Denali Therapeutics Reports Third Quarter 2022 Financial Results and Business Highlights

DNL310 (ETV:IDS): MPS II (Hunter syndrome)

TAK-594/DNL593 (PTV:PGRN): Frontotemporal Dementia-Granulin (FTD-GRN)

TAK-920/DNL919 (ATV:TREM2): Alzheimer’s Disease (AD)

SMALL MOLECULE PROGRAMS

BIIB122/DNL151 (LRRK2 inhibitor): Parkinson’s disease (idiopathic and LRKK2-positive)

SAR443820/DNL788 and SAR443122/DNL758 (RIPK1 inhibitors): Neurodegenerative and peripheral inflammatory diseases

DNL343 (eIF2B activator): ALS

Discovery Programs

Denali continues to advance a broad preclinical portfolio including programs enabled by the Enzyme Transport Vehicle, the Antibody Transport Vehicle, and the Oligonucleotide Transport Vehicle, and several small molecules engineered to cross the blood-brain barrier and intended as potential treatments for patients with neurodegenerative diseases.

Recent Corporate Updates

In October 2022, Denali raised net proceeds of approximately $296.2 million through a public offering of its common stock.

Participation in Upcoming Investor Conferences

Third Quarter 2022 Financial Results

For the three months ended September 30, 2022, Denali reported a net loss of $103.3 million compared to a net loss of $84.6 million for the three months ended September 30, 2021.

Collaboration revenue was $3.6 million for the three months ended September 30, 2022, compared to $5.3 million for the three months ended September 30, 2021. The decrease in collaboration revenue of $1.7 million for the three months ended September 30, 2022, compared to the comparative period in the prior year was primarily due to a decrease in revenue from our collaboration with Takeda as the preclinical performance obligations are now satisfied under the Takeda Collaboration Agreement, partially offset by an increase in revenue from our collaboration with Sanofi pertaining to Alzheimer's Disease service performance.

Total research and development expenses were $87.8 million for the three months ended September 30, 2022, compared to $71.6 million for the three months ended September 30, 2021. The increase of approximately $16.2 million was primarily attributable to an increase in ETV:IDS program external expenses due to progress in the clinic in 2022, LRRK2 program external expenses primarily due to the $5.0 million clinical milestone payment owed to Genentech, which was triggered upon commencement of dosing in the global phase 3 LIGHTHOUSE study of BIIB122/DNL151 by Biogen, and personnel-related expenses, including employee compensation and stock-based compensation, driven primarily by higher headcount and equity award grants. Additionally, there were increases in external expenses related to the progression of other programs in Denali's portfolio, including the eIF2B and PTV:PGRN programs, the advancement of the TV platform as well as Denali's continued overall investment in developing a broad pipeline. These expense increases were partially offset by decreases in ATV:TREM2 program external expenses due to timing of clinical activities and increases in cost sharing reimbursements.

General and administrative expenses were $23.3 million for the three months ended September 30, 2022, compared to $19.3 million for the three months ended September 30, 2021. The increase of approximately $4.0 million was primarily attributable to an increase in personnel-related expenses, including employee compensation and stock-based compensation expenses, driven by higher headcount and equity award grants. Additionally, there were increases in other general corporate services costs including IT services and subscriptions, taxes, travel-related expenses, and consulting and legal professional services expenses.

Cash, cash equivalents, and marketable securities were approximately $1.11 billion as of September 30, 2022.

About Denali Therapeutics

Denali Therapeutics is a biopharmaceutical company developing a broad portfolio of product candidates engineered to cross the blood-brain barrier (BBB) for neurodegenerative diseases. Denali pursues new treatments by rigorously assessing genetically validated targets, engineering delivery across the BBB and guiding development through biomarkers that demonstrate target and pathway engagement. Denali is based in South San Francisco. For additional information, please visit www.denalitherapeutics.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements expressed or implied in this press release include, but are not limited to, statements regarding Denali's progress, business plans, business strategy, product candidates, planned preclinical studies and clinical trials and expected milestones; plans, timelines and expectations regarding DNL151 for the treatment of Parkinson's disease in collaboration with Biogen, including the ongoing Phase 2b LUMA study and the ongoing Phase 3 LIGHTHOUSE study; plans, timelines and expectations regarding DNL310, including the presentation of data from the ongoing Phase 1/2 study and the potential for the DNL310 combined data package to support registration of DNL310; plans, timelines and expectations regarding DNL788 of both Denali and Sanofi, including with respect to expected enrollment for a Phase 2 trial in ALS; plans, timelines and expectations regarding DNL758 of both Denali and Sanofi, including with respect to the planned Phase 2 study in ulcerative colitis; plans, timelines and expectations regarding DNL593, including Phase 1/2 trial dosing and initial clinical data from the Phase 1 portion of such trial; plans, timelines and expectations regarding DNL343, including the presentation of initial data from the ongoing Phase 1b study of DNL343 in ALS; and statements made by Denali’s Chief Executive Officer. Actual results are subject to risks and uncertainties and may differ materially from those indicated by these forward-looking statements as a result of these risks and uncertainties, including but not limited to, risks related to: any and all risks to Denali’s business and operations caused directly or indirectly by the ongoing COVID-19 pandemic; risk of the occurrence of any event, change or other circumstance that could give rise to the termination of Denali’s agreements with Sanofi, Takeda, Biogen or any of Denali’s other collaboration agreements; Denali’s transition to a late stage clinical drug development company; Denali’s and its collaborators’ ability to complete the development and, if approved, commercialization of its product candidates; Denali’s and its collaborators’ ability to enroll patients in its ongoing and future clinical trials; Denali’s reliance on third parties for the manufacture and supply of its product candidates for clinical trials; Denali’s dependence on successful development of its blood-brain barrier platform technology and its programs and product candidates; Denali’s and its collaborators' ability to conduct or complete clinical trials on expected timelines; the risk that preclinical profiles of Denali’s product candidates may not translate in clinical trials; the potential for clinical trials to differ from preclinical, early clinical, preliminary or expected results; the risk of significant adverse events, toxicities or other undesirable side effects; the uncertainty that product candidates will receive regulatory approval necessary to be commercialized; Denali’s ability to continue to create a pipeline of product candidates or develop commercially successful products; Denali's ability to attract, motivate and retain qualified managerial, scientific and medical personnel; developments relating to Denali's competitors and its industry, including competing product candidates and therapies; Denali’s ability to obtain, maintain, or protect intellectual property rights related to its product candidates; implementation of Denali’s strategic plans for its business, product candidates and blood-brain barrier platform technology; Denali's ability to obtain additional capital to finance its operations, as needed; Denali's ability to accurately forecast future financial results in the current environment; general economic and market conditions; and other risks and uncertainties, including those described in Denali’s most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (SEC) on August 8, 2022 and Denali’s future reports to be filed with the SEC. The forward-looking statements in this press release are based on information available to Denali as of the date hereof. Denali disclaims any obligation to update any forward-looking statements, except as required by law.

Denali Therapeutics Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2022
2021
2022
2021
Collaboration revenue: Collaboration revenue from customers(1)$184 $5,285 $94,805 $36,143 Other collaboration revenue 3,375 — 3,375 4 Total collaboration revenue 3,559 5,285 98,180 36,147 Operating expenses: Research and development(2) 87,786 71,559 266,621 197,477 General and administrative 23,259 19,319 66,959 57,300 Total operating expenses 111,045 90,878 333,580 254,777 Loss from operations (107,486) (85,593) (235,400) (218,630)Interest and other income, net 4,187 1,005 8,114 3,310 Loss before income taxes (103,299) (84,588) (227,286) (215,320)Income tax expense — — (27) — Net loss$(103,299) $(84,588) $(227,313) $(215,320)Net loss per share, basic and diluted$(0.84) $(0.69) $(1.85) $(1.77)Weighted average number of shares outstanding, basic and diluted 123,473,390 121,742,067 123,054,889 121,309,197                 

________________________________________________

(1) Includes related-party collaboration revenue from a customer of $0.2 million and $2.9 million for the three and nine months ended September 30, 2022, respectively, and $0.9 million and $2.5 million for the three and nine months ended September 30, 2021, respectively.
(2) Includes expense for cost sharing payments due to a related party of $1.4 million and $3.8 million for the three and nine months ended September 30, 2022, respectively, and an offset to expense from related-party cost sharing reimbursements of $1.2 million and $5.3 million for the three and nine months ended September 30, 2021, respectively.


Denali Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands) September 30, 2022 December 31, 2021Assets Current assets: Cash and cash equivalents$118,615 $293,477Short-term marketable securities 987,440 571,930Cost sharing reimbursements due from related party — 1,226Prepaid expenses and other current assets 32,471 30,601Total current assets 1,138,526 897,234Long-term marketable securities — 425,449Property and equipment, net 41,692 38,865Operating lease right-of-use assets 31,271 30,743Other non-current assets 16,117 11,871Total assets$1,227,606 $1,404,162Liabilities and stockholders' equity Current liabilities: Accounts payable$7,539 $4,779Cost sharing payments due to related party 1,443 —Accrued compensation 13,253 19,013Accrued clinical and other research & development costs 21,701 15,887Accrued manufacturing costs 16,732 9,955Other accrued costs and current liabilities 2,395 2,857Operating lease liabilities, current 7,068 5,453Related-party contract liability, current 290,516 292,386Contract liabilities, current 23 27,915Total current liabilities 360,670 378,245Related-party contract liability, less current portion 276 1,295Contract liabilities, less current portion — 3,398Operating lease liabilities, less current portion 54,978 58,554Other non-current liabilities 379 379Total liabilities 416,303 441,871Total stockholders' equity 811,303 962,291Total liabilities and stockholders’ equity$1,227,606 $1,404,162      

Investor Relations Contact:

Laura Hansen, Ph.D.
Vice President, Investor Relations
(650) 452-2747
hansen@dnli.com

Media Contact:

dna Communications
Angela Salerno-Robin
Senior Vice President, Media Relations, Healthcare
+ 1 212 445 8219
Asalerno-robin@dna-comms.com