Denali Therapeutics Inc.

Previous wording

•our ability to successfully market, manufacture, and commercialize AVLAYAH and any other products for which we obtain marketing approval;

Current wording

•the commercial success of AVLAYAH and any other products for which we obtain marketing approval;

Previous wording

We currently have one approved product. Our commercial product, AVLAYAHTM(tividenofusp alfa-eknm) received U.S. Food and Drug Administration ("FDA") approval on March 24, 2026 and is approved for the treatment of neurologic manifestations in patients with Hunter syndrome or mucopolysaccharidoses II (MPS II) when initiated in presymptomatic or symptomatic pediatric patients weighing at least 5 kg prior to advanced neurologic impairment. Continued approval for this indication may be contingent upon verification of clinical benefit in a confirmatory trial. We began commercial distribution of AVLAYAH in April 2026.

Current wording

We currently have one approved product. Our commercial product, AVLAYAHTM(tividenofusp alfa-eknm) received accelerated approval from the U.S. Food and Drug Administration ("FDA") on March 24, 2026 and is approved for the treatment of neurologic manifestations in patients with Hunter syndrome or mucopolysaccharidoses II (MPS II) when initiated in presymptomatic or symptomatic pediatric patients weighing at least 5 kg prior to advanced neurologic impairment. AVLAYAH's accelerated approval was based on a surrogate endpoint (reduction in CSF HS), and continued approval is contingent upon confirmation of clinical benefit in the ongoing global Phase 2/3 COMPASS trial, as further described under "Clinical-Stage Programs" below.

Previous wording

•DNL126 (ETV:SGSH), composed of N-sulfoglucosamine sulfohydrolase ("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);

Current wording

•Zafinofusp alfa (DNL126; ETV:SGSH) is an investigational ETV-enabled enzyme replacement therapy designed to systemically deliver N-sulfoglucosamine sulfohydrolase (SGSH) throughout the body, including the brain, for the treatment of Sanfilippo syndrome type A (MPS IIIA);

Previous wording

•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;

Current wording

•In January 2026, we announced that the FDA has lifted the clinical hold on the IND application for DNL952 (ETV:GAA), and we are enrolling the Phase 1 study;

Previous wording

•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. In March 2026, the first patient was dosed in the Phase 1b study of DNL628, which is an investigational therapy enabled by Denali’s Oligonucleotide TransportVehicle™ (OTV);

Current wording

•In January 2026, we announced that the CTA for DNL628 (OTV:MAPT) to initiate a Phase 1b study in Alzheimer’s disease was approved. In March 2026, the first patient was dosed in the Phase 1b study of DNL628;

Previous wording

•In March 2026, we received $200.0 million in gross proceeds in connection with the closing of the synthetic royalty funding agreement with Royalty Pharma Investments 2023 ICAV (“Royalty Pharma”); and

Current wording

•In March 2026, we received $200.0 million in gross proceeds in connection with the closing of the synthetic royalty funding agreement with Royalty Pharma Investments 2023 ICAV (“Royalty Pharma”);

Previous wording

•In April 2026, we announced we received notification from Takeda of its decision to terminate the collaboration agreement to co-develop and co-commercialize DNL593 (PTV:PGRN) for Frontotemporal Dementia (FTD-GRN). The termination will become effective 60 days following the notice date, at which time all rights in the DNL593 program will revert to Denali. Takeda’s decision to terminate the collaboration agreement for DNL593 was driven by strategic considerations and not related to efficacy or safety data. Data from the ongoing Phase 1/2 study of DNL593, including biomarker results, are expected by the end of 2026.

Current wording

•In April 2026, we received notification from Takeda of its decision to terminate the collaboration agreement to co-develop and co-commercialize DNL593 (PTV:PGRN) for FTD-GRN. The termination became effective in June 2026, at which time all rights in the DNL593 program reverted to Denali. Takeda’s decision to terminate the collaboration agreement for DNL593 was driven by strategic considerations and not related to efficacy or safety data. We continue to conduct the Phase 1/2 study of DNL593 for FTD-GRN;

Previous wording

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 $128.4 million and $133.0 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we had an accumulated deficit of $2.18 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 approved product AVLAYAH to full US and broader global approval; advance our current clinical stage programs through healthy volunteer and patient trials; broaden and improve our TV platform; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel.

Current wording

We have incurred significant operating losses to date and expect to continue to incur operating losses for the foreseeable future. We had net losses of $127.6 million and $256.0 million for the three and six months ended June 30, 2026, respectively, and $124.1 million and $257.1 for the three and six months ended June 30, 2025, respectively. As of June 30, 2026, we had an accumulated deficit of $2.31 billion. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates. We expect to continue to incur significant expenses and operating losses as we advance our approved product AVLAYAH to full US and broader global approval; advance our current clinical stage programs through healthy volunteer and patient trials; broaden and improve our TV platform; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel.

Previous wording

It is challenging to predict the nature, timing and estimated long-range costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. This is made more challenging by events outside of our control, such as increased geopolitical uncertainty. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of AVLAYAH or any of our other product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

Current wording

It is challenging to predict the nature, timing and estimated long-range costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. This is made more challenging by events outside of our control, such as increased geopolitical uncertainty. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

Previous wording

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, including those associated with our commercial organization. Allocated expenses consist of rent, depreciation and other expenses related to our office and research and development facility not otherwise included in research and development expenses. We have increased our administrative headcount to support the commercialization of AVLAYAH and may continue to increase headcount to support our commercial and research and development activities, which we expect will increase general and administrative expenses.

Current wording

Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and stock-based compensation expense, expenses for outside professional services, commercialization activities, and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees, including those associated with our commercial organization. Allocated expenses consist of rent, depreciation and other expenses related to our office and research and development facility not otherwise included in research and development expenses. We have increased our headcount to support the commercialization of AVLAYAH and may continue to increase headcount to support our commercial and research and development activities, which we expect will increase selling, general and administrative expenses.

Previous wording

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.

Current wording

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 non-cash interest expense related to the revenue participation right liability and interest expense on our finance lease liability.

Previous wording

(1)Personnel related expenses include stock-based compensation expense of $13.6 million and $15.1 million for the three months ended March 31, 2026 and 2025, respectively, reflecting a decrease of $1.5 million.

Current wording

(1)Personnel related expenses include stock-based compensation expense of $13.5 million and $15.2 million for the three months ended June 30, 2026 and 2025, respectively, reflecting a decrease of $1.7 million.

Previous wording

The decrease in research and development expenses of approximately $12.4 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, was primarily attributable to the following:

Current wording

The decrease in research and development expenses of approximately $5.7 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, was primarily attributable to the following:

Previous wording

As of March 31, 2026, we had cash, cash equivalents and marketable securities in the amount of $1.05 billion. 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, and we expect product sales to contribute to funding our operations following the commercial launch of AVLAYAH, although such revenues are not expected to be sufficient to offset our expenses in the near term. We have sold common stock and other securities in public offerings, a private placement, and stock purchase agreements with Takeda and Biogen.

Current wording

As of June 30, 2026, we had cash, cash equivalents and marketable securities in the amount of $940.0 million. We fund our operations primarily with the proceeds from the sale of common stock and payments received from our collaboration partners, including those received under agreements with Takeda, Sanofi, and Biogen. Following the commercial launch of AVLAYAH, we expect product revenue to contribute to funding our operations, and our liquidity requirements will include working capital to support commercial inventory, patient support programs, market access activities, distribution arrangements, pharmacovigilance obligations and continued investment in commercial infrastructure. Although we expect AVLAYAH product revenue to contribute to funding our operations, we do not expect such revenue to be sufficient to offset our operating expenses in the near term. We have sold common stock and other securities in public offerings, a private placement, and stock purchase agreements with Takeda and Biogen.

Previous wording

Through March 31, 2026, 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$56.6 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.

Current wording

Through June 30, 2026, we have received$115.0 million,$225.0 million, $565.0 million and $62.5 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$58.2 million and $16.2 million in gross cost sharing reimbursements from Takeda and Biogen, respectively, and received$13.7 million in specified reimbursements from Sanofi.

Previous wording

Prior to the FDA approval of AVLAYAH, we had not generated any product revenue. Following the FDA approval of AVLAYAH, we commenced commercialization in April 2026 and expect to begin generating product revenue; however, we expect it to take time to generate sufficient revenue to offset our expenses, and we can provide no assurance as to when, if ever, this will occur. We do not expect to generate any product revenue from our other product candidates unless and until we obtain regulatory approval for those product candidates, and we do not know when, if ever, this will occur.

Current wording

Prior to the FDA approval of AVLAYAH, we had not generated any product revenue. Following the FDA approval of AVLAYAH, we commenced commercialization in April 2026 and have begun generating product revenue; however, we expect it to take time to generate sufficient revenue to offset our expenses, and we can provide no assurance as to when, if ever, this will occur. We do not expect to generate any product revenue from our other product candidates unless and until we obtain regulatory approval for those product candidates, and we do not know when, if ever, this will occur.

Previous wording

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $2.18 billion as of March 31, 2026. We expect to incur substantial additional losses in the future as we support the commercialization of AVLAYAH and conduct and expand our research and development activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the twelve months following the filing date of this Quarterly Report on Form 10-Q, including our existing commitments as outlined below. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In the longer term, we anticipate that we will need substantial additional resources to fund our operations and meet future commitments.

Current wording

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $2.31 billion as of June 30, 2026. We expect to incur substantial additional losses in the future as we support the commercialization of AVLAYAH and conduct and expand our research and development activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the twelve months following the filing date of this Quarterly Report on Form 10-Q, including our existing commitments as outlined below. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In the longer term, we anticipate that we will need substantial additional resources to fund our operations and meet future commitments.

Previous wording

Our existing commitments primarily relate to our obligations under existing lease agreements, certain commercial product, clinical and manufacturing agreements. As of March 31, 2026, we had total undiscounted lease payment obligations of $51.1 million. We had total non-refundable purchase commitments of $109.1 million as of March 31, 2026. While the lease obligations span multiple years, the majority of the purchase commitments are due within the upcoming twelve months. Further, we may be required to make contingent payments under existing arrangements upon the achievement of defined clinical, regulatory and commercial milestones in certain programs, including contingent consideration payments to former shareholders of F-star under the F-star Gamma license, and milestone and royalty payments to Genentech under the Genentech License Agreement. These commitments are more fully described in Note 9 "Commitments and Contingencies" of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and in Note 4, "Acquisition, License Agreement and Research and Development Funding Collaboration Agreement" and Note 7, "Commitments and Contingencies" to the consolidated financial statements included in Item 8. of our Annual Report on Form 10-K filed on February 26, 2026.

Current wording

Our existing commitments primarily relate to our obligations under existing lease agreements, certain commercial product, clinical and manufacturing agreements. As of June 30, 2026, we had total undiscounted lease payment obligations of $47.8 million. We had total non-refundable purchase commitments of $104.7 million as of June 30, 2026. While the lease obligations span multiple years, the majority of the purchase commitments are due within the upcoming twelve months. Further, we may be required to make contingent payments under existing arrangements upon the achievement of defined clinical, regulatory and commercial milestones in certain programs, including contingent consideration payments to former shareholders of F-star under the F-star Gamma license, and milestone and royalty payments to Genentech under the Genentech License Agreement. These commitments are more fully described in Note 10 "Commitments and Contingencies" of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and in Note 4, "Acquisition, License Agreement and Research and Development Funding Collaboration Agreement" and Note 7, "Commitments and Contingencies" to the consolidated financial statements included in Item 8. of our Annual Report on Form 10-K filed on February 26, 2026.

Previous wording

In March 2026, we received $200.0 million in gross proceeds under the Royalty Agreement with Royalty Pharma, which is recorded as a liability related to the revenue participation right on our Condensed Consolidated Balance Sheet as of March 31, 2026. Under the Royalty Agreement, we may receive an additional $75.0 million upon approval of AVLAYAH by the EMA on or before December 31, 2029. In exchange, Royalty Pharma is entitled to a 9.25% royalty on worldwide net sales of AVLAYAH until cumulative royalty payments reach a cap of 3.0 times the total funding received, or 2.5 times the total funding received if such cap is reached on or before the first quarter of 2039. These obligations are described in this Quarterly Report on Form 10-Q in Note 8, “Liability Related to the Revenue Participation Right”.

Current wording

In March 2026, we received $200.0 million in gross proceeds under the Royalty Agreement with Royalty Pharma, which was initially recorded as a liability related to the revenue participation right on our Condensed Consolidated Balance Sheet in the first quarter of 2026. Under the Royalty Agreement, we may receive an additional $75.0 million upon approval of AVLAYAH by the EMA on or before December 31, 2029. In exchange, Royalty Pharma is entitled to a 9.25% royalty on worldwide net sales of AVLAYAH until cumulative royalty payments reach a cap of 3.0 times the total funding received, or 2.5 times the total funding received if such cap is reached on or before the first quarter of 2039. These obligations are described in this Quarterly Report on Form 10-Q in Note 9, “Liability Related to the Revenue Participation Right”.

Previous wording

During the three months ended March 31, 2026, net cash used in operating activities was $131.2 million, which consisted of a net loss of $128.4 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.

Current wording

During the six months ended June 30, 2026, net cash used in operating activities was $228.2 million, which consisted of a net loss of $256.0 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net accretion of discounts on marketable securities, non-cash interest expense related to revenue participation right liability, and non-cash rent expenses. Cash used in operating activities was also driven by changes in our operating assets and liabilities.

Previous wording

During the three months ended March 31, 2026, net cash provided by investing activities was $94.5 million, which consisted of $220.0 million in proceeds from the maturities of marketable securities, partially offset by $123.1 million of purchases of marketable securities and $2.5 million capital expenditures to purchase property and equipment.

Current wording

During the six months ended June 30, 2026, net cash used in investing activities was $9.6 million, which consisted of $394.6 million for purchases of marketable securities, $28.8 million in milestone payments related to intangible assets, and $3.3 million in capital expenditures to purchase property and equipment. partially offset by $417.0 million in proceeds from the maturities of marketable securities.

Previous wording

During the three months ended March 31, 2026, cash provided by financing activities was $219.0 million which consisted of $200.0 million gross proceeds related to the sale of the revenue participation right under the synthetic royalty funding agreement with Royalty Pharma, $12.4 million of proceeds from public offerings of our common stock, and $6.7 million in proceeds from the exercise of stock options.

Current wording

During the six months ended June 30, 2026, cash provided by financing activities was $234.0 million, which consisted of $200.0 million in gross proceeds related to the sale of the revenue participation right under the synthetic royalty funding agreement with Royalty Pharma, $12.4 million in proceeds from public offerings of our common stock, and $21.7 million in proceeds from the exercise of stock options.

Previous wording

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. In our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, we described the accounting estimates that we believe involve a significant level of estimation uncertainty which could have a material impact on our financial condition or results of operations. There have been no material changes to these critical accounting estimates during the three months ended March 31, 2026.

Current wording

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in detail in the notes to our condensed consolidated financial statements included elsewhere in this report. In our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, we described the accounting estimates that we believe involve a significant level of estimation uncertainty which could have a material impact on our financial condition or results of operations. There have been no material changes to these critical accounting estimates during the six months ended June 30, 2026, except as discussed in the notes to our condensed consolidated financial statements with respect to accounting policies adopted upon the commercialization of AVLAYAH.

Previous wording

There have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended March 31, 2026, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, that are of significance or potential significance to us.

Current wording

There have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2026, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, that are of significance or potential significance to us.