercialized. When the Sanofi Collaboration Agreement became effective in November 2018, Sanofi paid us $125.0 million upfront. Under the Sanofi Collaboration Agreement, Sanofi is required to make milestone payments totaling up to approximately $495.0 million upon achievement of certain clinical, regulatory and sales milestone events for the Peripheral Products. Such milestone payments include $120.0 million in clinical milestone payments, $175.0 million in regulatory milestone payments and $200.0 million in commercial milestone payments for Peripheral Products, as defined, that are developed and approved in the United States, Europe and in Japan for three indications. Sanofi has made payments of $35.0 million for Peripheral Product clinical milestones through December 31, 2025, and payments of $65.0 million for CNS Product clinical milestones through the sale date. On February 24, 2025, Denali and Sanofi executed a side letter terminating Sanofi's license to the CNS Products program including SAR443820/DNL788. Subsequent to this side letter, the Company expects to receive no future milestone or royalty payments from Sanofi related to the CNS Products program. The Company will receive variable royalties on net sales for Peripheral Products sold worldwide, each as further described below.
Sanofi will be responsible, at its cost, for conducting activities relating to the development and commercialization of all Peripheral Products. Denali will be entitled to receive tiered royalties in the low- to mid- teen percentages on net sales of Peripheral Products.
The Company believes that the Sanofi Collaboration Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Arrangements.
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During the year ended December 31, 2023, the Company earned a clinical milestone of $25.0 million when the associated performance obligation was satisfied, which was recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss. There were no milestones recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss for the years ended December 31, 2025 or 2024.
The Company has no remaining performance obligations under the Sanofi Collaboration Agreement, and nocontract liability remains on the Consolidated Balance Sheets as of December 31, 2025 or 2024. As of December 31, 2025, the Company had earned milestone payments of $100.0 million. and hadnot recorded any product sales under the Sanofi Collaboration Agreement.
Takeda
Takeda Collaboration Agreement
In January 2018, the Company entered into a Collaboration and Option Agreement ("Takeda Collaboration Agreement") with Takeda Pharmaceutical Company Limited ("Takeda"), pursuant to which the Company granted Takeda an option to develop and commercialize, jointly with the Company, certain biologic products that are enabled by the Company's BBB delivery technology and intended for the treatment of neurodegenerative disorders, concurrent with a stock purchase agreement under which Takeda purchased 4,214,559 shares of Denali common stock for $110.0 million. The programs subject to the Takeda Collaboration Agreement were the Company’s ATV:BACE1/Tau, ATV:TREM2 and PTV:PGRN programs. The Takeda Collaboration Agreement became effective in February 2018, at which time Takeda paid the Company an upfront payment of $40.0 million. In February 2019, the agreement was amended to replace the ATV:BACE1/Tau program with the ATV:Tau program, and in March 2022, Takeda and the Company agreed to terminate activity on the ATV:Tau program. Subsequent to the ATV:Tau termination, total preclinical milestone payments that Takeda owed under the Takeda Collaboration Agreement was $55.0 million for all three programs, all of which had been earned and received as of December 31, 2022.
Subsequent to Takeda exercising its option with respect to a particular target and collaboration program (i.e., the biologic products directed to the target for which Takeda has exercised its option), Takeda has the right to develop and commercialize, jointly with the Company, a specified number of biologic products enabled by its BBB delivery technology that were developed during the research period and which are directed to the relevant target, and the Company grants to Takeda a co-exclusive license under the intellectual property the Company controls related to those biologic products.
The Company did not record any product sales and there are no remaining performance obligations under the initial Takeda Collaboration Agreement. The Takeda Collaboration Agreement was superseded by the PTV:PGRN and ATV:TREM2 Collaboration Agreements subsequent to opt-in for the two programs in November and December 2021, respectively, recognition of all preclinical milestones, and termination of the ATV:Tau program. In February 2025, after mutual agreement to discontinue preclinical activities on ATV:TREM2, Takeda delivered notice of its election to terminate the ATV:TREM2 program, as per the terms of the Takeda Collaboration Agreement. Subsequent to the effective date of the termination of the ATV:TREM2 Collaboration Agreement, there are no future milestones, cost, or profit sharing related to this agreement. Prior to its termination, the ATV:TREM2 Collaboration Agreement was accounted for consistent with the treatment of the PTV:PGRN Collaboration Agreement, which is discussed in the subsequent section.
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PTV:PGRN Collaboration Agreement
In November 2021, Takeda exercised its options to jointly develop and commercialize the PTV:PGRN program, triggering the option fee of $5.0 million, which formed the transaction price at contract inception, all of which was allocated to the underlying Technology License which was delivered on or around the effective date of the Collaboration Agreement. Management determined that the opt-in by Takeda on the PTV:PGRN program represents a new contract with a customer for accounting purposes (the "PTV:PGRN Collaboration Agreement"), effective in December 2021 upon payment of the option fee. From inception of the PTV:PGRN Collaboration Agreement through December 31, 2025, there was no change to the terms of the agreement.
The Company believes that the PTV:PGRN Collaboration Agreement is a collaboration arrangement as defined in ASC 808, Collaborative Arrangements. The Company also believes that Takeda meets the definition of a customer as defined in ASC 606, Revenue From Contracts With Customers for the PTV:PGRN Technology License performance obligation delivered in the collaboration agreement. Since ASC 808 does not address recognition and measurement, the Company looked to other accounting literature for the PTV:PGRN Development Activities unit of account, and determined that the guidance in ASC 730, Research and Development should be applied.
Under the PTV:PGRN Collaboration Agreement, Takeda may be obligated to pay the Company up to $140.0 million upon achievement of certain clinical milestone events and up to $100.0 million in regulatory milestone events relating to receipt of regulatory approval in the United States, certain European countries and Japan. Takeda may also be obligated to pay the Company up to $75.0 million upon achievement of a certain sales-based milestone. Further, the Company and Takeda share equally the development and commercialization costs, and, if applicable, the profits, for the PTV:PGRN program.
A $10.0 million milestone was triggered under the PTV:PGRN Collaboration Agreement upon achievement of a specified clinical milestone and recognized in collaboration revenue from customers in the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2023. No product sales have been recorded under the agreement.
Collaboration Revenue
Revenue disaggregated by collaboration agreement and performance obligation is as follows (in thousands):
Year Ended December 31,
Takeda Collaboration Revenue - PTV:PGRN Program — — 10,000
Sanofi Collaboration Revenue - CNS Program — — 25,000
Biogen Collaboration Agreement:
ATV:Abeta Program License(1) — — 293,912
Option Research Services(2) — — 1,619
Total Biogen Collaboration Revenue — — 295,531
Total Collaboration Revenue $ — $ — $ 330,531
_________________________________________________
(1)Revenue of $288.9 million for the year ended December 31, 2023 was included in the related-party contract liability balance at the beginning of the period.
(2)Revenue was included in the contract liability balance at the beginning of the year.
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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 Consolidated Statements of Operations and Comprehensive Loss, and cost sharing reimbursements from collaboration partners recorded as an offset to research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss are as follows (in thousands):
Year Ended December 31,
Takeda Collaboration Agreement:
PTV:PGRN cost sharing (reimbursements) $ (6,456) $ (4,789) $ (7,065)
ATV:TREM2 cost sharing (reimbursements) (147) (1,147) (5,100)
Net cost sharing payments (reimbursements) $ 9,202 $ 10,806 $ 5,513
________________________________________________
(1)Cost sharing reimbursements of $1.6 million and $1.5 million were recorded as a receivable within prepaid expenses and other current assets on the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively.
(2)Cost sharing payments due to Biogen of $2.8 million and $2.5 million were recorded within accounts payable on the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively.
6. Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consists of the following (in thousands):
As of December 31,
Accounts receivable and other receivables $ 2,177 $ 2,171
Prepaid clinical research & development costs 7,280 6,473
Prepaid manufacturing and other research & development costs 10,249 16,196
Other prepaid assets and other current assets 13,073 7,265
Total prepaid expenses and other current assets $ 32,779 $ 32,105
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
As of December 31,
Computer equipment and purchased software 2,203 1,841
Total property and equipment, net $ 52,402 $ 55,236
Depreciation expense was $11.2 million, $7.8 million and $16.7 million for the years ended December 31, 2025, 2024 and 2023, respectively. Depreciation expense for the year ended December 31, 2023 includes $7.9 million of accelerated depreciation on leasehold improvements due to the Company terminating the previous SLC Lease in March 2023.
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Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consists of the following (in thousands):
As of December 31,
Accrued clinical and other research & development costs 19,458 22,822
Operating lease liability, current 9,463 8,308
Finance lease liability, current 83 3,726
Deferred research and development funding liability, current 21,101 14,129
Other accrued costs and current liabilities 7,401 4,579
Total accrued expenses and other current liabilities $ 95,021 $ 91,071
7. Commitments and Contingencies
Lease Obligations
In May 2018, the Company entered into an operating lease for its corporate headquarters in South San Francisco (the "Headquarters Lease"), a 148,020 rentable square feet building in South San Francisco, California (the "Headquarters"). The Headquarters Lease has a contractual term of 10 years which ends on March 31, 2029, after which the Company has an option to extend the lease term for a further ten years. The Company determined that this renewal was not reasonably certain at lease inception. The accounting lease commencement date was determined to be August 1, 2018.
The Headquarters Lease provides for monthly base rent amounts escalating over the term of the lease. In addition, the Headquarters Lease provided a tenant improvement allowance ("TIA") of up to $25.9 million, which was fully utilized, of which $4.4 million will be repaid to the landlord in the form of additional monthly rent. This is recorded as leasehold improvement assets and an offset to the lease ROU asset on the Consolidated Balance Sheets. The Company is also required to pay the operating expenses for the Headquarters, such as taxes and insurance, which are treated as variable lease payments.
In August 2021, the Company entered into an operating lease for laboratory, office and warehouse facilities in Salt Lake City, Utah. In March 2023, the Company terminated this operating lease, which resulted in the recognition of $7.9 million of accelerated depreciation on leasehold improvements during the year ended December 31, 2023. The lease had not commenced for accounting purposes.
In April 2023, the Company entered into a finance lease for its clinical manufacturing site in Salt Lake City (the "SLC Lease") for a 59,336 square foot laboratory, office and warehouse premises with a contractual term of approximately 15 years, and undiscounted lease payments of approximately $13.4 million, which was subsequently amended in October 2023. The Company has the option to extend the lease term for a period of ten years at the end of the lease term. The accounting lease commencement date was determined to be August 1, 2024, the date the Company was deemed to have obtained control over the property, at which time the lease was determined to be a finance lease and the lease liability and ROU asset were recorded on the Consolidated Balance Sheets. The Finance lease ROU asset includes approximately $47.4 million of lessor owned improvements funded by the Company.
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Management exercised judgment in applying the requirements of ASC 842, including the determination as to whether certain contracts contain a lease, lease classification, the lease consideration, and the commencement date of the leases, and for leases identified under the standard, the discount rate used to determine the measurement of the lease liability. The discount rates of the Company's operating and finance leases are an approximation of the Company's incremental borrowing rate and are dependent upon the term and economics of the agreement. To estimate the incremental borrowing rates, management considered observable debt yields of comparable market instruments, as well as benchmarks within the lease agreement that may be indicative of the rate implicit in the lease. There were no changes to the terms of the leases recognized under ASC 842 during the year ended December 31, 2025.
The following table summarizes lease costs recognized for the periods presented (in thousands):
Year Ended December 31,
Finance lease cost:
The following table contains a summary of other information pertaining to the Company’s leases for the periods presented (in thousands):
Year Ended December 31,
As of December 31,
Weighted-average remaining lease term (in years):
Operating lease 3.3 years 4.3 years 5.3 years
Finance lease 13.3 years 14.3 years —
Weighted-average discount rate applied (%):
Operating lease 9.0 % 9.0 % 9.0 %
Finance lease 13.7 % 13.7 % — %
The following table reconciles the undiscounted cash flows for the next five years and total of the remaining years to the operating and finance lease liabilities recorded in the Consolidated Balance Sheet as of December 31, 2025 (in thousands):
Year Ended December 31: Operating Lease Finance Lease
Less: present value adjustment (5,475) —
Less: imputed interest — (6,481)
Total future minimum lease payments $ 36,673 $ 5,615
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Indemnification
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners, board members, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company, negligence or willful misconduct of the Company, violations of law by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Loss, or Consolidated Statements of Cash Flows.
Commitments
In the normal course of business, the Company enters into firm purchase commitments primarily related to supply of pre-launch commercial product, research, development and manufacturing activities. The Company had contractual obligations under certain commercial product, clinical and manufacturing agreements of $44.3 million and $60.8 million, as of December 31, 2025 and 2024, respectively. Further, the Company had other commitments of $1.5 million and $2.2 million as of both December 31, 2025 and 2024, respectively.
Royalty Pharma Funding Agreement
On December 4, 2025, the Company entered into a royalty funding arrangement (the “Royalty Agreement”) with Royalty Pharma plc (“Royalty Pharma”). Pursuant to the Royalty Agreement, Royalty Pharma agreed to provide up to $275.0 million in funding to the Company in exchange for a 9.25% royalty on worldwide net sales of tividenofusp alfa. The transaction is subject to various closing conditions, including the Company achieving FDA approval of tividenofusp alfa on or before June 30, 2026. At closing, Royalty Pharma will make an initial payment of $200.0 million and Royalty Pharma will be obligated to make an additional payment of $75.0 million upon European Medicines Agency (the "EMA") approval of tividenofusp alfa on or before December 31, 2029. Royalty payments will cease upon Royalty Pharma receiving a multiple of 3.0x of the initial investment proceeds, or 2.5x if achieved by the first quarter of 2039. As of December 31, 2025, the transaction had not closed and no liability related to the Royalty Agreement was recorded in the consolidated financial statements.
Contingencies
From time to time, the Company may be involved in lawsuits, arbitration, claims, investigations and proceedings consisting of intellectual property, employment and other matters which arise in the ordinary course of business. The Company records accruals for loss contingencies to the extent that the Company concludes that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated.
8. Common Stock
In February 2024, the Company entered into a securities purchase agreement (the "Purchase Agreement") with certain investors for the private placement of (i) 3,244,689 shares of the Company's common stock at a price of $17.07 per share and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 26,046,065 shares of the Company's common stock at a purchase price of $17.06 per pre-funded warrant, which represents the per share price for the common stock less the $0.01 exercise price. The private placement closed on February 29, 2024, at which time the Company received aggregate net proceeds of approximately $499.3 million, after deducting issuance costs of approximately $0.5 million.
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On December 9, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC as representatives of the several underwriters named therein (collectively, the “Underwriters”), relating to the public offering of (i) 9,142,857 shares of the Company’s common stock, at a public offering price of $17.50 per share, and (ii) additional Pre-Funded Warrants to purchase 2,285,714 shares of Common Stock at a public offering price of $17.49 per pre-funded warrant, which represents the per share price for the common stock less the $0.01 exercise price.The public offering closed on December 11, 2025, at which time the Company received aggregate net proceeds of approximately $189.2 million, after deducting issuance costs of approximately $0.7 million. In January 2026, the underwriters exercised their option to purchase an additional 746,468 shares of the Company’s Common Stock, on which date the Company received aggregate net proceeds of approximately $12.4 million.
All of the Pre-Funded Warrants issued in the aforementioned private placement and the public offering were outstanding as of December 31, 2025, and were classified as a component of permanent equity in the Company’s consolidated balance sheet as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its shares and permit the holders to receive a fixed number of shares of common stock upon exercise.
9. Stock-Based Awards
Equity Incentive Plans
The Company's equity incentive plans, the 2017 Equity Incentive Plan (the “2017 Plan”), and previously, the 2015 Stock Incentive Plan (the “2015 Plan”), reserve shares of common stock for the issuance of stock options, restricted stock and other stock awards, to employees, non-employee directors, and consultants under terms and provisions established by the board of directors and approved by the stockholders. Upon adoption of the 2017 Plan, no new awards or grants are permitted under the 2015 Plan. The 2015 Plan continues to govern restricted stock awards and option awards previously granted thereunder.
Awards granted under the 2017 Plan and 2015 Plan expire no later than ten years from the date of grant. For stock options, the option price shall not be less than 100% of the estimated fair value of the Company's common stock on the day of grant. Options granted typically vest over a four-year period but may be granted with different vesting terms.
The 2017 Plan provides that the number of shares reserved and available for issuance under the 2017 Plan will automatically increase each January 1, beginning on January 1, 2019, by the lesser of (i) 10.0 million shares, (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator of the 2017 Plan. In 2025, common stock available for issuance under the 2017 Plan was increased by approximately 7.2 million shares as a result of this automatic increase provision. As of December 31, 2025 and 2024, there were approximately 14.8 million and 14.3 million common shares available for the Company to grant under the 2017 Plan, respectively.
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Stock Option Activity
The following table summarizes option award activity under the 2017 Plan and the 2015 Plan: