Denali Therapeutics Inc. (DNLI) FY 2025 MD&A

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 clinical programs 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:

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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):

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*Percentage is not meaningful.

Research and development expenses. Research and development expenses were $418.8 million for 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):

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(1)Personnel-related expenses include stock-based compensation expense of $59.5 million and $59.1 million for 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 million obtained 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 and pre-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):

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.