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目录
美国
证券交易委员会
华盛顿特区20549
表格 10-Q
(标记一)
根据1934年证券交易所法案第13或15(d)条的规定提交的季度报告
截至季度结束日期的财务报告2024年9月30日
或者
根据1934年证券交易法第13或15(d)节的转型报告书
对于过渡期从                    7,151,500。                    
委托文件编号:001-39866001-38311
Denali Therapeutics Inc. 公司
(根据其章程规定的注册人准确名称)
特拉华州46-3872213
(国家或其他管辖区的
公司成立或组织)
(IRS雇主
唯一识别号码)
161牡蛎点大道.
South San Francisco, 加利福尼亚州, 94080
(总部地址及邮政编码)
(650) 866-8548
(注册人电话号码,包括区号)
_______________________________________
在法案第12(b)条的规定下注册的证券:
每一类的名称交易代码在其上注册的交易所的名称
普通股,每股面值0.01美元DNLI纳斯达克全球精选市场
请勾选以下内容。申报人是否(1)在过去12个月内(或申报人需要报告这些报告的时间较短的期间内)已提交证券交易法规定的第13或15(d)条要求提交的所有报告;以及(2)过去90天内已被要求提交此类报告。    Yes☒  不可以
请用复选标记表示,注册人是否已根据S-t条例第405条规定必须提交的每个互动数据文件电子提交 (本章第232.405条) 在过去的12个月中(或者注册人被要求提交此类文件的更短期间)。在过去的12个月中是否(或在注册人被要求提交此类文件的更短期间)。Yes☒  不可以
勾选相应单选框以表示注册人是大型加速文件提交者,加速文件提交者,非加速文件提交者,小型报告公司或新兴增长公司。参见《交易所法规》第120亿.2条中“大型加速文件提交者”,“加速文件提交者”,“小型报告公司”和“新兴增长公司”的定义。
大型加速报告人加速文件提交人
非加速文件提交人更小的报告公司
新兴成长公司
如果是新兴增长企业,请勾选是否选择不使用扩展过渡期,在符合交易所法第13(a)条规定的任何新的或修订的财务会计准则的合规方面遵循。☐
请勾选以下内容。申报人是否是外壳公司(根据证券交易法规则12b-2定义)。    是      否  
截至2024年10月30日,注册公司的普通股未偿还股份数量为为 461.4 百万143,921,624。这个数字不包括 26,046,065 股普通股股份可由预资的认股权证行使后发行 2024年10月30日 (可立即按每股普通股0.01美元的行使价行使,但须遵守持股限制规定)于2024年2月在注册公司的定向增发中出售。请参阅附注7——普通股详细财务报表。



目录

页面
第 1 项。
第 2 项。
第 3 项。
第 4 项。
第 1 项。
第 1A 项。
第 2 项。
第 3 项。
第 4 项。
第 5 项。
第 6 项。

2


目录
第一部分 财务信息
项目1.——基本报表
Denali Therapeutics Inc. 公司
汇编的综合资产负债表
(未经审计)
(单位:千元,股份数量除外)
2024年9月30日2023年12月31日
资产
流动资产:
现金及现金等价物$90,636 $127,106 
短期市场证券745,923 907,405 
预付费用和其他流动资产32,280 29,626 
总流动资产868,839 1,064,137 
长期有价证券445,463  
资产和设备,净值50,822 45,589 
经营租赁资产使用权23,717 26,048 
融资租赁使用权资产38,685  
其他非流动资产26,487 18,143 
资产总额$1,454,013 $1,153,917 
负债和股东权益
流动负债:
应付账款$9,594 $9,483 
已计提的临床和其他研发成本23,923 19,035 
已计生产成本9,568 15,462 
应计的薪资14,874 21,590 
经营租赁负债,流动负债8,036 7,260 
研发资金递延责任,流动16,269  
其他应计成本和流动负债4,829 5,152 
流动负债合计87,093 77,982 
经营租赁负债,不含流动部分38,850 44,981 
融资租赁负债,减少当前部分5,631  
递延研究资金和开发责任,减少当前部分3,944  
负债合计135,518 122,963 
承诺事项和不确定事项(第6页)
股东权益:
可转换优先股,每股面值$0.01每股面值; 40,000,000 截至2024年9月30日和2023年12月31日,已授权股票数量为 0 2024年9月30日和2023年12月31日已发行和流通的股票
  
普通股,每股面值为 $0.0001;0.01每股面值; 400,000,000 截至2024年9月30日和2023年12月31日,已授权股票数量为 143,840,029持续经营活动中普通股股东的收益138,385,498 股份分别为2024年9月30日和2023年12月31日的已发行和流通股份
1,764 1,711 
额外实收资本2,735,433 2,144,811 
累计其他综合收益5,529 643 
累积赤字(1,424,231)(1,116,211)
股东权益合计1,318,495 1,030,954 
负债和股东权益总额$1,454,013 $1,153,917 
请参见附注的未经审计的简明合并财务报表。
3

目录
Denali Therapeutics Inc. 公司
联合综合收益及损失简明合并报表
(未经审计)
(以千为单位,除股份数量和每股金额外)

截至9月30日的三个月截至9月30日的九个月
2024202320242023
合作收入:
客户合作营业收入(1)
$ $1,267 $ $330,531 
合作总收入 1,267  330,531 
营业费用:
研发(2)
98,238 89,737 296,653 316,073 
一般行政24,949 25,325 75,379 78,585 
营业费用总计123,187 115,062 372,032 394,658 
出售小分子项目获利  14,537  
经营亏损(123,187)(113,795)(357,495)(64,127)
利息和其他收入,净额15,995 14,442 49,475 38,376 
净损失(107,192)(99,353)(308,020)(25,751)
其他全面收益(损失):
持有可交易证券的未实现净收益(扣除税金)
8,188 790 4,886 6,235 
综合损失$(99,004)$(98,563)$(303,134)$(19,516)
基本和稀释每股净亏损$(0.63)$(0.72)$(1.89)$(0.19)
加权平均股份(基本和摊薄)169,456,988137,644,534162,589,325137,076,199
__________________________________________________
(1)包括来自关联方合作的客户营业收入$1.31百万美元和295.5截至2023年9月30日,分别为三个月和九个月的总营收为百万美元。
(2)包括由相关方支付的费用分摊付款,金额为$3.41百万美元和14.5百万 分别为截至2023年9月30日的三个月和九个月。

请参见附注的未经审计的简明合并财务报表。
 

4

目录

Denali Therapeutics Inc. 公司
股东权益的简化合并报表
(未经审计)
(以千为单位,股份数量除外)    

普通股股本外溢价
累计其他综合收益(损失)
累计赤字股东权益总计
股份数量
2023年12月31日结余为138,385,498 $1,711 $2,144,811 $643 $(1,116,211)$1,030,954 
发行普通股和预先资本化的权证净额,扣除发行成本$480K
3,244,689 32 499,221 — — 499,253 
股权激励计划下的发行948,705 10 13,224 — — 13,234 
受限制股票单位解除限制1,261,137 11 (11)— —  
基于股票的补偿— — 78,188 — — 78,188 
净损失— — — — (308,020)(308,020)
其他综合收益
— — — 4,886 — 4,886 
2024年9月30日的余额143,840,029 $1,764 $2,735,433 $5,529 $(1,424,231)$1,318,495 
2024年6月30日余额143,123,582 $1,757 $2,704,992 $(2,659)$(1,317,039)$1,387,051 
股权激励计划下的发行291,183 3 5,453 — — 5,456 
受限制股票单位解除限制425,264 4 (4)— —  
基于股票的补偿— — 24,992 — — 24,992 
净损失— — — — (107,192)(107,192)
其他综合收益
— — — 8,188 — 8,188 
2024年9月30日的余额143,840,029 $1,764 $2,735,433 $5,529 $(1,424,231)$1,318,495 
2022年12月31日结存余额135,965,918 $1,686 $2,018,617 $(6,886)$(970,987)$1,042,430 
股权激励计划下的发行953,575 9 13,106 — — 13,115 
受限制股票单位解除限制1,132,305 12 (12)— —  
基于股票的补偿— — 82,302 — — 82,302 
净损失— — — — (25,751)(25,751)
其他综合收益
— — — 6,235 — 6,235 
2023年9月30日结余138,051,798 $1,707 $2,114,013 $(651)$(996,738)$1,118,331 
2023年6月30日的余额137,362,688 $1,700 $2,083,951 $(1,441)$(897,385)$1,186,825 
股权激励计划下的发行
222,688 2 2,490 — — 2,492 
受限制股票单位解除限制466,422 5 (5)— —  
基于股票的补偿
— — 27,577 — — 27,577 
净损失— — — — (99,353)(99,353)
其他综合收益— — — 790 — 790 
2023年9月30日结余138,051,798 $1,707 $2,114,013 $(651)$(996,738)$1,118,331 
请参见附注的未经审计的简明合并财务报表。
5

目录
Denali Therapeutics Inc. 公司
简明的综合现金流量表
(未经审计)
(以千计)

九个月结束
9月30日,
20242023
经营活动
净损失$(308,020)$(25,751)
调整为净损失到经营活动现金流量净使用:
折旧和摊销5,942 14,549 
股票为基础的薪酬费用77,800 82,114 
有价证券折价的净累积(28,952)(31,709)
经营租赁费用的非现金调整
(3,025)(2,762)
融资租赁的使用权资产摊销
431  
小分子项目出售的非现金收益(14,537) 
经营性资产和负债变动:
预付费用和其他流动资产(2,625)1,910 
其他非流动资产(1,178) 
应付账款151 4,512 
应计费用及其他流动负债6,090 (11,665)
关联方合同负债 (290,532)
递延研发资金负债,减去流动部分3,944  
经营活动使用的净现金流量(263,979)(259,334)
投资活动
购买有市场流通的证券(1,056,263)(1,399,982)
市场可买证券的到期兑现和出售806,120 1,586,947 
购买固定资产(10,820)(10,704)
投资活动的净现金流量(使用)/提供的净现金流量(260,963)176,261 
筹资活动
普通股和预拟配证券发行所得款项,扣除发行成本 $480K
499,253  
股权激励计划下的奖励行使所得款项13,234 13,115 
融资租赁权益资产支付(24,015) 
筹资活动产生的现金净额488,472 13,115 
现金、现金等价物和受限制现金净减少额(36,470)(69,958)
期初现金、现金等价物及受限制的现金余额128,681 219,544 
期末现金、现金等价物及受限制的现金余额$92,211 $149,586 
现金流补充资料披露
由于出租商资产减少,使用权资产增加$7,051 $ 
新融资租赁的非现金确认$5,689 $ 
支付的融资租赁利息现金$121 $ 
期间支付的所得税$ $4 
小分子项目出售中收到的股权交易款(注释10)$15,000 $ 
已计入但尚未支付的固定资产购置$263 $6,230 

请参阅未经审计的汇编财务报表附注。
6

目录
Denali Therapeutics Inc. 公司
基本合并财务报表注释
(未经审计)
1.    重要会计政策
业务的组织和描述

Denali Therapeutics Inc.(“Denali”或“公司”)是一家生物制药公司,注册地在特拉华州,致力于发现和开发治疗神经退行性疾病和溶酶体贮积症的药物。该公司总部位于加利福尼亚州南旧金山。
报告范围

附带的未经审计的简式综合财务报表是根据美国通用会计准则("U.S. GAAP")编制的,适用于中期财务信息和证券交易委员会("SEC")第10条款和交易委员会("SEC")S-X规则第10条款的说明,适用于中期财务信息。

这些未经审计的简明综合财务报表和注释应与2023年12月31日结束并已提交给美国证券交易委员会的10-k表格中包含的审计综合财务报表和注释一同阅读("2023年度10-K表")。2023年12月31日的简明综合资产负债表来源于截至当时的经审计的年度综合财务报表。通常包括在公司年度综合财务报表中的某些信息和脚注披露已经被概要或省略。随附的未经审计简明综合财务报表反映了所有在管理层看来对所呈现的中期时段的结果作出的调整。所有这些调整除了讨论如下的采纳新会计准则的影响外,均属于正常重复性质的调整。这些中期财务结果未必代表全财政年度或任何随后的中期时段预期的结果。

2024年9月30日结束的九个月中,公司的重大会计和财务报告政策仅在2023年年度报告Form 10-k中反映的政策基础上增加了与融资租赁相关的会计政策。关于公司其余重要会计政策的更多信息,请参阅《注1,“重要会计政策”》,包括在2023年年度报告Form 10-k中的公司合并财务报表。
合并原则

这些未经审计的简明合并财务报表包括公司及其全资子公司的账户。在合并中,所有公司间余额和交易已被消除。对于公司及其子公司,功能货币被确定为美元。以外币计价的货币资产和负债按期末汇率重估,以外币计价的非货币资产和负债按历史汇率重估,以外币交易按平均汇率重估。由于重估而产生的外币收益和损失被确认在利息和其他收入中,净额出现在简明合并利润表和全面损失中。
7

目录
使用估计

按照美国通用会计准则编制基本报表需要公司做出一定的估计、判断和假设,这些会影响资产和负债的申报金额、在简明综合财务报表日期披露的相关资产和负债,以及报告期间的费用金额。实际结果可能与这些估计有所不同,这些差异可能对简明综合资产负债表和简明综合损益表产生重大影响。
信用风险的集中和其他风险和不确定性

可能使公司面临重大信用风险的金融工具主要包括现金、现金等价物和可交易证券。几乎所有公司的现金和现金等价物存放在管理层认为信用质量较高的金融机构账户中。此类存款已经超过并将继续超出联邦保险限额。公司将其现金存放在具有资质的金融机构,并因此,这些资金面临极低的信用风险。

公司的投资政策限制投资于美国政府及其机构发行的某些类型证券,以及具有投资级信用评级的机构, 并对到期日、类型、发行方的集中度设定限制。公司在现金、现金等价物和可交易证券的持有机构以及在简明合并资产负债表上记录的可交易证券发行者发生违约时承担信用风险。截至2024年9月30日和2023年12月31日,公司存在 no 不良资产表集中度的表外信用风险。

该公司面临许多与其他处于临床阶段生物制药公司类似的风险,包括但不限于获得足够的额外资金、当前或未来临床前试验或临床试验可能失败、依赖第三方进行临床试验、获得其产品候选药物的监管和营销批准、竞争对手开发新的技术创新、成功商业化并获得市场对公司产品候选药物的认可、根据授权给公司的许可证的条款和条件开发和商业化其产品候选药物的权利、保护专有技术、根据任何许可或合作协议应支付的里程碑、版税或其他费用的能力,以及与第三方达成和保持充足的制造安排的需求。如果该公司不能成功商业化或与其产品候选药物中的任何一种合作,那么它将无法产生产品收入或实现盈利。此外,公司还面临来自最近事件造成的广泛市场风险和不确定性,如银行倒闭或金融服务行业的不稳定、全球大流行病、战争和武装冲突、通货膨胀、利率上升、经济衰退风险以及供应链和劳工短缺。
板块

公司在加利福尼亚州为其办公空间租赁了一个子租约,该租约于2023年11月开始,最初租约期至2026年1月。该租约替代了同一地址于2022年1月开始的租约,最初租约期至2024年1月(于2024年1月结束)。此外,该公司还租用其他租期少于十二个月的空间;因此,在资产负债表上不承认此租约为营运租约。之一 经营部门。公司的首席经营决策者,首席执行官,以合并基础管理公司的运营,以便分配资源。
8

目录
投资
股权证券投资可以使用以下方式核算:(i) 如果选择,可以选择公允价值选项,(ii) 如果公允价值可轻易确定,则可以选择按公允价值计量,或者(iii) 对于没有轻易确定公允价值的股权投资,可以采用衡量备选方案,以成本调整进行计量,包括任何减值和可观测价格变动等。可以为每笔符合条件的投资选择使用衡量备选方案。
现金、现金等价物和受限制的现金
公司认为所有在购买日起的原始到期日不超过90天的高流动性投资为现金及现金等价物。 现金等价物以公允价值计量。
现金、现金及现金等价物以及限制性现金报告在简明合并现金流量表中,由简明合并资产负债表中报告的现金及现金等价物组成,以及公司总部大楼租赁信用证的限制性现金$1.6 百万美元限制性现金用于公司总部大楼租赁信用证,包括简明合并资产负债表中的其他非流动资产内。
流动证券

公司通常将其多余的现金投资于货币市场基金和投资级别的短期至中期固收证券。此类投资包括在资产负债表的现金及现金等价物、短期可变现证券或长期可变现证券中,被视为可供出售,并按公允价值报告,其中纳入的净未实现收益和损失作为股东权益的一部分。

公司将到期日在一年以下的证券投资,或者其意图是将这些投资用于资助当前运营或使其可用于当前运营的,归类为短期投资。公司将到期日在一年以上的证券投资,除非用于资助当前运营,归类为长期投资。债务证券的摊销成本已经调整,包括摊销溢价和贴现到期的累积,这些项目包含在综合利润和损失的利息及其他收入中。实现的收益和损失,以及由于市场性证券信用损失导致的价值下降,如果有的话,将包括在利息及其他收入中。

公司定期评估对信贷损失准备金的需求。此评估包括考虑多个定性和定量因素,包括是否计划卖出该证券,是否很有可能在摊销成本基础恢复之前需要出售任何可销售证券,以及实体是否有持有该证券直至到期的能力和意图,以及任何信贷损失导致的未实现损失的部分。在进行这些评估时考虑的因素包括报价市场价格,最近的财务结果和运营趋势,来自最近交易或投资方证券要约的隐含价值,债务工具发行人的信用质量,来自证券的预期现金流,其他可能影响可销售证券价值的公开信息,价值下降的持续时间和严重程度,以及公司对持有可销售证券的策略和意图。
9

目录
应收账款

应收账款包括在预付费用和其他流动资产中。应收账款余额代表应收款项,减去如有需要的信用损失准备。
租约

公司租赁房地产和某些设备用于运营。有关租赁安排是否在开始阶段属于租赁的裁定。公司根据未来最低租金支付的现值在开始日期承认融资租赁和经营租赁使用权(ROU)资产以及融资租赁和经营租赁负债。公司根据其在租赁开始日期的增量借款利率或已知的租赁内含利率确定租赁支付的现值。公司在确定租赁期限时不假定续租,除非管理层在租赁开始时认为续租是相当确定的。

公司确认对其融资租赁的ROU资产的摊销及租赁负债上的利息。融资租赁ROU资产将从起租日开始,按直线法摊销,直至ROU资产的有用寿命结束或租赁期结束中较早者。经营租赁费用将按照租赁期内的直线法确认。

有一个初始期限为十二个月或更短的租赁不会记录在资产负债表上,除非它们包括公司有合理把握会行使的购买基础资产的选择权。公司按照租赁期内的直线法认定租赁费用。公司具有租赁和非租赁元件的租赁,公司已选择将其视为单个租赁元件进行会计处理。
营业收入确认

许可、选择和合作营收

公司分析其合作安排,以判断其是否属于《ASC 808,合作安排》(“ASC 808”)的范围,从而判断此类安排是否涉及由活跃参与活动且受活动商业成功所依赖的重大风险和回报所敞开的各方执行的联合经营活动。此评估在合作协议的整个生命周期中进行,基于合作协议的各方责任的变化。对于《ASC 808》范围内包含多个要素的合作安排,公司首先确定了哪些合作的要素被视为属于《ASC 808》范围内的,以及哪些更符合供应商-客户关系的,因此属于《Topic 606》的范围。对于根据《ASC 808》核算的合作安排要素,将确定适当的确认方法,并一致地应用,通常是类比于《Topic 606》。根据《Topic 606》的核算处理如下所述。

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许可、选择和合作协议的条款通常包括以下一项或多项付款:不可退还的预先授权费;选择行使费;研发、监管和商业里程碑付款;制造供应和研发服务的付款以及按许可产品的净销售额支付的版税。这些付款中的每一项都导致许可、合作和其他营业收入,除了来自许可产品的净销售额的版税收入,这些被归类为版税收入。第606号准则的核心原则是在已经向客户转让承诺的商品或服务,或者反映预计换取这些商品或服务的金额时确认营业收入。公司还可能收到补偿款项或向合作伙伴支付款项,以满足成本分担要求。这些付款根据ASC 808进行核算,并相应地记录为研发费用的抵消或增加。

确定在公司履行其在每份协议下的义务时应确认的营业收入的适当金额,公司执行以下步骤:(i) 确定合同中承诺的货物或服务;(ii) 确定承诺的货物或服务是否履行义务,包括它们在合同背景下是否是独立的;(iii) 测定交易价格,包括对可变量的限制;(iv) 根据估计的销售价格将交易价格分配给履行义务;以及(v) 当公司满足每项履行义务时确认营业收入。
在满足营业收入确认准则之前收到的款项在公司的简明综合资产负债表中被记录为合同负债。如果相关履约义务预计将在接下来的十二个月内履行,则将被分类为流动负债。在公司具有无条件权利(除非仅仅取决于时间的权利)收款之前确认为营业收入的数额在公司的简明综合资产负债表中被记录为合同资产。如果公司预计在接下来的十二个月内会拥有收款的无条件权利,这将被分类为流动资产。每个与客户签订的合同都会呈现净合同资产或负债。

在合同签订之初,公司评估与客户合同中承诺的商品或服务,并确定代表履约责任的那些独特商品和服务。如果在与客户的合同背景下,承诺的商品或服务较不重要,或者无法从合同中其他承诺单独识别(要么是因为无法分割,要么是因为在合同背景下不可分割),或者承诺的商品或服务未向客户提供重要权利,则可能不会将承诺的商品或服务确定为一项履约责任。

公司考虑合同条款以确定交易价格。交易价格是公司预期将以转让承诺的商品或服务为客户而应当收到的代价金额。与客户签订的合同中约定的代价可能包括固定金额、变动金额或两者兼有。只有在可判断为非受限时,才会将变动代价纳入交易价格中,这是指预计不会发生累计营业收入金额发生重大逆转的情况下。

如果确定存在多个履约义务,则交易价格将在协议成立时根据各个已识别的履约义务的相对单独销售价格("SSP")进行分配。每个可交付物的相对SSP是根据外部来源的证据进行估计,如果有的话。如果没有外部来源的证据,公司将使用其对可交付物的SSP的最佳估计。

当公司通过向客户交付承诺的商品或服务来满足履行义务时,将确认营业收入。资产的转移发生在客户取得控制权时,对于服务而言,被视为服务被接受和使用。公司通过根据向客户承诺的服务性质使用适当的输入或输出方法,测量达到满足相关履行义务的完全满意程度的进展来随时间确认营业收入。

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合同生效后,交易价格在每个期末进行重新评估,因不确定事件的解决等变化而更新。交易价格的任何变化都按照合同生效时的相同基础分配给履约义务,或者根据适用情况分配给单个履约义务。公司将重大权利的行使视为合同修改或者根据事实和情况最恰当的方式继续现有合同。

管理层可能需要行使相当的判断来估计应识别的营业收入。 在确定履约义务、估计交易价格、估计确定履约义务的SSP以及估计可以包括预测的收入、开发时间表、人员成本的补偿比率、折扣率和技术及监管成功率的进展情况,以及估计履行履约义务的进度时,需要做出判断。
综合亏损

综合损失由净损失和从净损失中排除的股东权益变动组成,主要是公司可交易证券的未实现收益或损失。
每股净亏损

基本每股净亏损是通过将净亏损除以期间内流通的普通股加权平均股份数量计算而得出的,不考虑普通股等效证券。每股摊薄净亏损与基本每股净亏损相同,因为潜在稀释证券的影响对于每个期间而言是反稀释的。截至2024年9月30日的加权平均流通普通股包括在2024年2月私募定向增发中发行的预先拨款权,更多细节请参阅第7条注释"普通股".
最近发布的会计声明
2023年11月,财务会计准则委员会("FASB")发布了会计准则更新No. 2023-07, 分部报告(主题 280):报告服务部门(主题 280)变更披露方式,通过升级对意义重大的分部费用的披露来改进分部报告披露要求。该准则适用于 2023 年 12 月 15 日之后的财年和 2024 年 12 月 15 日之后的财年间隔期。该准则必须适用于财务报表中呈现的所有期间的追溯。该公司目前正在评估该标准对合并财务报表的影响。该更新旨在通过加强关于重要分板块费用的披露,从而改进可报告分板块披露要求。本更新中的修订适用于所有上市实体,即从2023年12月15日后开始的财政年度,以及从2024年12月15日后开始的财政年度内的中间期,允许提前采纳。建议按照追溯性方式适用于基本报表中所呈现的所有以前期间。公司尚未提前采纳此更新,并目前正在评估新标准对其合并财务报表及相关披露的影响。
2023年12月,FASB发布了会计准则更新号2023-09,要求更多细分有关所得税调节和所缴所得税披露的信息。该更新将于2024年12月15日后开始执行,并应采用前瞻性基础,并具有追溯性执行标准的选择。允许提前采纳。本公司目前正在评估此变化对公司披露的影响。 所得税(主题740):改进所得税披露。该标准要求上市的业务实体在每年披露税率调节表的特定类别,并为满足数量门限的调节项目提供其他信息(如果这些调节项目的影响相当于或大于将税前收入(或损失)与适用的法定所得税率相乘所得金额的5%)。它还要求所有实体每年披露按联邦、州和外国税种分解的所支付的所得税(扣除退款),以及按所支付的所得税(扣除退款)在个别司法管辖区分解的金额,当所支付的所得税(扣除退款)相当于或大于所支付的总所得税(扣除退款)的5%时。最后,该标准取消了要求所有实体披露未识别税务负债余额在未来12个月内合理可能变动范围的性质和估计,或声明无法估算范围的要求。该标准对公司自2026年1月1日开始的年度适用。可以提前采纳该标准。该标准应以前瞻性基础应用。允许追溯适用。公司目前正在评估该标准可能对其财务报表产生的影响。根据该更新,在年度基础上,要求企业披露额外的所得税信息,主要涉及税率调整和所缴纳的所得税。本更新中的修订事项将于2024年12月15日后的年度期间开始适用,并允许提前采纳。公司尚未提前采用此更新,目前正在评估该新准则对其所得税披露的影响。
2024年11月,FASB发布了《会计准则更新2024-03》, 损益表 - 报告综合收益 - 费用细分披露(子课题220-40): D损益表费用的细分旨在通过提供有关常见费用项目的更详细信息,改进有关费用的披露。本次更新的修订适用于2026年12月15日之后开始的年度报告期和2027年12月15日之后开始的中期报告期。允许提前采纳。修订可以采用远期或回顾方式应用。公司尚未提前采纳此更新,目前正在评估此新准则对其合并财务报表和相关披露的影响。
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2.    公允价值衡量
每个资产负债表日期测量的资产和负债的公允价值如下(以千为单位):
2024年9月30日
一级二级Level 3总计
资产:
现金等价物:
货币市场基金$75,600 $ $ $75,600 
短期市场性证券:
美国政府国债703,259   703,259 
企业债券 16,386  16,386 
商业票据 26,278  26,278 
长期市场性证券:
美国政府国债415,891   415,891 
企业债券 29,572  29,572 
总计$1,194,750 $72,236 $ $1,266,986 
2023 年 12 月 31 日
第 1 级第 2 级第 3 级总计
资产:
现金等价物:
货币市场基金$121,034 $ $ $121,034 
短期有价证券:
美国政府国库869,172   869,172 
美国政府机构证券 7,086  7,086 
商业票据 31,147  31,147 
总计$990,206 $38,233 $ $1,028,439 

公司的二级证券是使用第三方定价来源进行估值的。定价服务采用行业标准估值模型,包括收入和市场为基础的方法,其中所有重要输入都是可观察的,直接或间接地。
公司在2024年9月30日结束的九个月内或者在2023年12月31日结束的一年内,未在公允价值衡量水平之间转移任何资产或负债。
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3.    流动证券
所有板块的证券于2024年9月30日和2023年12月31日被视为可供出售。公司按照第2号附注"公允价值测量"中讨论的Level 1或Level 2输入,定期记录其证券的公允价值。 公司各类主要证券的摊销成本、毛额未实现持有收益或损失以及公允值,在每个资产负债表日期总结如下(以千为单位):
2024年9月30日
摊销成本未实现持仓盈利未实现持仓亏损合计公允价值
短期市场性证券:
美国政府国债(1)
$701,700 $1,565 $(6)$703,259 
企业债券
16,279 107  16,386 
商业票据
26,278   26,278 
总的短期市场有价证券
744,257 1,672 (6)745,923 
长期市场性证券:
美国政府国债(2)
412,031 3,861 (1)415,891 
企业债券
29,217 355  29,572 
总的长期市场有价证券
441,248 4,216 (1)445,463 
总计
$1,185,505 $5,888 $(7)$1,191,386 
__________________________________________________
(1)未实现的持有损失在 1 安防-半导体的总公允价值为$59.9百万美元。
(2)未实现的持有亏损 1 安防-半导体,其累积公允价值为$5.0百万美元。

2023年12月31日
摊销成本未实现持有收益未实现持有亏损合计公允价值
短期市场性证券:
美国政府国债
$868,174 $998 $ $869,172 
美国政府机构债券(1)
7,089  (3)7,086 
商业票据
31,147   31,147 
总计
$906,410 $998 $(3)$907,405 
__________________________________________________
(1)未实现的持有损失 2 总公平价值为$ 的证券7.1百万美元。
截至2024年9月30日和2023年12月31日,公司的一些可变现证券处于未实现亏损位置。公司已经 no未确认截至2024年9月30日或者2023年12月31日的信贷损失准备金。公司确定有能力和意愿持有所有一直处于持续亏损状态的可变现证券直至到期或恢复。此外,其中大部分可变现证券持有在美国政府证券中,其余最初及持续持有在投资级别和高信用质量的机构。所有截至每个资产负债表日期的未实现亏损证券亏损时间不足12个月,或者该亏损不重要。

截至2024年9月30日,公司所有的可交易证券的有效到期日均不超过 发生.
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4.    收购和研发资金合作协议
F-star Gamma公司的收购
2016年8月,公司与F-star Gamma有限公司(“F-star Gamma”)、德国F-star生物技术研发公司(F-star GmbH)和F-star生物技术有限公司(“F-star Ltd”)(统称“F-star”)签订了许可和合作协议(“F-star合作协议”),以利用F-star的模块抗体技术和公司在神经退行性疾病治疗领域的专业知识。2018年5月,公司行使了F-star合作协议下事先协商的选择权协议(“选择权协议”),并与F-star Gamma股东及股东代表服务有限责任公司签订了股票购买协议(“购买协议”),根据该协议,公司收购了F-star Gamma的所有已发行股份(“收购”)。收购的详细信息进一步详述在公司2023年度10-K表格中的附注4、“收购”中,可查阅合并财务报表中。
截止2024年9月30日,公司已支付合计$49.8百万美元的考虑,包括预付款、临床前和临床后的有条件考虑金额,所有这些金额均按照发生的研发费用记录。该金额包括一笔$30.0百万美元的有条件考虑付款,该付款在2023年3月触发并按照ETV:IDS项目中指定临床里程碑的实现而被记录为研发费用。该有条件考虑付款完全满足了公司根据收购协议的临床有条件考虑义务。在截至2024年9月30日的三个和九个月,或截至2023年9月30日的三个月内,都已确认有 no 发生的有条件考虑费用。
合作与发展资金协议
2024年1月29日,公司与不相关的第三方签订了一项合作和发展资金协议,根据该协议,该第三方将提供高达美元的资金,并与公司合作进行全球货币阶段2a研究,针对带有帕金森病和已确认携带LRRK2致病变体的患者。75.0百捷公司将与一家无关的第三方合作,并提供高达100万美元的资金,与公司合作开展全球货币2a期研究,以研究帕金森氏病患者中携带LRRK2致病变体的情况。
根据该协议,2024年1月收到了一笔预付款$12.5百万美元,并于2024年7月收到了另一笔支付$12.5百万美元,剩余款项将在研究中实现运营里程碑后支付。在支付完全$75.0百万美元的考虑后,第三方将有资格从公司在全球年销售的LRRK2抑制剂中以低一位数的收入获得帕金森病治疗药物的版税。
公司确定这项安排属于ASC 730下的研发资金安排。由于第三方与公司共同承担与研究和开发活动相关的风险,开发资金被确认为履行合同服务的义务。因此,收到的付款将被记录为一笔负债,并由公司在预估的第2a阶段研究周期内,按实际发生的研究和开发成本减少研究和开发费用。根据该安排的研发资助为$2.51百万美元和4.8百万,抵消了2024年9月30日三个月和九个月的综合损益经营状况中的研究和开发费用。截至2024年9月30日,当前和非流动递延研发资金负债分别记录在简明合并资产负债表上,为$16.31百万美元和3.9百万。
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5.    协作协议我们已与战略合作伙伴签署协作协议,以加速各种潜在mRNA药物在治疗领域的发现和推进。截至2021年9月30日和2020年12月31日,我们与AstraZeneca plc (AstraZeneca)、福泰制药,境外影响公司以及其它公司签订了协作协议。请参阅我们的2020年第10-K表格下的“第三方战略联盟”以及我们合并财务报表附注5,以进一步了解这些协作协议的详细描述。
Biogen

2020年10月,公司签署了一份最终合作与许可协议(“LRRK2协议”) 根据该协议,公司授予了渤健公司(Biogen)一项许可证, 共同开发和共同商业化其小分子LRRK2抑制剂计划(“LRRK2计划”),以及第一次协商、选择和许可协议(“ROFN和选择协议”),根据该协议,公司授予了对于利用公司的TV科技平台的某些项目的首选协商权和选择权,包括其淀粉样β计划(总称“渤健公司合作协议”), 与渤健公司的子公司渤健MA公司(“BIMA”)和渤健国际GmbH公司(“BIG”)(BIMA和BIG合称“渤健公司”)签署。有关渤健公司合作协议、2023年8月对ROFN和选择协议的修订,以及公司已收到和有权收到的付款详见基本报表第5号,“合作协议”,2023年度10-K表格中的一式合并财务报表。

2023年4月,渤健公司行使了对达纳利的ATV:Abeta项目许可的选择权,此前已被确认为一项重大权利,触发了支付$5.0百万美元的选择权费,该费用于2023年5月收到,并全部分配给了重大权利。

2024年7月26日,Denali和渤健公司执行了与ROFN和选项协议相关的附属信函,根据该信函生效日期的规定, 渤健公司 终止了由Denali的TfR靶向技术支持的ATV:Abeta计划的许可,用于治疗阿尔茨海默病,并授予Denali在合作期间生成数据的权利。附属信函还立即终止了ROFN和选项协议;因此,公司预计将从渤健公司收到 no 与ATV:Abeta计划相关的未来里程碑或版税支付。 在2024年9月30日和2023年结束的三个月和九个月内,LRRK2协议条款未发生变化。

公司在加利福尼亚州为其办公空间租赁了一个子租约,该租约于2023年11月开始,最初租约期至2026年1月。该租约替代了同一地址于2022年1月开始的租约,最初租约期至2024年1月(于2024年1月结束)。此外,该公司还租用其他租期少于十二个月的空间;因此,在资产负债表上不承认此租约为营运租约。no 根据渤健公司合作协议,剩余履约义务尚未实现,因此 no 合同责任仍然存在于 2024年9月30日或2023年12月31日的简明合并资产负债表上. 截至2023年12月31日,根据ASC 850的定义,渤健公司不再被视为关联方。

截至2024年9月30日,该公司已经 no未在渤健公司合作协议下记录重要的营业收入或产品销售。

2018年10月,公司与赛诺菲安万特的全资子公司赛诺菲公司签署了一项《赛诺菲合作协议》。 赛诺菲合作协议的详细内容以及公司已收到和有权收取的款项在公司2023年度10-K表格的合并基本报表中的第5号附注“合作协议”中进一步描述。 公司在加利福尼亚州为其办公空间租赁了一个子租约,该租约于2023年11月开始,最初租约期至2026年1月。该租约替代了同一地址于2022年1月开始的租约,最初租约期至2024年1月(于2024年1月结束)。此外,该公司还租用其他租期少于十二个月的空间;因此,在资产负债表上不承认此租约为营运租约。no 赛诺菲合作协议下的剩余履约义务,因此 no 合同责任仍然存在于 2024年9月30日或2023年12月31日的简明合并资产负债表中. 截至2024年9月30日,公司已获得里程碑付款 $100.0 百万美元,并且 no没有记录在赛诺菲安万特合作协议下的任何产品销售。
16

目录
武田
2018年1月,公司与武田制药有限公司("武田")签署了一份合作和选择协议("武田合作协议")。 武田合作协议的详细内容在公司2023年度10-k表格上的基本报表附注5,“合作协议”中进一步描述。 no 根据最初的武田合作协议,尚有未履行的绩效义务或潜在支付额。
武田公司对PTV:PGRN和ATV:TREM2计划的选择加入表示 两个 为了会计目的与客户签订了新合同(“PTV:PGRN合作协议”和“ATV:TREM2合作协议”),这两个合同均于2021年12月生效。有关PTV:PGRN合作协议和ATV:TREM2合作协议的详细信息进一步在公司2023年年度报告的基本报表中第5节“合作协议”中描述。
截至2024年9月30日,公司从Takeda根据PTV:PGRN和ATV:TREM2合作协议收到了累计$10.0百万美元的期权费用支付和$10.0百万美元的里程碑支付,并且在这两个协议下尚未记录任何产品销售。 no尚未记录任何产品销售。
合作收入
按合作协议和履约义务细分的营业收入如下(以千元为单位):
截止到9月30日的三个月截止到9月30日的九个月
2024202320242023
武田合作协议:
PTV:PGRN 合作协议(1)
$ $  10,000 
总武田合作营业收入   10,000 
赛诺菲安万特合作协议
CNS 项目许可证(2)
   25,000 
总赛诺菲安万特合作营业收入   25,000 
渤健公司合作协议
ATV:Abeta项目许可(3)
   293,912 
选择研究服务(4)
 1,267  1,619 
总渤健公司合作营业收入 1,267  295,531 
总合作营业收入$ $1,267 $ $330,531 
_________________________________________________
(1)2023年9月30日结束的九个月中,来自DNL593在额叶颞叶痴呆患者(FTD-GRN)Phase 1/2研究中特定临床里程碑的营业收入。
(2)2023年9月30日止的九个月营业收入,来源于2023年1月开始对多发性硬化患者进行SAR443820/DNL788第2期研究的阶段性付款。
(3)2023年9月30日结束的九个月的营业收入与渤健公司行使其执照授权Denali的ATV:Abeta项目有关,该项目先前被认定为一项重要权益,其中288.9万美元包括在期初的合同责任余额中,其中5.0万美元是2023年4月收到的期权行使费。
(4)2023年9月30日结束的三个月和九个月的营业收入已经包含在期初的合同负债余额中。
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目录
成本分担付款和报销
向合作伙伴支付的成本分摊款项被记录为综合损益表中的研发费用支出,在综合损益表和综合损失陈述中,来自合作伙伴的成本分摊补偿被记录为研发费用支出的抵消(单位:千元):
截止到9月30日的三个月截止到9月30日的九个月
2024202320242023
武田合作协议:
PTV:PGRN成本分担(报销)
$(1,211)$(1,777)$(3,549)$(5,120)
ATV:TREM2成本分担(报销)
(208)(1,018)(936)(4,279)
总武田成本分担(报销)(1)
(1,419)(2,795)(4,485)(9,399)
渤健公司合作协议:LRRK2成本分担付款(2)
4,965 3,378 14,194 14,504 
净成本分担款(报销)
$3,546 $583 $9,709 $5,105 
_________________________________
(1)成本分享补偿款项为$1.41百万美元和2.7百万被记录为应收款,计入2024年9月30日和2023年12月31日的预付费用和其他流动资产负债表中。
(2)到2024年9月30日和2023年12月31日,凤凰健康应付给渤健公司的费用分摊款项分别记录在资产负债表的应付账款中。5.01百万美元和3.2万美元的成本分担款项记录在2024年9月30日和2023年12月31日的资产负债表中的应付账款中。
18

目录
6.     承诺和事后约定
租赁义务
2018年5月,公司在南旧金山为其公司总部签订了一份经营租赁协议("总部租赁协议"),详见附注8"承诺及或有事项",以及公司2023年度10-k表格中的合并基本报表。2021年8月,公司在犹他州盐湖城为实验室、办公室和仓储场所签订了一份租赁协议。。2023年3月,公司终止了这份租赁合同,导致租赁改良加速折旧的确认金额为7.9百万美元 截至9月30日的九个月 2023年9月30日.
2023年4月,公司与盐湖城签订了一份租约,租赁了一个实验室、办公室和仓库,合同期约为(待确认)年,未经贴现的租金约为$百万美元,后来于2023年10月进行了修订。会计租约起始日被确定为2024年8月1日,公司被视为控制了这笔资产,而此时租约被确定为融资租赁,租赁责任和资产利用权ROU资产被记录在  (“ SLC租约” ) 租赁了科罗拉多州博尔德市一个面积为 59,33615 百万美元,后来于2023年10月进行了修订。会计租约起始日被确定为2024年8月1日,公司被视为控制了这笔资产,而此时租约被确定为融资租赁,租赁责任和资产利用权ROU资产被记录在 13.4 百万美元,后来于2023年10月进行了修订。会计租约起始日被确定为2024年8月1日,公司被视为控制了这笔资产,而此时租约被确定为融资租赁,租赁责任和资产利用权ROU资产被记录在  资产负债表上。 资产负债表上。 包括在ROU资产中 2024年9月30日 are $33.1 公司购买的资产中,被认为归房东所有。
管理层在应用ASC 842要求时行使了判断,包括判断某些合同是否包含租赁内容、租赁分类、租赁报酬、租赁开始日期,以及根据标准确定测定租赁负债的折扣率。公司的经营租赁和融资租赁的折扣率是公司增量借款利率的近似值,并且取决于协议的期限和经济条件。为了估算增量借款利率,管理层考虑了可观察到的类似市场工具的债务收益率,以及租赁协议中可能表明租赁隐含利率的基准。在ASC 842下承认的租赁条款未发生变化。 三个月和九个月的结束时间 2024年9月30日。
2024年6月30日和2023年6月30日的经营租赁成本分别为$1.9万美元和5.8百万的与股票相关的补偿,约三个月和九个月的结束时间 September 30, 2024, respectively, and $1.9万美元和6.1百万的与股票相关的补偿,约三个月和九个月的结束时间 2023年9月30日和2024年9月30日分别。变量租赁成本为$1.6万美元和3.9百万的与股票相关的补偿,约三个月和九个月的结束时间 2024年9月30日分别,和$1.3万美元和3.3百万的与股票相关的补偿,约三个月和九个月的结束时间 2023年9月30日分别。代表ROU资产摊销和租赁负债利息的融资租赁成本分别为$0.4万美元和0.1 百万,分别为 三个月和九个月的结束时间 2024年9月30日发生。没有 no 财务租赁成本用于 三个月和九个月的结束时间 2023年9月30日。
下表包含公司租赁期间提供的其他信息摘要(以千为单位):
截止到9月30日的三个月截止到9月30日的九个月
2024202320242023
来自经营租赁的经营活动现金流量$2,885 $2,793 $8,532 $8,552 

19

目录

截至2022年9月30日,
20242023
加权平均剩余租期(年):
经营租赁
4.65.6
融资租赁
14.5
加权平均贴现率应用​​(%):
经营租赁9.0%9.0%
融资租赁13.7%%
下表调和了2024年9月30日在汇编综合资产负债表中记录的经营性和融资租赁负债的未打折现金流量的未来五年和剩余年份的合计(以千为单位):
截至 12 月 31 日的年度:
经营租赁
融资租赁
2024(三个月)$2,885 $191 
202511,793 777 
202612,182 794 
202712,584 811 
202813,001 829 
此后4,381 9,661 
未贴现的租赁付款总额56,826 13,063 
减去:现值调整(9,940) 
减去:估算利息 (7,381)
未来最低租赁付款总额$46,886 $5,682 
赔偿
在业务的日常过程中,公司可能针对某些事项向供应商、出租人、业务合作伙伴、董事、高管和其他相关方提供不同范围和条款的赔偿保障,这些事项包括但不限于因协议违约、公司提供的服务、公司疏忽或恶意行为、公司违法行为,或第三方对知识产权侵权的索赔而产生的损失。此外,公司已与董事、某些高管和员工签订了赔偿协议,该协议将要求公司在其他事项之间对他们进行赔偿,以防止因其身份或担任董事、高管或员工而可能产生的某些责任。公司尚未接到根据此类协议提出赔偿要求的任何需求,因此公司目前意识到不会对公司产生重大影响的任何索赔。 汇编的综合资产负债表, 联合综合收益及损失简明合并报表,或关注 @EVERFI。简明的综合现金流量表.
20

目录
承诺
2017年9月,公司与龙沙销售股份公司(“龙沙”)订立修订后的开发与制造服务协议(“DMSA”),用于生物制品的开发与制造。根据DMSA,公司将根据项目计划执行采购订单,授权龙沙就公司某些抗体和酶产品提供开发和制造服务,并按照DMSA和项目计划支付提供的服务和交付的批次。 除非提前终止,DMSA将在所有开发和制造服务完成时到期,预计时间为2028年1月之前。截至2024年9月30日和2023年12月31日,公司在DMSA下具有总额为的非取消性采购承诺 ,为止公司在DMSA下拥有总额为的非取消性采购承诺。23.4万美元和37.62024年4月30日和2023年4月30日的六个月内的外汇重新计量净收益分别为$百万。
截至2024年9月30日和2023年结束的三个月内,公司分别发生了$成本。6.0万美元和10.4,分别进行了$支付,用于DMSA下提供的开发和半导体制造服务。1.9万美元和12.8 截至2024年9月30日和2023年结束的九个月内,公司分别发生了$成本。28.6万美元和26.5 ,分别进行了$支付。32.2万美元和24.9 分别为DMSA下提供的开发和半导体制造业服务支付了1000万美元和2000万美元。
在正常业务过程中,公司进入其他团体购买承诺,主要与研发活动相关。截至2024年9月30日和2023年12月31日,公司在某些临床和制造协议下有合同义务,而不是DMSA的 $百万,其中某些金额需与武田进行成本分担。25.6万美元和34.8 在正常业务过程中,公司进入其他团体购买承诺,主要与研发活动相关。截至2024年9月30日和2023年12月31日,公司在某些临床和制造协议下有合同义务,而不是DMSA的 $百万,其中某些金额需与武田进行成本分担。
备用金
公司不时可能涉及知识产权、雇佣和其他事项的诉讼、仲裁、索赔、调查和程序,这些事项是业务常规事务的一部分。公司根据认为可能已经发生责任并且相关损失金额可以合理估计的程度为损失准备记录。
7.    普通股
2024年2月27日,该公司与某些投资者签订了一份证券购买协议("购买协议"),用于定向增发(i) 3,244,689 Denali普通股份的股份数量为,每股价格为$17.07 ,以及用于购买Denali普通股的预先融资认股权证的总数为 26,046,065 份("预购转换权证"),购买价格为每份预先融资认股权证的$17.06 ,这代表了普通股的每股价格减去$0.01 行权价格。该定向增发于2024年2月29日关闭,公司净收益约为$499.3 百万美元,扣除发行成本约为$0.5百万美元。

预资金权证被归类为公司合并资产负债表中的永久权益部分,因为它们是独立的金融工具,可以立即行使,不代表公司回购其股份的义务,并允许持有人在行使权益时收到固定数量的普通股。所有定向增发发行的预资金权证截至2024年9月30日均未行使。
8.    基于股票的奖励
本公司已根据各种股权激励和股票购买计划发行了基于股票的奖励,详细信息请参阅《基本报表》第9条“基于股票的奖励”,该报表包含在公司2023年度10-k表格上。
21

目录
期权活动
以下表格总结了2024年9月30日结束的九个月的股票期权活动:
期权数量
加权平均值
行使价格
截至2023年12月31日的余额16,490,551 $27.34 
已授予
4,498,161 20.30 
已锻炼
(744,389)13.47 
被没收
(1,663,311)31.29 
截至 2024 年 9 月 30 日的余额18,581,012 $25.84 
已归属,预计将于 2024 年 9 月 30 日归属17,771,141 $26.98 
可在 2024 年 9 月 30 日行使11,543,850 $27.89 

员工获授期权的估计公允价值是使用Black-Scholes期权定价模型根据以下假设计算的:

截止到9月30日的九个月
20242023
预计期限(年)
5.50 - 6.08
5.50 - 6.08
波动性
64.5% - 66.0%
67.9% - 69.6%
无风险利率
3.7% - 4.5%
3.4% - 4.3%
股息率
限制股票活动
以下表格总结了2024年9月30日结束的九个月内受限制股票单位("RSU")的活动:
RSU股份数量加权平均授予日期每股的公平价值
2023年12月31日的未归属股份3,635,157 $35.60 
已行权2,347,721 20.49 
已归属和释放(1,261,137)37.07 
被取消(727,400)28.85 
在2024年9月30日将未解锁并预计解锁的3,994,341 $27.48 
股票补偿费用
公司的经营业绩包括以下与股票补偿相关的费用(以千为单位):
截至9月30日的三个月截至9月30日的九个月
2024202320242023
研究和开发
$14,141 $15,821 $44,847 $47,795 
一般和行政
10,719 11,638 32,953 34,319 
总计
$24,860 $27,459 $77,800 $82,114 
22

目录
9.    每股净亏损
由于公司在所有报告期内处于亏损地位,基本每股净亏损与稀释每股净亏损相同,在所有期间内均包括所有潜在的普通股股份将被认为具有抗稀释性。 下表列出了基本和稀释每股净亏损的计算(以千为单位,除了每股份额和每股金额外)。
截止到9月30日的三个月截止到9月30日的九个月
2024202320242023
分子:
净损失$(107,192)$(99,353)$(308,020)$(25,751)
分母:
加权平均数目为:
普通股股份总额
143,410,923 137,644,534 142,151,719 137,076,199 
定向增发预先融资认股权证
26,046,065  20,437,606  
总计
169,456,988 137,644,534 162,589,325 137,076,199 
每股净亏损$(0.63)$(0.72)$(1.89)$(0.19)
潜在稀释证券,包括已发行和尚未发行的期权、尚未计入稀释每股计算的员工股票购买计划(“ESPP”)股份以及未来可能解除限制的受限股份,因为它们将会产生抵消效应,合计约为 22.7500万股,并且总成本(包括佣金和消费税)分别为$20.7 2024年9月30日和2023年9月30日分别达到了百万股。
10.    临床前小分子项目的剥离
2024年3月1日,公司通过与创业公司签署的资产购买和许可协议("资产购买协议"),剥离了某些资产,包括特定的知识产权、有形资产和用于进行早期小分子药物发现的设备("剥离资产")。此外,公司的部分员工终止了与公司的雇佣关系,并成为创业公司的员工。

作为剥离资产的交换,公司以未来股权简单协议(“SAFE”)的形式获得股权对价,等于美元15.0VBPC下一轮融资中的百万股权,或者,如果VBPC的下一轮股权融资在2024年12月31日之前没有发生,则在本协议之前的VBPC上一轮股权融资中发行的优先股数量等于美元15.0百万除以投资者在先前的股权融资中支付的每股价格。公司也可能有资格获得某些基于市场估值、开发和销售的里程碑付款,最高可达约美元1.2 在VBPC当选时,以现金或股权的形式提供10亿美元。公司还将有权从在该国首次商业销售此类产品之时开始,直到 (i) 某些相关专利到期,(ii) 监管排他性到期,或 (iii) 监管独家权到期,或 (iii) 以较晚者为准,就与某些既定目标具有约束力的任何产品的净销售总额获得未来的特许权使用费 十年 在这样的首次商业销售之后。

与VBPC同时,公司还签订了一份租赁协议,涉及公司总部内的 平方英尺办公和实验室空间,以及过渡和研究服务协议("服务协议")。分租于2024年5月开始,持续约 12,985 延展周期。服务协议允许Denali为VBPC提供设备访问和管家式特定行政和研究服务,在分租期末之前的一段时间内。 十个月 两个 选择性的 六个月 延展周期。服务协议允许Denali为VBPC提供设备访问和管家式特定行政和研究服务,在分租期末之前的一段时间内。
23

目录

这次资产剥离未符合报告终止经营的标准,因为出售并未代表公司业务的战略转变。公司在2024年9月30日结束的九个月内的综合损益简表中确认了资产剥离获利约$百万,这代表获得对价的公允价值与被剥离资产账面价值之间的差额。14.5在截至2024年9月30日的九个月期间,公司在损益简表和综合损失中确认了大约$百万的资产剥离收益,这代表获得对价的公允价值与被剥离资产账面价值之间的差额。

公司将SAFE以 $ 记录15.0百万美元,基于有望在未来事项中收到的股权预期价值,按照简明合并资产负债表中的其他非流动资产。截止2024年9月30日,SAFE仍然未清偿。
24

目录
第2项 管理层对财务状况和经营业绩的讨论与分析
我们财务状况和业绩分析的讨论应与本季度报告中包含的简明合并财务报表及相关附注一起阅读。本讨论和分析以及报告的其他部分包含基于当前信仰、计划和期望的前瞻性陈述,涉及与未来事件和我们未来财务表现相关的风险、不确定性和假设,例如关于我们意图、计划、目标、期望、预测和投影的陈述。由于几个因素,这些前瞻性陈述中预期的实际结果和选定事件的时间可能与之存在实质差异,其中包括本季度报告中“风险因素”部分所述内容。在“风险因素”一节中列出的几个因素可能导致我们的实际业绩和选择事件的时间与这些前瞻性陈述所预期的产生实质性差异。

前瞻性陈述包括但不限于以下方面的陈述:

我们的开发活动、临床前研究和临床试验的进展、成功、成本和时间,特别是我们血脑屏障(“BBB”)平台技术、项目和生物标志物的开发,包括研究或试验的启动和完成以及相关准备工作,受试者的招募,临床试验数据可用时间,新分子实体的临床开发推进及相关时间,以及提交调查性新药申请和临床试验申请的时间;

临床前研究结果对我们达到使我们能够探索人体内这些候选药物的强大药效区间的曝露有着重要影响;

预期潜在好处和战略合作与第三方的潜在营业收入,以及我们吸引具有开发、监管和商业化专业知识的合作伙伴的能力;

监管申报和批准的时间或可能性;

我们具备获取和维持产品候选品获得监管批准的能力,并且任何获批产品候选品标签中的相关限制、限制和/或警告;

我们过去和/或者将来可能受到的任何剂量限制对我们产品候选品成功的影响程度;

涵盖产品候选物和技术的知识产权权利的保护范围,我们能够建立和维护的范围;

授权给我们的许可条款和条件,以及我们许可和/或获取与我们的产品候选者和BBb平台技术相关的额外知识产权的能力;

我们能够获得资金来支持我们的运营,包括开发和商业化我们目前和潜在的未来产品候选者所需的资金;

我们的计划和能力,以及建立销售、营销和分销制造行业的基础设施,以推广我们获得批准的任何产品候选物。

与第三方达成协议,以推广我们的产品候选人。

我们的产品候选人市场的规模和增长潜力对于商业使用获得批准,以及我们满足这些市场的能力。
25

目录

市场对我们的产品候选者的接受速度和程度;

美国和其他国家的现有法规和监管发展;

我们的知识产权和第三方知识产权的潜在索赔。

我们与第三方供应商和制造商签订合同以及他们的足够履行能力。

我们计划及开发自家制造业设施的能力;

产品候选品的定价和报销,如果获得批准并商业化;

竞争产品或平台技术的成功及其可能出现的影响。

我们吸引和留住关键的管理、科学和医疗人员的能力;

我们所估计的关于费用、未来收入、资本需求和融资需要的准确性;

我们能力提升操作、财务和信息管理系统;

不良经济条件的影响,比如金融服务板块的不稳定,利率期货上升,通货膨胀加剧,劳动力市场竞争加剧;

全球政治不确定性增加、大流行病或其他全球卫生紧急事件以及相关的全球经济动荡和社会状况对我们业务的影响;

关于我们2024年2月私募股权投资("PIPE")融资所得款项使用意图的预期;和

我们的财务表现。

这些前瞻性声明受到许多风险、不确定性和假设的影响,包括《风险因素》中描述的那些。在某些情况下,您可以通过诸如“预期”,“相信”,“可能”,“估计”,“期望”,“打算”,“可能”,“计划”,“潜在”,“预测”,“项目”,“应该”,“将会”,“会”,或这些术语的否定形式,以及传达未来事件或结果不确定性的类似表达方式来识别这些声明。这些前瞻性声明反映了我们对未来事件的信仰和观点,是根据截至本季度报告表格10-Q日期的估计和假设进行的,并且受到风险和不确定性的影响。我们在本季度报告表格10-Q中的“风险因素”部分以及本报告的其他地方更详细地讨论了许多这些风险。此外,我们在一个竞争激烈且快速变化的环境中运营。新的风险不时出现。无法预测所有风险,也无法评估所有因素对我们业务的影响程度,或任何因素或多个因素可能使我们在做出的任何前瞻性声明中包含的实际结果与大相径庭。鉴于这些不确定性,您不应过度依赖这些前瞻性声明。我们通过这些警告性声明对本季度报告表格10-Q中的所有前瞻性声明进行限定。除非法律要求,我们不承担在公开更新这些前瞻性声明的义务,也不承担更新实际结果可能与任何前瞻性声明中预期的结果大相径庭的原因的义务,无论是出于新信息、未来事件还是其他原因。
26

目录
概述

我们的目标是发现、开发和提供药物治疗手段,以战胜退化。

我们的发现和开发策略受三项全面原则的指导,我们相信这些原则将显著增加成功的可能性,并加快将有效的治疗药物带给患有神经退行性和溶酶体贮积病的人们的时间。:

Degenogenes:基因途径实现 —我们的每个项目都针对经遗传验证会导致或增加神经退行性疾病风险的分子靶点或生物途径。

脑递送:验证和可选性 – 我们设计我们的药物候选产品以跨越BBb,直接在大脑中发挥作用。我们的专有运输载体("TV")平台技术旨在在静脉给药后有效传递大型治疗性分子,如酶、蛋白质、抗体和寡核苷酸等,穿越BBb。

通过生物标志物驱动的开发和批准 我们发现、开发和使用生物标志物来指导剂量选择、评估临床活性,并识别最有可能对我们疗法做出反应的患者。我们正在积极与卫生监管机构讨论生物标志物作为支持更快批准路径的主要临床终点的潜在应用。

Our 晚期和中期诊所所有程序如下:
Tividenofusp alfa(DNL310,ETV:IDS),我们的主要酶替代疗法计划,由我们的酶传输车辆("ETV")实现,旨在穿越BBb,恢复硫酸鱼精蛋白酶("IDS")并减少糖氨基聚糖("GAGs")在外周和大脑中的积聚,在患有黏多糖代谢障碍II型("MPS II"或"亨特氏综合征")的个体中;

我们的真核起始因子EIF2B活化剂项目DNL343旨在应对运动神经元病(“ALS”) 及额颞叶痴呆症(“FTD”)等疾病;

BIIB122/DNL151,我们与渤健公司合作开发的富含亮氨酸重复激酶2("LRRK2")抑制剂项目,旨在治疗帕金森病("PD");并

Eclitasertib (SAR443122/DNL758),一种周围和非中枢穿透的RIPK1抑制剂,正在与赛诺菲安万特合作开发,以应对溃疡性结肠炎("UC")等周围炎症性疾病。
Ou早期阶段的诊所以下是各项目的详细信息:
DNL126 (ETV:SGSH),我们第二个 最先进的爱文思控股 启用的 ETV 计划,旨在恢复 N-磺代葡糖胺磺酶("SGSH")的溶酶体活性,该酶负责降解溶酶体中的硫酸海帕伦,适用于患有MPS IIIA(Sanfilippo综合症A型)的个体;和
TAk-594/DNL593(PTV:PGRN),我们的重组前胶蛋白("PGRN")生物治疗药物,通过我们的蛋白转运载体("PTV")实现,与武田合作开发,旨在应对前颞叶痴呆-颗粒素("FTD-GRN")或由 GRN基因。
27

目录
以下表格总结了我们临床阶段项目的关键信息:
程式候选产品临床研究指示操作控制
ETV: IDS
tividenofusp alfa,或 DNL310
Ph 1/2
亨特综合症 (MPS II)德纳利
Ph 2/3
eif2bDNL343Ph 1b也有德纳利
Ph 2/3也有与希利中心合作
LRRK2BIIB122/DNL151
Ph 2a
帕金森氏病
德纳利
ph 2b
与 Biogen 合作
RIPK1(外围设备)
eclitasertib 或 SAR443122/DNL758
Ph 2
UC
赛诺菲
ETV: SGSHDNL126
Ph 1/2
A 型圣菲利波综合征 (MPS IIIA)德纳利
PTV: PGRN
TAK-594/DNL593
Ph 1/2
FTD-GRN
与武田合作

自我们开始运营以来,我们已经将几乎所有资源投入到发现、获取和开发候选产品、构建我们的BB平台技术以及组建我们在理解关键神经退行性疾病途径方面的核心能力。

2024年迄今的主要运营和融资里程碑包括:

2024年1月,我们宣布继续进行全球2/3期COMPASS研究的招生,预计将于2024年完成。2月,我们在第20届世界年会上公布了正在进行的MPS II中tividenofusp alfa的1/2期研究的新阳性数据座谈会TM 在两年的治疗中,脑脊液(CSF HS)中的硫酸肝素持续正常化,溶酶体功能障碍和神经元损伤(nFl;神经丝灯)的生物标志物持续大幅减少,多种临床结果指标得到改善和稳定。同样在二月份,我们参加了里根-乌德尔基金会举办的美国食品药品管理局关于脑脊液HS作为潜在替代生物标志物的研讨会,以支持加快MPS的批准。4月,我们在1/2期开放标签研究中完成了47名MPS II参与者的入组。里根-乌德尔基金会研讨会结束后,我们收到了美国食品药品管理局药物评估与研究中心(“CDER”)部门的书面来文,表示愿意讨论以脑脊液硫酸肝素(CSF HS)为原料的MPS II中tividenofusp alfa的加速批准途径 代孕 生物标志物。2024年9月,我们宣布,根据最近与美国食品药品管理局药物评估与研究中心(CDER)部门成功会晤的结果,我们计划提交生物制剂许可申请(BLA),加速批准用于治疗MPS II(亨特综合症)的tividenofusp alpha(DNL310)。此外,会议还根据tividenofusp临床开发计划的总体情况,为转换为全面批准提供了途径。根据与CDER的讨论,我们将在作为MPS II治疗的tividenofusp alfa的BLA中纳入有关生物标志物(CSF HS和神经丝灯(nFl))和安全性的临床前和临床数据,并打算在2025年初通过加速批准途径提交BLA;

2024年1月,我们宣布TAk-594/DNL593 第1/2期研究中FTD-GRN参与者的b部分已经自愿暂停,以实施协议修改。2024年第二季度,我们 已完成第1/2期研究的协议修订,并正在进行B2队列参与者的筛选;

28

目录
2024年1月,我们宣布了出售我们的临床前小分子组合物组合的意图,这项交易于2024年3月1日生效。我们将保留并继续推进我们当前的临床阶段小分子项目组合。这一决定是基于临床验证以及优先考虑我们用于大分子脑递送的TV技术平台。

2024年2月,我们宣布在MPS IIIA的1/2期研究中开始了DNL126的剂量。此外,2024年2月,我们在全球展示了支持性的临床前数据。Symposium此款超便携式投影仪使用了最新的 Android TV 界面,而且遥控器还内置了 Google AssistantTM 功能,用户可以非常方便地使用它。 展示DNL126改善MPS IIIA小鼠溶酶体和微胶质形态、退行和认知行为的数据。2024年6月,DNL126被FDA的开始临床试验促进罕见疾病治疗(压力位)计划选中,以加速罕见疾病治疗的发展。 11月,我们宣布在MPS IIIA参与者中进行的正在进行的开放标签1/2期研究中,持续多达25周的剂量的初步数据显示脑脊液HS水平从基线开始显著降低,包括正常化。安全性支持继续开发。最常见的治疗相关的不良事件是所有参与者中的轻度和中度程度的输液相关反应。有一个被调查者认为与药物无关的重大不良事件。根据初步的1/2期结果和积极的监管环境, 我们最近扩大了研究,并继续评估发展计划,包括加速批准路径; 我们最近扩大了研究,并继续评估发展计划,包括加速批准路径;

2024年2月,我们宣布评估SAR443820/DNL788在患有ALS的参与者中的HIMALAYA研究未达到ALS功能评分量表修订版(ALSFRS-R)变化的主要终点。2024年10月,我们收到赛诺菲安万特通知,评估SAR443820/DNL788对多发性硬化患者的血清神经丝轻链水平的K2 第2期研究基于未达到主要和关键次要终点而中止;

2024年2月,我们宣布已进入证券购买协议 与特定现有的合格投资者签署 定向增发我们公司3244689股普通股,每股定价17.07美元,并预先融资认股权以购买26046065股我们公司的普通股,每份预先融资认股权的购买价格为17.06美元,净收益约为49930万美元。预先融资认股权的行权价为每股普通股0.01美元,可立即行使,并将保持行使权直至全部行使为止。定向增发在2024年2月29日结束,需符合惯例的结算条件;

2024年2月,我们宣布已于2024年1月与一家第三方签署了一项与全球二期研究BIIB122/DNL151有关的合作与开发资金协议,我们计划自行运作以评估与帕金森病及确认具有LRRK2致病变异的参与者有关的BIIB122/DNL151的安全性和生物标志物。该协议包括承诺投资7500万元,其中1250万元已于2024年1月收到,另外1250万元于2024年7月收到,其余部分将根据研究中的运营里程碑触发。第三方将有资格根据帕金森病用LRRK2抑制剂全球年净销售额获得低个位数的专利费,专利费的金额将根据标签范围变化。 Denali已开始为全球二期研究中评估与帕金森病及确认具有LRRK2致病变异的参与者有关的BIIB122/DNL151的安全性和生物标志物的筛选工作。 渤健公司将继续进行早期帕金森病的全球二期20亿LUMA研究。丹纳利和渤健公司将共同推广BIIB122/DNL151,假设获得监管批准;

2024年5月,肖恩·希利Sean m. Healey & AMG ALS中心与马萨诸塞州综合医院(MGH)合作,共同宣布东北ALS联盟(NEALS)在HEALEY ALS平台试验的2/3期Regimen G(DNL343)招募工作已完成;以及

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2024年7月,渤健公司终止了利用我们的TfR靶向技术对抗淀粉样蛋白的ATV:Abeta计划的许可,用于潜在治疗阿尔茨海默病,并授予我们在合作期间生成的数据的权利。由于终止,所有开发、制造、执行医疗事务活动和商业化新的TfR靶向ATV:Abeta治疗药物的权利都将返还给我们。渤健公司在2023年4月许可了我们的TfR靶向ATV:Abeta计划,行使了作为两家公司之间2020年合作协议一部分的期权。渤健公司的决定与TV平台的任何功效或安全性问题无关。
我们没有任何产品获得批准销售,也自成立以来没有产生任何产品收入。我们主要通过发行和销售可转换优先股、普通股的销售以及其他途径进行运营资金筹集。 预先融资认股权证用于购买我们公司的股票。 在公开发行和私募中,以及从与武田、赛诺菲安万特、渤健公司和其他第三方的合作和资金协议中收到的付款。

迄今为止,我们已经蒙受了巨额营业亏损,预计在可预见的将来将继续蒙受营业亏损。 在截至2024年9月30日的三个月和九个月中,我们的净亏损分别为1.072亿美元和3.08亿美元, 以及净亏损 截至2023年9月30日的三个月和九个月分别为9,940万美元和2580万美元。 截至2024年9月30日,我们的累计赤字为f 14.2 亿美元。 我们创造产品收入的能力将取决于我们一种或多种产品念珠菌的成功开发和最终商业化是的。我们 e随着我们通过健康的志愿者和患者试验推进当前的临床阶段项目;扩大和改进我们的BBB平台技术;收购、发现、验证和开发其他候选产品;获取、维护、保护和执行我们的知识产权组合;以及雇用更多人员,预计将继续产生巨额费用和运营亏损。
营业费用的成分
合作收入

迄今为止,我们尚未从产品销售中产生任何营业收入,并且预计在可预见的将来也不会从产品销售中产生任何营业收入。到目前为止,所有已认定的营业收入均来自与武田、赛诺菲安万特和渤健公司的合作协议的合作和许可收入。
未来的营业收入可能来自武田合作协议、赛诺菲安万特合作协议和渤健公司合作协议,可能产生于产品销售或里程碑支付、版税和利润分享等其他合作协议、战略联盟和许可安排的补偿。我们预计我们的营业收入会因许可费、选择权行使费、里程碑支付、利润分享补偿、其他支付和产品销售的时间和金额而每个季度和每年波动,只要成功商业化。如果我们未能及时完成产品候选品的开发或为其获得监管批准,我们产生未来营业收入的能力以及我们的经营业绩和财务状况将受到重大不利影响。
研究和开发

迄今为止,我们的研究和开发费用与AV-101的开发有关。研究和开发费用按照发生的原则确认,并将在收到将用于研究和开发的货物或服务之前支付的款项资本化,直至收到这些货物或服务。

研发活动占据我们营业费用的大部分。我们按发生额记录研发费用。为了发现和开发我们的候选产品和BBb平台科技,我们所发生的研发费用包括:

外部研发费用,包括:

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与第三方安排产生的费用,如医药外包概念("CROs"),临床前试验机构,合同开发和制造组织("CDMOs"),学术和非营利机构以及顾问;

用于研发尚未达到技术可行性并且没有替代未来用途的技术获取费用;

与我们的许可和合作协议相关的费用;

人事相关费用,包括工资、福利和基于股票的补偿支出;和

其他费用,包括实验室、设施和其他费用的直接和分摊费用。

我们的部分研发费用是直接的外部支出,在一个项目已经进行了晚期IND启动研究后,我们会根据专门的项目进行跟踪。
 
项目费用包括与我们最先进的候选产品以及备用或下一代分子的发现和开发相关的费用。我们还跟踪与我们的电视平台相关的外部费用。这些费用包括我们产生的与武田合作协议、赛诺菲合作协议相关的外部费用 a和 Biogen 合作协议。艾尔l 与早期项目相关的外部成本或使整个投资组合受益的外部成本将作为一个整体进行跟踪。我们还为我们的研发计划承担人事和其他运营费用,这些费用以汇总形式列报。这些费用主要与工资和福利、股票补偿、包括租金和折旧在内的设施费用以及实验室消耗品有关。我们在其中与合作伙伴分担成本,例如在我们的 Biogen 合作协议中 和武田合作协议,研发费用可能包括来自我们的合作伙伴的费用分摊报销或向其付款。此外,我们在哪里收到 来自第三方的研发资金,这可能被视为研发费用的减少。

预测开发并获得相关监管批准的产品候选者所需的性质、时间和预估的长期成本是具有挑战性的。全球货币大流行和地缘政治不确定性的事件让这一挑战变得更加困难。我们也无法预测销售或许可产品候选者产生实质性净现金流入的时间,如果有的话。这是因为药物开发涉及的风险和不确定性很多,包括:
 
我们增加并保留重要的研发人员能力;

我们能够通过IND前毒理研究建立适当的安全性概况;

我们成功开发、获得监管批准并成功商业化我们的产品候选者的能力;

我们成功参加并完成了临床试验;

与我们自行确定或通过合作收购的任何额外产品候选开发相关的费用;

我们能够发现、开发和利用生物标志物,以展示我们分子对靶点的作用、通路的参与,以及对疾病进展的影响。

如果我们的产品候选者获得批准,我们将与第三方制造商建立协议,为我们的临床试验和商业生产提供临床试验的供应。

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任何合作、授权或其他安排的条款和时间,包括其中任何里程碑支付的条款和时间;

我们能否在产品候选获得批准时获得并保持专利、商业秘密和其他知识产权保护和监管独家权利;

我们已收到适用监管机构的市场批准;

我们有能力在获得批准后独自或与其他人合作进行产品的商业化;以及

产品候选者获批后仍保持可接受的安全性概况。

这些变量中的任何变化都会显著改变与开发任何我们产品候选品相关的成本、时间和可行性。随着我们继续执行我们的业务策略、推进当前项目、扩大研发工作、为成功完成临床试验的任何产品候选品寻求监管批准、获取和发展额外的产品候选品以及承担与雇用额外人员支持研发工作相关的费用等,我们预计研发费用未来数年至少将增加。此外,处于临床开发后期的产品候选品通常比处于临床开发早期的产品候选品发展成本更高,主要是因为后期临床试验规模和持续时间的增加。
一般和行政

一般和行政费用包括与人员相关的费用,如工资、福利、旅行和基于股票的补偿费用,外部专业服务的费用以及分配的费用。外部专业服务包括法律、会计和审计服务以及其他咨询费用。分配的费用包括租金、折旧和与我们办公室和研发设施有关的其他费用,这些费用未包括在研究和开发费用中。我们预计随着将产品候选品推进到临床开发阶段,我们的行政人员人数将增加,这将增加我们的一般和行政费用。

出售小分子项目获利

小分子项目剥离所获得的收益完全来自于剥离带来的非现金收益, 与选择的临床前小分子项目相关的资产,包括指定的知识产权、用于开展早期小分子药物发现的有形资产和设备,作为股权对价进行交易。

利息及其他收入,净额

利息及其他收入,净额, 主要由我们的现金、现金等价物和可交易证券产生的利息收入和投资收入构成,以及转租收入和我们的融资租赁负债的利息。主要由我们的现金、现金等价物和可交易证券产生的利息收入和投资收入构成,以及转租收入和我们的融资租赁负债的利息。
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运营结果
比较 三个月和九个月结束于 2024年9月30日与2023年的比较

下表列出了我们运营结果的重要元件(以千为单位):
截至九月三十日的三个月变化
20242023$%
合作营业收入:
来自客户的合作营业收入
$— $1,267 $(1,267)*%
合作总营收
— 1,267 (1,267)*
营业费用:
研究与开发
98,238 89,737 8,501 
一般和管理费用
24,949 25,325 (376)(1)
营业费用总额
123,187 115,062 8,125 
营业亏损(123,187)(113,795)(9,392)
利息及其他收入,净额
15,995 14,442 1,553 11 
净亏损$(107,192)$(99,353)$(7,839)%
__________________________________________________
*百分比没有实际意义。

截至九月三十日的九个月变化
20242023$%
合作营业收入:
来自客户的合作营业收入
$— $330,531 $(330,531)*%
合作总营收
— 330,531 (330,531)*
营业费用:
研究与开发
296,653 316,073 (19,420)(6)
一般和管理费用
75,379 78,585 (3,206)(4)
营业费用总额
372,032 394,658 (22,626)(6)
小分子项目处置收益14,537 — 14,537 *
营业亏损(357,495)(64,127)(293,368)*
利息及其他收入,净额
49,475 38,376 11,099 29 
净亏损$(308,020)$(25,751)$(282,269)*%
__________________________________________________
*百分比没有实际意义。

合作收入。 截至2024年9月30日的三个月和九个月内没有合作收入,而截至2023年9月30日的三个月和九个月的合作收入分别为130万美元和3.305亿美元。2024年9月30日结束的三个月相比于2023年9月30日减少的主要原因是与渤健公司的合作协议下的活动。2024年9月30日结束的九个月相比于2023年9月30日结束的九个月减少的主要原因是2023年4月按照渤健公司的合作协议确认收入减少了29390万美元,以及由于临床里程碑而导致从武田获得的收入减少了1000万美元,来自赛诺菲公司的收入减少了2500万美元。

研发费用截至2024年9月30日的三个月和九个月,研发费用为9820万美元和29670万美元,而截至2023年9月30日的三个月和九个月,研发费用为8970万美元和31610万美元。

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下表总结了我们的研发费用,按项目和类别分类(单位:千元):
截至九月三十日的三个月截至九月三十日的九个月
2024202320242023
ETV:IDS项目外部费用$22,840 $20,388 $73,639 $87,674 
ETV:SGSH项目外部费用3,435 1,792 10,474 6,417 
PTV:PGRN项目外部费用2,500 1,889 6,145 8,107 
电视平台及其他项目外部费用
8,534 2,105 16,416 11,865 
LRRK2项目外部费用2,051 1,049 4,133 3,867 
eIF20亿项目外部费用7,702 4,971 24,219 14,866 
其他外部研发费用
3,539 6,451 13,182 19,839 
人员相关费用(1)
35,318 39,578 111,699 119,640 
其他未分配的研发费用
11,291 10,931 31,823 38,693 
净成本分摊和研发资金支付(2)
1,028 583 4,923 5,105 
研发总支出
$98,238 $89,737 $296,653 $316,073 
__________________________________________________
(1)与人员相关的费用包括截至2024年9月30日的三个月和九个月的股票薪酬费用分别为1410万美元和4480万美元,以及截至2023年9月30日的三个月和九个月的股票薪酬费用分别为1580万美元和4780万美元,反映出分别减少了170万美元和300万美元。
(2)下表中显示了净成本分担和研发资金付款的明细。报销和研发资金的基础费用已包含在上述表格中指定的外部支出和人员相关费用中。ATV:TREM2项目的外部支出列在电视平台和其他项目外部支出一栏中。
截至九月三十日的三个月截至九月三十日的九个月
2024202320242023
武田:PTV:PGRN项目的净报销$(1,211)$(1,777)$(3,549)$(5,120)
武田:ATV:TREM2项目的净报销
(208)(1,018)(936)(4,279)
渤健公司:LRRK2项目的净支付
4,965 3,378 14,194 14,504 
LRRK2研究和开发资金
(2,518)— (4,786)— 
净成本分担支付和研究与开发资金支付
$1,028 $583 $4,923 $5,105 

截至2024年9月30日的三个月内,研究和开发费用增加了约850万美元,相比于截至2023年9月30日的三个月,主要归因于以下原因:
各临床阶段项目的成本增加,包括eIF20亿($270万)、ETV:IDS($250万)、ETV:SGSH($160万)、LRRK2($100万)和PTV:PGRN($60万),反映了这些项目在临床试验中的持续进展;
增加了 $640万在电视平台和其他项目的外部支出,反映了我们对电视产品候选项目的持续投资。
这些增加部分被以下因素抵消了, 减少了 $430万的人事相关费用因人数减少而导致薪资和基于股票的补偿费用减少,主要是由于我们在2024年3月出售了临床前小分子项目,以及与我们临床前小分子项目的处置相关的其他外部研究和开发费用减少了$290万。
截至2024年9月30日的九个月里,研发费用减少了约1940万,与截至2023年9月30日的九个月相比,主要归因于以下几点:
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由于我们收购F-star Gamma导致在2023年第一季度与里程碑相关的费用为3000万美元,ETV:IDS项目的外部支出减少了1400万美元。该减少部分被与我们正在进行的1/2期研究以及可能的注册性2/3期研究相关的2024年支出增加所部分抵消;
人员相关费用和其他未分配研发费用分别减少了790万和690万,这主要是由于我们在2024年3月剥离了前临床小分子项目。
PTV:PGRN项目外部开支减少了200万美元,因为TAk-594/DNL593(PTV:PGRN)一期/二期研究之前自愿暂停了;并且
由于加速折旧与前SLC租约终止相关的租赁改善,导致截至2023年9月30日的九个月内,其他外部研究和开发费用减少了670万美元,主要是由于设施成本增加。
这些减少部分被eIF20亿和ETV:SGSH项目外部费用各增加940万和410万所抵消,反映了这些项目在临床试验中的持续进展,以及在电视平台和其他项目外部费用中增加的460万,反映了我们在电视相关产品候选者上的持续投资。
一般和行政费用。 一般和行政费用为 截至2024年9月30日的三个月内为2490万,2023年同期为2530万。
一般和管理费用为 截至2024年9月30日的九个月中的7540万美元,相比于截至2023年9月30日的7860万美元。减少320万美元 主要归因于 250万美元的专业服务和设施成本的综合减少,以及由于2024年3月剥离我们前临床小分子项目而导致的180万美元的人员相关费用减少,其中包括员工薪酬和基于股票的薪酬费用,部分被其他企业成本增加110万美元所抵消。
从剥离小分子项目中获得的收益。 有关详细描述,请参见第2项。运营成果的元件 包含在此季度报告(表格10-Q)中。
流动性和资本资源
流动性来源
截至 截至2024年9月30日,我们的现金、现金等价物和可交易证券总额为12.8亿美元。 我们的运营主要由普通股销售的收益以及来自合作伙伴的款项资助,包括与武田、赛诺菲安万特和渤健公司的协议中收到的款项。我们通过公开发行、定向增发和与武田和渤健公司的股票购买协议售出了普通股和其他证券。
通过 2024年9月30日 我们已经获得了大约 $75440万 通过公开发行我们普通股 $29620万 通过出售 1190万 2022年10月的普通股股份。在与合作伙伴的股票购买协议下,我们还收到了进一步的 57500万美金2024年9月30日.
此外,在2024年2月,我们收到了约 $49930万 通过定向增发出售约 320万 普通股和 预先融资的Warrants 购买2600万股我们的普通股票.
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在2022年2月,我们建立了一项注册的「市场外」设施,通过与高盛 & Co. LLC、Leerink Partners LLC(前身为SVb Securities LLC)和Cantor Fitzgerald & Co.作为销售代理签订股权分配协议,随时销售最多4亿美元的普通股。目前为止,还没有根据股权分配协议出售任何股票。

根据我们与武田、赛诺菲安万特、渤健公司以及一个无关第三方的合作和研发资金协议,通过 2024年9月30日 我们已经收到了 11500万美元, 22500万美元、56500万美元和2500万美元,分别为 并且还收到了 4720万美元和1620万美元的武田和渤健公司的费用分担报销,分别为 已经收到 来自赛诺菲安万特的1370万美元特定报销。
未来的资金需求和承诺

截至目前,我们尚未产生任何产品营业收入。除非我们获得对任何产品候选者的监管批准并进行商业化,否则我们预计不会产生任何产品营业收入,我们不知道何时或是否会发生这一切。
我们预计在可预见的未来将继续遭受重大损失,并且随着我们扩大研究和开发活动、继续开发我们的产品候选者并寻求监管审批,以及开始商业化任何获批产品,损失将会增加。此外,随着我们继续产生与支持我们不断增长的运营相关的额外成本,我们预计一般和行政费用也会增加。我们面临与新产品候选者开发相关的所有典型风险,并可能遇到不可预见的开支、困难、复杂情况、延误和其他未知因素,这些因素可能会对我们的业务产生不利影响。我们预期在继续运营的过程中将需要 substantial additional funding。
直到我们能够从我们的产品候选者的商业化或现有合作协议,或与其他第三方的未来协议中产生足够的营业收入为止,我们预计将通过公开或私募股权或债务融资来支持我们的未来现金需求。 额外的资金可能不会以合理的条件提供,如果会的话。如果我们无法以足够的数量或我们可接受的条款筹集额外资金,我们可能不得不大幅推迟、缩减或停止一个或多个产品候选者的开发或商业化。如果通过发行额外的债务或股权证券来筹集额外资金,可能会导致我们现有股东的稀释、固定支付义务的增加以及可能优于我们普通股的权利证券的存在。如果我们承担债务,我们可能会受制于限制我们运营的契约,并可能对我们的竞争力产生不利影响,比如限制我们承担额外债务的能力、限制我们获取、出售或许可知识产权的能力,以及其他可能对我们开展业务产生不利影响的运营限制。此外,我们与第三方达成的任何未来合作可能会在短期内提供资金,但会限制我们未来的潜在现金流和营业收入。上述任何情况可能会严重损害我们的业务、财务状况和前景。

自我们成立以来,我们已经产生了显著的亏损和负的经营现金流。到2024年9月30日,我们的累计亏损达到14.2亿美元。我们预计在未来进行和扩大研究与开发活动时将产生可观的额外亏损。我们相信,现有的现金、现金等价物和可交易证券将足以支持我们在提交此季度报告(10-Q表格)后至少十二个月的预测运营,包括下面列出的现有承诺。我们这一估算基于可能被证明错误的假设,我们可能会比预计更早使用可用的资本资源。从长远来看,我们预计将需要大量额外资源以资助我们的运营并满足未来的承诺。

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我们现有的承诺主要与我们在现有租赁协议下的义务和某些临床及制造业-半导体-半导体协议有关,包括与龙沙销售有限公司("龙沙")签署的DMSA,用于生物产品的开发和制造。截至2024年9月30日,经营租赁负债为4690万美元,融资租赁负债为570万美元。在与龙沙签署的DMSA和其他某些临床及制造业-半导体-半导体协议下,截止到2024年9月30日,我们的总不可退款采购承诺为4900万美元,部分金额需要与武田分摊。虽然租赁义务跨越多个年度,但与龙沙及其他临床和制造业-半导体-半导体协议下的大部分采购承诺将在十二个月内到期,部分承诺跨越数年。这些承诺在本季度10-Q报告的注释6 - 承诺和或有事项中有更详细的描述。.

我们的未来资金需求,包括变更和新承诺, 将取决于许多因素,包括:

临床前和临床开发活动的时机和进展;

我们决定追求的临床前和临床项目的数量和范围;

与我们签订授权和合作协议的第三方开发工作的进展;

我们维持当前研究和开发项目的能力,以及建立新的研究和开发、许可或合作安排的能力;

我们在与第三方建立制造业-半导体-半导体关系或建立和运营制造设施方面的能力和成功;

与起诉、辩护和执行专利权及其他知识产权诉讼相关的费用;

监管批准的成本和时间;

我们努力提升运营、财务和信息管理系统,并招聘额外的人员,包括支持我们产品候选开发的人员;

获取和投资新技术的成本及持续投资。

任何这些或其他变量的结果变化,可能会显著改变与我们任何产品候选人开发相关的成本和时间。此外,我们的运营计划可能在未来发生变化,我们可能需要额外的所有基金类型以满足与这些运营计划相关的运营需求和资本要求。
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现金流

下表概述了以下每个期间的主要现金来源和用途(单位:千美元):
截至九月三十日的九个月
20242023
用于经营活动的净现金$(263,979)$(259,334)
投资活动产生的现金(使用)提供的净额(260,963)176,261 
融资活动提供的净现金488,472 13,115 
现金、现金等价物及受限现金的净减少$(36,470)$(69,958)
经营活动中使用的净现金

截至2024年9月30日的九个月期间,运营活动使用的净现金为26400万美元,其中包括30800万美元的净亏损,通过与股票基础补偿费用、折旧和摊销、可交易证券折扣的净增加、非现金租赁费用以及小分子项目剥离的非现金收益相关的非现金项目进行调整。运营活动使用的现金还受到我们运营资产和负债变化的影响。
投资活动所提供(使用)的净现金

截至2024年9月30日的九个月期间,投资活动所用净现金为人民币26100万元,其中包括10.6亿元的可交易证券购买和1080万元的固定资产购置支出,部分被80610万元的可交易证券到期和销售收益所抵消。
融资活动提供的净现金

截至2024年9月30日的九个月期间,融资活动提供的现金为4.885亿美元,其中包括2024年2月定向增发普通股和预先资金的Warrants所获得的净收益49930万美元,以及因行使期权和公司的员工股票购置计划(ESPP)所得的1320万美元,但部分被与我们的融资租赁相关的2400万美元支付所抵消。
关键会计估计

我们对财务状况和经营结果的讨论与分析是基于我们的合并基本报表,该报表已按照美国通用会计准则准备。这些合并基本报表的编制要求我们进行估计和假设,这会影响到合并基本报表日期的资产和负债的报告金额,以及或有资产和负债的披露,同时还影响到报告期间认可的收入和发生的费用。我们的估计基于我们的历史经验和在特定情况下我们认为合理的其他各种因素,这些结果构成了我们对不易从其他来源显现的资产和负债的账面价值进行判断的基础。在不同的假设或控件下,实际结果可能与这些估计有所不同。我们的主要会计政策在本报告的其他部分中合并基本报表的注释中有详细描述。在我们的 「管理层对财务状况和经营结果的讨论与分析」包含在我们截至2023年12月31日的年度报告10-k表格中,该报告已提交给美国证券交易委员会, 在2024年2月28日,我们描述了我们认为涉及重大估计不确定性的会计估计,这可能对我们的财务状况或经营结果产生重大影响。 在截至九个月期间,这些关键会计估计没有发生重大变化。 2024年9月30日的中期期间。
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近期会计公告

截至的九个月内,没有新的会计公告或会计公告的变更。2024年9月30日与我们在2023年12月31日结束的年度报告(提交给证券交易委员会于2024年2月28日)中描述的近期会计公告相比,没有对我们具有重大或潜在重大意义的公告。
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项目 3.     有关市场风险的定量和定性披露

在我们日常业务中,我们面临市场风险,主要与利率和外币敏感性有关。
利率敏感性

我们面临与利率期货变化相关的市场风险。截至2024年9月30日,我们拥有现金、现金等价物和可交易证券共计12.8亿美元,主要由货币市场基金和可交易证券组成,这些证券大部分由投资级、短期至中期的固收证券构成。

我们投资活动的主要目标是保留资金以支持我们的运营。我们还寻求在不承担重大风险的情况下最大化投资收入。为了实现我们的目标,我们根据董事会批准的投资政策,维护一组投资于各种高信用评级和开空期限证券的投资组合。我们的投资受到利率风险的影响,如果市场利率上升,可能会贬值。在所呈现的任何期间内,假设利率相对变化10%,对我们的简明合并基本报表不会产生重大影响。
外币敏感性

我们大多数交易是以美元进行的。然而,我们确实有一些以其他货币进行的交易,主要是欧元、瑞士和英镑,因此我们面临汇率风险。美元相对于其他货币的价值波动影响了与有限数量的临床前、临床和制造业-半导体-半导体活动相关的费用、资产和负债的报告金额。

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项目4.     控制和程序
披露控制及程序的评估

我们的管理层对根据《交易所法》第13a-15(e)和15d-15(e)条款定义的披露控制和程序的设计与事件的有效性进行了评估。我们的披露控制和程序旨在确保我们根据《交易所法》提交或提交的报告中所需披露的信息在美国证券交易委员会规则和表格规定的时间内被记录、处理、汇总和报告,并确保该信息被收集并传达给我们的管理层,包括首席执行官和首席运营与财务官,以便及时做出关于所需披露的决策。

任何控制和程序,无论设计和操作得多好,仅能提供合理的保证,以实现所需的控制目标,管理层在评估可能的控制和程序的成本效益关系时必然会运用其判断。基于这一评估,我们的首席执行官和首席运营及财务官得出结论,截至 2024年9月30日的设计和操作我们的披露控制和程序在合理保证水平上是有效的。
对财务报告内部控制的变更

在截至季度的评估中,根据《证券交易法》第13a-15(d)和15d-15(d)条款,我们的财务报告内部控制没有识别出任何变化。 2024年9月30日 该变化对我们财务报告的内部控制没有产生实质性影响,或者合理可能会产生实质性影响。

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第二部分。其他信息
项目 1.    法律程序
我们可能会不时参与诉讼或其他法律程序。目前,我们不是任何诉讼或法律程序的当事方,管理层认为这些诉讼或法律程序不太可能对我们的业务产生重大不利影响。无论结果如何,诉讼都可能对我们产生不利影响,因为它涉及到军工股和和解成本、管理注意力和资源的转移以及其他因素。
项目1A.     风险因素

投资我们的普通股涉及高度风险。您应该仔细考虑以下描述的风险,以及其他信息,在此季度报告中,包含我们的基本报表及相关说明,以及标题为「管理层对业务、财务状况及运营结果的讨论与分析」的部分。以下描述的任何事件或发展都可能对我们的业务、财务状况、运营结果和增长前景造成损害。在这种情况下,我们的普通股市场价格可能会下降,您可能会失去全部或部分投资。当前我们尚未了解的或认为不重要的额外风险和不确定性也可能影响我们的业务运营和普通股市场价格。

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Table of Contents
Risk Factor Summary
This summary of risks below provides an overview of the principal risks we are exposed to. These risks are described more fully in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q.
Risks Related to Our Business, Financial Condition and Capital Requirements
We are in the clinical stages of drug development and have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.
We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future.
Drug development is a highly uncertain undertaking. We have never generated any revenue from product sales, and may never do so.
Due to the significant resources required for the development of our programs, and depending on our ability to access capital, we must prioritize development of certain product candidates.
A pandemic, epidemic, or outbreak of an infectious disease, such as COVID-19, or the perception of its effects, may materially and adversely affect our business, operations, and financial condition.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
We are heavily dependent on the successful development of our BBB technology and the programs currently in our pipeline, which are in the preclinical and clinical development stages.
We may not be successful in our efforts to continue to create a pipeline of product candidates or to develop commercially successful products.
We have concentrated a substantial portion of our efforts on the treatment of neurodegenerative and lysosomal storage diseases, fields that have seen limited success in drug development.
We may encounter substantial delays in our clinical trials, or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all.
We may encounter difficulties enrolling and/or retaining patients in our clinical trials, and our clinical development activities could thereby be delayed or otherwise adversely affected.
Our clinical trials may reveal significant adverse events, toxicities, or other side effects and may fail to demonstrate substantial evidence of the safety and efficacy or potency of our product candidates, which would prevent, delay or limit the scope of regulatory approval and commercialization.
We face significant competition and our operating results may suffer if we fail to compete effectively.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties, we may not be successful in commercializing product candidates if and when they are approved.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
Risks Related to Regulatory Approval and Other Legal Compliance Matters
The regulatory approval processes of the FDA, European Medicines Agency ("EMA") and comparable foreign regulatory authorities are lengthy, time consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue.
We currently conduct clinical trials outside the United States, and the FDA, EMA and applicable foreign regulatory authorities may not accept data from such trials.
To the extent we seek orphan drug designation for any of our product candidates, we may be unable to obtain such designations or to maintain the benefits associated with orphan drug status.
Healthcare legislative measures aimed at reducing healthcare costs may have a material adverse effect on our business and results of operations.
Our business is subject to complex and evolving U.S. and foreign laws and regulations, information security policies, and contractual obligations relating to privacy and data protection.
Risks Related to Our Reliance on Third Parties
We depend on collaborations with third parties for the research, development and commercialization of certain product candidates. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.
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We rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily.
Our reliance on third parties for the manufacture of the significant majority of the materials for our research programs, preclinical studies and clinical trials. This reliance on third parties may increase the risk that we will not have sufficient quantities of such materials or product candidates.
We depend on third-party suppliers for key raw materials used in our manufacturing, and the loss of these suppliers or their inability to supply us with adequate raw materials could harm our business.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our product candidates or our BBB technology, our competitors could develop and commercialize products or technology similar or identical to ours, and adversely affect our ability to commercialize any product candidates.
If any of our owned or in-licensed patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.
Our rights to develop and commercialize our BBB technology and product candidates are subject, in part, to the terms of licenses granted to us by others or licenses granted by us to others.
We may not be able to protect our intellectual property and proprietary rights throughout the world.
Our patent protection could be reduced or eliminated if we are unable to comply with requirements imposed by government patent agencies.
Changes in U.S. patent law could impair our ability to protect our products.
Issued patents covering our BBB technology, product candidates and other technologies could be found invalid or unenforceable if challenged.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
We may be subject to claims challenging the inventorship of our intellectual property.
If we are unable to protect the confidentiality of our trade secrets, our business would be harmed.
We may not be successful in obtaining, through acquisitions, in-licenses, or otherwise, necessary rights to our BBB platform technology, product candidates or other technologies.
We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers.
Third-party intellectual property claims against us, our licensors or our collaborators may prevent or delay the development of our BBB platform technology, product candidates and other technologies.
Risks Related to Our Operations
If we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
We have engaged in and may in the future engage in acquisitions or strategic partnerships, which may increase our capital requirements, dilute our stockholders, or cause us to incur debt or assume contingent liabilities.
Our internal computer systems, or those used by our collaborators, CROs or other contractors, may fail or suffer security breaches or incidents that could compromise the confidentiality, integrity, and availability of such systems and data, expose us to liability, and affect our reputation.
Our business is subject to risks associated with international operations.
Risks Related to Ownership of Our Common Stock
The market price of our common stock has been and may continue to be volatile, which could result in substantial losses for investors.
If securities analysts publish negative evaluations of our stock, or if they do not publish research or reports about our business; the price of our stock and trading volume could decline.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Delaware law and provisions in our charter documents might prevent a change in control of our company or changes in our management, depressing the trading price of our common stock.
Our amended and restated certificate of incorporation provides exclusive forums for disputes between us and our stockholders, limiting their ability to obtain a favorable judicial forum.
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Risks Related to Our Business, Financial Condition and Capital Requirements
We are in the clinical stages of drug development and have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our business and predict our future success and viability.

We are a clinical-stage biopharmaceutical company with a limited operating history, focused on developing therapeutics for neurodegenerative diseases, including Alzheimer’s disease, Parkinson’s disease, and ALS, and lysosomal storage diseases, including Hunter syndrome and Sanfilippo syndrome. We commenced operations in May 2015, have no products approved for commercial sale, and have not generated any revenue from product sales. Drug development is a highly uncertain undertaking and involves a substantial degree of risk. Our clinical-stage programs are in various phases ranging from Phase 1 through Phase 3. To date, we have not completed a pivotal clinical trial, obtained marketing approval for any product candidates, manufactured a commercial scale product or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Our limited operating history makes any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by clinical-stage biopharmaceutical companies, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties. If we do not address these risks and difficulties successfully, our business will suffer.
We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future.

We have incurred significant net losses since our inception. Our net losses were $107.2 million and $308.0 million for the three and nine months ended September 30, 2024, respectively, and net losses of $99.4 million and $25.8 million for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $1.42 billion.

We have invested significant financial resources in research and development activities, including for our preclinical and clinical product candidates and our TV platform. We do not expect to generate revenue from product sales for several years, if at all. The amount of our future net losses will depend, in part, on the level of our future expenditures and revenue. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

We expect to continue to incur significant expenses and increasingly higher operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:
 
continue our research and discovery activities;

progress our current and any future product candidates through preclinical and clinical development;

initiate and conduct additional preclinical, clinical, or other studies for our product candidates;

work with our contract manufacturers to scale up the manufacturing processes for our product candidates or establish and operate a manufacturing facility;

change or add additional contract manufacturers or suppliers;

seek regulatory approvals and marketing authorizations for our product candidates;

establish sales, marketing and distribution infrastructure to commercialize any products for which we obtain approval;

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acquire or in-license product candidates, intellectual property and technologies;

make milestone, royalty or other payments due under any license or collaboration agreements;

obtain, maintain, protect, and enforce our intellectual property portfolio, including intellectual property obtained through license agreements;

attract, hire, and retain qualified personnel and incur increased stock-based compensation, especially in light of a competitive compensation environment;

provide additional internal infrastructure to support our continued research and development operations and any planned commercialization efforts in the future;

implement additional internal systems and infrastructure related to cybersecurity;

experience any delays or encounter other issues related to our operations;

meet the requirements and demands of being a public company;

defend against any product liability claims or other lawsuits related to our products; and

build clinical manufacturing capabilities and capacity.

Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.
Drug development is a highly uncertain undertaking and involves a substantial degree of risk. We have never generated any revenue from product sales, and we may never generate product revenue or be profitable.

We have no products approved for commercial sale and have not generated any revenue from product sales. To obtain revenue from the sales of our product candidates that are significant or large enough to achieve profitability, we must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing, and marketing therapies with significant commercial success.

Our ability to generate revenue and achieve profitability depends significantly on many factors, including:
 
successfully prioritizing and completing research and preclinical and clinical development of our product candidates;

obtaining regulatory approvals and marketing authorizations for product candidates for which we successfully complete clinical development and clinical trials;
 
developing a sustainable and scalable manufacturing process for our product candidates, including those that utilize our TV platform, as well as establishing and maintaining commercially viable supply relationships with third parties that can provide adequate products and services to support clinical activities and commercial demand of our product candidates;

identifying, assessing, acquiring and/or developing new product candidates;

negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;
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launching and successfully commercializing product candidates for which we obtain regulatory and marketing approval, either by collaborating with a partner or, if launched independently, by establishing a sales, marketing and distribution infrastructure;

obtaining and maintaining an adequate price for our product candidates, both in the United States and in foreign countries where our products are commercialized;

obtaining adequate reimbursement for our product candidates from payors;

obtaining market acceptance of our product candidates as viable treatment options;

addressing any competing technological and market developments;

receiving milestone and other payments under our current and any future collaboration arrangements;

maintaining, protecting, expanding, and enforcing our portfolio of intellectual property rights;

attracting, hiring, and retaining qualified personnel;

general economic conditions, including conditions resulting from rising inflation and interest rates, recent bank failures and instability in the financial services sector, geopolitical uncertainty, and instability or war; and

addressing any delays in our clinical trials or other impacts from a pandemic or other global health emergency.

Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of our expenses, or when we will be able to generate any meaningful revenue or achieve or maintain profitability, if ever. In addition, our expenses could increase beyond our current expectations if we are required by the FDA, or foreign regulatory agencies, to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our current or our future collaborators’ clinical trials or the development of any of our product candidates. Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate and ongoing compliance efforts.

Even if we are able to generate revenue from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations. Revenue from the sale of any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether we own the commercial rights for that territory. If the number of addressable patients is not as significant as we anticipate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice. or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates, or continue our operations and cause a decline in the value of our common stock, all or any of which may adversely affect our viability.
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If we fail to obtain additional financing, we may be unable to complete the development and, if approved, commercialization of our product candidates.

Our operations have required substantial amounts of cash since inception. We currently fund our operations primarily with the proceeds from our follow-on offering completed in October 2022, payments received from our collaboration agreements with Biogen, Sanofi, and Takeda, and a strategic private offering transaction completed in February 2024. We have a diversified portfolio with numerous programs at various stages of research, discovery, preclinical, and clinical development. Developing our product candidates is expensive, and we expect to continue to spend substantial amounts as we fund our early-stage research projects, and continue to advance our programs through preclinical and clinical development. Even if we are successful in developing our product candidates, obtaining regulatory approvals and launching and commercializing any product candidate will require substantial additional funding.

As of September 30, 2024, we had $1.28 billion in cash, cash equivalents and marketable securities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our projected operations through at least the next twelve months. Our estimate as to how long we expect our existing cash, cash equivalents, and marketable securities to be available to fund our operations is based on assumptions that may be proven inaccurate, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, such as recent bank failures, geopolitical uncertainty, rising inflation or interest rates, or a perceived or actual economic downturn, may cause us to increase our spending significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. We may also need to raise additional funds sooner than we anticipate if we choose to expand more rapidly than we presently anticipate.

We have no committed source of additional capital, and we cannot be certain that additional funding will be available when we need it, on terms acceptable to us or at all. If adequate capital is not available to us on a timely basis, we may be required to significantly delay, scale back, or discontinue our research and development programs or the commercialization of any product candidates, if approved, or be unable to continue or expand our operations or otherwise capitalize on our business opportunities, which could materially affect our business, financial condition, results of operations, and growth prospects and cause the price of our common stock to decline.
Due to the significant resources required for the development of our programs, and depending on our ability to access capital, we must prioritize development of certain product candidates. Moreover, we may expend our limited resources on programs that do not yield a successful product candidate and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We have a diversified portfolio with numerous programs at various stages of research, discovery, preclinical, and clinical development. These programs require significant capital investment. We seek to maintain a process of prioritization and resource allocation to maintain an optimal balance between aggressively advancing lead programs and replenishing our portfolio. We regularly review the programs in our portfolio, and terminate those programs which do not meet our development criteria, which we have done a number of times in the past.
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Due to the significant resources required for the development of our programs, we must focus our programs on specific diseases and disease pathways and decide which product candidates to pursue and advance and the amount of resources to allocate to each. Our decisions concerning the allocation of research, development, collaboration, management, and financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial product and may divert resources away from better opportunities. Similarly, our potential decisions to delay, terminate, divest, or collaborate with third parties in respect of certain programs may subsequently also prove to be suboptimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the viability or market potential of any of our programs or product candidates or misread trends in the biopharmaceutical industry, in particular for neurodegenerative and lysosomal storage diseases, our business, financial condition, results of operations, and growth prospects could be materially adversely affected. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forgo or delay pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights.
A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, or the perception of its effects, may materially and adversely affect our business, operations, and financial condition.

Public health outbreaks, such as epidemics or pandemics, may significantly disrupt our business. Such outbreaks pose the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time due to the spread of the disease, due to shutdowns that may be requested or mandated by federal, state, and local governmental authorities or certain employers, or due to the economic consequences associated with the pandemic. Business disruptions could include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities and the facilities of our partners, clinical trial sites, service providers, suppliers, or contract manufacturers. For example, the COVID-19 pandemic caused a temporary disruption in our ability to recruit participants for our clinical trials in the calendar year 2020 and the first quarter of 2021. While it is not possible to predict whether another pandemic, epidemic, or infectious disease outbreak similar to COVID-19 will materialize, any measures taken by governments and local authorities in response to such future health crises have the potential to disrupt and delay the initiation of new clinical trials, the progress of our ongoing clinical trials and our preclinical activities, and potentially the manufacture or shipment of both drug substance and finished drug product of our product candidates for preclinical testing and clinical trials, as well as adversely impact our business, financial condition, or operating results.
The continued impact of the COVID-19 pandemic may materially and adversely affect our business, operations and financial condition.
On May 11, 2023, the federal government ended the COVID-19 public health emergency, which ended a number of temporary changes made to federally funded programs, while some remain in effect. The full impact of the termination of the public health emergency on the FDA and other regulatory policies and operations remains unclear. In response to the COVID-19 pandemic, we implemented policies that enabled some of our employees to work remotely, which policies may continue for an indefinite period. Due to telecommuting patterns, modified work schedules, and enhanced safety protocols, our laboratory operations have at times and may again operate with decreased efficiency. Furthermore, our clinical trial sites for our clinical studies were impacted by the COVID-19 pandemic: in 2020, we experienced a pause in enrollment in our BIIB122/DNL151 Phase 1 and Phase 1b trials, our DNL343 Phase 1 and Phase 2/3 trials, and our ETV:IDS program observational biomarker study, and we have subsequently experienced certain delays in patient enrollment.

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The FDA issued a number of COVID-19 related guidance documents for manufacturers and clinical trial sponsors in 2020 and 2021, many of which have expired or were withdrawn with the expiration of the COVID-19 public health emergency in May 2023, although some COVID-19 related guidance documents remain in effect. Should the FDA issue additional guidance that mandates material changes to our clinical trials in response to a pandemic or other public health outbreaks, the costs of such clinical trials may increase. To the extent we experience any ongoing pandemic disruptions or other public health emergencies, potential impacts to our business may include delays or difficulties in enrolling patients, difficulties interpreting data impacted by trial disruptions, supply chain issues, staffing shortages, and disruptions to the operations of our service providers, any of which could have a material adverse effect on our business and clinical development plans.

To the extent another pandemic or other public health outbreak adversely affects our business, operations and financial condition in the future, it may also have the effect of heightening many of the risks described in this “Risk Factors” section.
Risks Related to the Discovery, Development, and Commercialization of Our Product Candidates
Research and development of biopharmaceutical products is inherently risky. We are heavily dependent on the successful development of our BBB platform technology and the programs currently in our pipeline, which are in preclinical and clinical development stages. We cannot give any assurance that any of our product candidates will receive regulatory, including marketing, approval, which is necessary before they can be commercialized.

We are at an early stage of development of many of the product candidates currently in our programs and are further developing our BBB platform technology. To date, we have invested substantially all of our efforts and financial resources to identify, acquire intellectual property for, and develop our BBB platform technology and our programs, including conducting preclinical studies and clinical trials, and providing general and administrative support for these operations. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the following:
 
our product candidates may not successfully complete preclinical studies or clinical trials;

our drug delivery platform technology may not be clinically viable;

a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

our competitors may develop therapeutics that render our product candidates obsolete or less attractive;

our competitors may develop platform technologies to deliver large molecule therapeutics across the BBB that render our platform technology obsolete or less attractive;

the product candidates and BBB platform technology that we develop may not be sufficiently covered by intellectual property for which we hold exclusive rights;

the product candidates and BBB platform technology that we develop may be covered by third parties’ patents or other intellectual property or exclusive rights;

the market for a product candidate may change so that the continued development of that product candidate is no longer reasonable or commercially attractive;

a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;
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if a product candidate obtains regulatory approval, we may be unable to establish sales and marketing capabilities, or successfully market such approved product candidate; and

a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors, if applicable.

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which could have a material adverse effect on our business.

We may not be successful in our efforts to further develop our BBB platform technology and current product candidates. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. Our product candidates are in the early stages of development and will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we generate any revenue from product sales, if at all.

We have never completed a clinical development program. We have previously discontinued the development of certain molecules prior to completion of preclinical development because we did not believe they met our criteria for potential clinical success. Further, we cannot be certain that any of our product candidates will be successful in clinical trials. For instance, in August 2023, together with our collaboration partner Takeda, we discontinued development of TAK-920/DNL919 (ATV:TREM2) in Alzheimer’s disease, based on data from the Phase 1 study and the rapidly evolving treatment landscape and shifted our efforts to exploring back-up molecules. We may in the future advance product candidates into clinical trials and terminate such trials prior to their completion.

If any of our product candidates successfully complete clinical trials, we generally plan to seek regulatory approval to market our product candidates in the United States, the European Union ("EU"), and in additional foreign countries where we believe there is a viable commercial opportunity. We have never commenced, compiled, or submitted an application seeking regulatory approval to market any product candidate, and may never receive such regulatory approval even if a product candidate successfully completes clinical trials, which would adversely affect our viability. To obtain regulatory approval in countries outside the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy or potency, purity, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing, and distribution of our product candidates. We may also rely on our collaborators or partners to conduct the required activities to support an application for regulatory approval, and to seek approval, for one or more of our product candidates. We cannot be sure that our collaborators or partners will conduct these activities or do so within the time frame we desire. Even if we (or our collaborators or partners) are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our revenue, business, financial condition, results of operations and growth prospects could be negatively affected.

Even if we receive regulatory approval to market any of our product candidates, whether for the treatment of neurodegenerative and lysosomal storage diseases or other diseases, we cannot assure you that any such product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives.
Investment in biopharmaceutical product development involves significant risk that any product candidate will fail to demonstrate adequate efficacy or potency, or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide any assurance that we will be able to successfully advance any of our product candidates through the development process or, if approved, successfully commercialize any of our product candidates.
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We may not be successful in our efforts to continue to create a pipeline of product candidates or to develop commercially successful products. If we fail to successfully identify and develop additional product candidates, our commercial opportunity may be limited.

One of our strategies is to identify and pursue clinical development of additional product candidates. We currently have several programs in the research, discovery and preclinical stages of development. Identifying, developing, obtaining regulatory approval for, and commercializing additional product candidates for the treatment of neurodegenerative and lysosomal storage diseases will require substantial additional funding and is prone to the risks of failure inherent in drug development. We cannot provide you any assurance that we will be able to successfully identify or acquire additional product candidates, advance any of these additional product candidates through the development process, successfully commercialize any such additional product candidates, if approved, or assemble sufficient resources to identify, acquire, develop or, if approved, commercialize additional product candidates. If we are unable to successfully identify, acquire, develop, and commercialize additional product candidates, our commercial opportunity may be limited.
We have concentrated a substantial portion of our research and development efforts on the treatment of neurodegenerative and lysosomal storage diseases, fields that have seen limited success in drug development. Further, our product candidates are based on new approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

We have focused our research and development efforts on addressing neurodegenerative and lysosomal storage diseases. Collectively, efforts by biopharmaceutical companies in the fields of neurodegenerative and lysosomal storage diseases have seen limited success in drug development. There are few effective therapeutic options available for patients with neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease, and ALS, and lysosomal storage diseases, such as Hunter syndrome and Sanfilippo syndrome. Our future success is highly dependent on the successful development of our BBB platform technology and our product candidates for treating neurodegenerative and lysosomal storage diseases. Developing and, if approved, commercializing our product candidates for treatment of neurodegenerative and lysosomal storage diseases subjects us to a number of challenges, including engineering product candidates to cross the BBB to enable optimal concentration of the therapeutic in the brain and obtaining regulatory approval from the FDA and other regulatory authorities who have only a limited set of precedents to rely on.

Our approach to the treatment of neurodegenerative and lysosomal storage diseases aims to identify and select targets with a genetic link to neurodegenerative and lysosomal storage diseases, as applicable, identify and develop molecules that engage the intended target, identify and develop biomarkers, which are biological molecules found in blood, other bodily fluids or tissues that are signs of a normal or abnormal process or of a condition or disease, to select the right patient population and demonstrate target engagement, pathway engagement and impact on disease progression of our molecules, and engineer our molecules to cross the BBB and act directly in the brain. This strategy may not prove to be successful. We may not be able to discover, develop, and utilize biomarkers to demonstrate target engagement, pathway engagement, and the impact on disease progression of our molecules. We cannot be sure that our approach will yield satisfactory therapeutic products that are safe and effective, scalable, or profitable. Moreover, public perception of drug safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to novel treatments.
We may encounter substantial delays in our clinical trials, or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all.
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Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. We cannot be sure that submission of an investigational new drug application ("IND"), or a clinical trial application ("CTA"), will result in the FDA or EMA, as applicable, allowing clinical trials to begin in a timely manner, if at all. Moreover, even if these trials begin, issues may arise that could suspend or terminate such clinical trials. A failure of one or more clinical trials can occur at any stage of testing, and our future clinical trials may not be successful. Events that may prevent successful or timely initiation or completion of clinical trials include:
 
inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;

delays in confirming target engagement, patient selection, or other relevant biomarkers to be utilized in preclinical and clinical product candidate development;

delays in reaching a consensus with regulatory agencies on trial design;

delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;

delays in identifying, recruiting, and training suitable clinical investigators;

delays in obtaining required Institutional Review Board ("IRB") approval at each clinical trial site;

imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons, including after review of an IND or amendment, CTA or amendment, or equivalent application or amendment; as a result of a new safety finding that presents unreasonable risk to clinical trial participants; a negative finding from an inspection of our clinical trial operations or trial sites; developments on trials conducted by competitors for related technology that raises FDA or EMA concerns about risk to patients of the technology broadly; or if the FDA or EMA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;

delays in identifying, recruiting, and enrolling suitable patients to participate in our clinical trials, and delays caused by patients withdrawing from clinical trials or failing to return for post-treatment follow-up;

difficulty collaborating with patient groups and investigators;

failure by our CROs, other third parties, or us to adhere to clinical trial requirements;

failure to perform in accordance with the FDA’s or any other regulatory authority’s current good clinical practices ("cGCPs") requirements, or other regulatory guidelines in other countries;

occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

changes in the approval policies or regulations of the FDA or other regulatory authorities;

changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

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the cost of clinical trials of our product candidates being greater than we anticipate;

clinical trials of our product candidates producing negative or inconclusive results, which may result in us or our collaborators deciding, or regulators requiring us, to conduct additional clinical trials or abandon product development programs;

transfer of manufacturing processes from our academic collaborators to larger-scale facilities operated by a CDMO or by us, and delays or failure by our CDMOs or us to make any necessary changes to such manufacturing process;

delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing; and

delays associated with a pandemic or other public health emergency.

Any inability to successfully initiate or complete clinical trials could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we or our collaborators may be required to or elect to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

We could also encounter delays if a clinical trial is suspended or terminated by us or our collaborators, by the data safety monitoring board for such trial, or by any regulatory authority, or if the IRBs of the institutions in which such trials are being conducted suspend or terminate the participation of their clinical investigators and sites subject to their review. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial.

For example, in January 2022, we announced that the TAK-920/DNL919 (ATV:TREM2) IND application had been placed on clinical hold by the FDA. In August 2023 we announced that, in agreement with Takeda, we would discontinue clinical development of TAK-920/DNL919 in Alzheimer’s disease. We cannot assure you that we will ever resume the clinical program for TAK-920/DNL919, nor can we assure you that our other product candidates will not be subject to new, partial or full clinical holds in the future, which may impact development plans.

We or our collaborators may in the future advance product candidates into clinical trials and terminate such trials prior to their completion, which could adversely affect our business. Further, after the commencement of clinical trials, we or our collaborators may discontinue advancement of lead molecules, such as the TAK-920/DNL919 program, or pause the advancement of lead molecules in favor of a backup molecule with a superior safety or efficacy profile, such as we did in our RIPK1 program, switching our focus from DNL747 to SAR443820/DNL788.
Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate revenue. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
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We may encounter difficulties enrolling and/or retaining patients in our clinical trials, and our clinical development activities could thereby be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment and retention in our clinical trials for a variety of reasons, including:
 
public health crises, such as the COVID-19 pandemic;

the size and nature of the patient population;

the patient eligibility criteria defined in the protocol, including biomarker-driven identification and/or certain highly-specific criteria related to stage of disease progression, which may limit the patient populations eligible for our clinical trials to a greater extent than competing clinical trials for the same indication that do not have biomarker-driven patient eligibility criteria;

the size of the study population required for analysis of the trial’s primary endpoints;

the proximity of patients to a trial site;

the design of the trial;

our ability to recruit clinical trial investigators with the appropriate competencies and experience;

competing clinical trials for similar therapies or targeting patient populations meeting our patient eligibility criteria;

clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies and product candidates;

our ability to obtain and maintain patient consents; and

the risk that patients enrolled in clinical trials will not complete such trials, for any reason, including the risk of higher drop-out rates if participants become infected with the COVID-19 virus or other infectious diseases that impact their participation in our trials.

Our inability to enroll and retain a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates and jeopardize our ability to obtain marketing approval for the sale of our product candidates. Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining participation in our clinical trials through the treatment and any follow-up periods, which could delay or negatively impact the anticipated readouts from our clinical trials, delay our regulatory submissions, and increase the costs of the clinical trials.
Our clinical trials may reveal significant adverse events, toxicities, or other side effects and may fail to demonstrate substantial evidence of the safety and efficacy or potency of our product candidates, which would prevent, delay, or limit the scope of regulatory approval and commercialization.

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Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex, and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each target indication. For those product candidates that are subject to regulation as biological drug products, we will need to demonstrate that they are safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical trials, and results of early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. The results of clinical trials in one set of patients or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy or potency results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. Open-label extension studies may also extend the timing and increase the cost of clinical development substantially. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy or potency profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or potency or unacceptable safety issues, notwithstanding promising results in earlier trials. This is particularly true in neurodegenerative diseases and lysosomal storage diseases, where failure rates historically have been higher than in many other disease areas. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.

We cannot be certain that our current clinical trials or any other future clinical trials will be successful. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Even if such clinical trials are successfully completed, we cannot guarantee that the FDA will approve the product candidates for the proposed indications, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, or to conduct additional trials in support of potential approval of our product candidates. Even if regulatory approval is secured for any of our product candidates, the terms of such approval, such as requiring us to narrow our indications to a smaller subset, may also limit its commercial potential.
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Interim, topline, and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available, and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary, interim, or topline data from our nonclinical studies and clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary, interim, or topline data should be viewed with caution until the final data are available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Adverse changes between interim data and final data could significantly harm our business and prospects. Further, additional disclosure of interim data by us or by our competitors in the future could result in volatility in the price of our common stock.

Further, others, including our collaborators or regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approval or commercialization of the particular product candidate and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information. You or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the preliminary or topline data that we report differ from late, final, or actual results, or if others, including our collaborators or regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize our product candidates may be harmed.
We face significant competition in an environment of rapid technological and scientific change, and our operating results may suffer if we fail to compete effectively.
The development and commercialization of new drug products is highly competitive. Moreover, the neurodegenerative and lysosomal storage fields are characterized by strong and increasing competition. Our potential competitors include pharmaceutical companies, biotechnology companies, academic institutions, government agencies, and other public and private research organizations that conduct research. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring, or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized, or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products.

A number of large pharmaceutical and biotechnology companies are developing products for the treatment of the neurodegenerative and lysosomal storage disease indications for which we have research programs, including Alzheimer’s disease, Parkinson’s disease, Hunter syndrome, and ALS. Companies that we are aware are developing therapeutics in the neurodegenerative and lysosomal storage disease areas include companies with significant financial resources. In addition to competition from other companies targeting neurodegenerative indications, any products we may develop may also face competition from other types of therapies, such as gene-editing therapies.

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Many of our current or potential competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered to have application for treatment of neurodegenerative or lysosomal storage disease indications, which could give such products significant regulatory and market timing advantages over any of our product candidates. Our competitors also may obtain regulatory approval for their products more rapidly than we do, and may obtain orphan product exclusivity for indications our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to enter the market. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.
The manufacture of our product candidates, particularly those that utilize our BBB platform technology, is complex and we may encounter difficulties in production. We may fail to successfully manufacture our product candidates, operate our own manufacturing facility, or obtain regulatory approval to utilize or commercialize from our manufacturing facility, which could adversely affect our clinical trials and the commercial viability of our product candidates.

The processes involved in manufacturing our drug and biological product candidates, particularly those that utilize our BBB platform technology, are complex, expensive, highly regulated and subject to multiple risks. Additionally, the manufacture of biologics involves complex processes, including developing cells or cell systems to produce the biologic, growing large quantities of such cells, and harvesting and purifying the biologic produced by them. As a result, the cost to manufacture a biologic is generally far higher than traditional small molecule chemical compounds, and the biologics manufacturing process is less reliable and is difficult to reproduce. Manufacturing biologics is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics, and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. Further, as product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials.

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In order to conduct clinical trials of our product candidates, or supply commercial products, if approved, we will need to manufacture them in small and large quantities. Our manufacturing partners may be unable to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If our manufacturing partners are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing, and clinical trials of that product candidate may be delayed or become infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business. The same risks would apply to our internal manufacturing facilities and capabilities, which we are actively building in Salt Lake City, Utah. Under a lease for approximately 60,000 rentable square feet of laboratory, office, and warehouse premises, we have initiated the build-out of our Utah site to expand our clinical manufacturing capabilities for biologic therapeutics including the manufacture of materials for toxicology studies and drug substance for early human clinical studies. In addition, building internal manufacturing capacity carries significant risks in terms of being able to plan, design, and execute on a complex project to build manufacturing facilities in a timely and cost-efficient manner. To date, we have experienced delays with the manufacturing site build-out, and there can be no assurance that our current and future efforts to scale our internal manufacturing capabilities will succeed.

In addition, the manufacturing process, including any material modifications in the manufacturing process for any products that we may develop, is subject to regulatory authority approval processes and continuous oversight, and we will need to contract with manufacturers who can meet all applicable regulatory authority requirements, including complying with current good manufacturing practices ("cGMPs"), on an ongoing basis. If we or our third-party manufacturers are unable to reliably produce products to specifications acceptable to regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CDMOs will be able to manufacture the approved product to specifications acceptable to the regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations and growth prospects.
If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any product candidates we may develop, we may not be successful in commercializing those product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing, or distribution of pharmaceutical products. To achieve commercial success for any approved product for which we retain sales and marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to third parties. In the future, we may choose to build a focused sales, marketing, and commercial support infrastructure to sell, or participate in sales activities with our collaborators for, some of our product candidates if and when they are approved.

There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and other commercialization capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our commercialization personnel.

Factors that may inhibit our efforts to commercialize any approved product on our own include:
 
our inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel;
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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future approved products;

the inability of reimbursement professionals to negotiate arrangements for formulary access, reimbursement, and other acceptance by payors;

the inability to price our products at a sufficient price point to ensure an adequate and attractive level of profitability;

restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population;

the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

unforeseen costs and expenses associated with creating an independent commercialization organization.

If we enter into arrangements with third parties to perform sales, marketing, commercial support, and distribution services, our product revenue or the profitability of product revenue may be lower than if we were to market and sell any products we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish commercialization capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates if approved.
Even if any product candidates we develop receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors, and others in the medical community necessary for commercial success.

The commercial success of any of our product candidates will depend upon its degree of market acceptance by physicians, patients, third-party payors, and others in the medical community. Even if any product candidates we may develop receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors, and others in the medical community. The degree of market acceptance of any product candidates we may develop, if approved for commercial sale, will depend on a number of factors, including:
 
the efficacy or potency and safety of such product candidates as demonstrated in pivotal clinical trials and published in peer-reviewed journals;

the potential and perceived advantages compared to alternative treatments;

the ability to offer our products for sale at competitive prices;

the ability to offer appropriate patient access programs, such as co-pay assistance;

the extent to which physicians recommend our products to their patients;

convenience and ease of dosing and administration compared to alternative treatments;

the clinical indications for which the product candidate is approved by FDA, EMA or other regulatory agencies;

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product labeling or product insert requirements of the FDA, EMA or other comparable foreign regulatory authorities, including any limitations, contraindications or warnings contained in a product’s approved labeling;

restrictions on how the product is distributed;

the timing of market introduction of competitive products;

publicity concerning our products or competing products and treatments;

the strength of marketing and distribution support;

sufficient third-party coverage or reimbursement; and

the prevalence and severity of any side effects.

If any product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenue, and we may not become profitable.
Even if we are able to commercialize any product candidates, such products may become subject to unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives, which would harm our business.

The regulations that govern marketing approvals, pricing, and reimbursement for new drugs vary widely from country to country. In the United States, legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if any product candidates we may develop obtain marketing approval.
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Our ability to successfully commercialize any products that we may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Government authorities currently impose mandatory discounts for certain patient groups, such as Medicare, Medicaid and Veterans Affairs ("VA"), hospitals, and may seek to increase such discounts at any time. Future regulation may negatively impact the price of our products, if approved. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any product candidate that we commercialize and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. In order to get reimbursement, physicians may need to show that patients have superior treatment outcomes with our products compared to standard of care drugs, including lower-priced generic versions of standard of care drugs. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors and coverage and reimbursement levels for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time consuming and costly process that may require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the medicine is approved by regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale, and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products we may develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize product candidates, and our overall financial condition.
If any of our small molecule product candidates obtain regulatory approval, additional competitors could enter the market with generic versions of such drugs, which may result in a material decline in sales of affected products.
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Under the Drug Price Competition and Patent Term Restoration Act of 1984 (the "Hatch-Waxman Act"), a pharmaceutical manufacturer may file an abbreviated new drug application ("ANDA") seeking approval of a generic copy of an approved, small molecule innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit a new drug application ("NDA") under section 505(b)(2) that references the FDA’s prior approval of the small molecule innovator product. A 505(b)(2) NDA product may be for a new or improved version of the original innovator product. The Hatch-Waxman Act also provides for certain periods of regulatory exclusivity, which preclude FDA approval (or in some circumstances, FDA filing and reviewing) of an ANDA or 505(b)(2) NDA. These include, subject to certain exceptions, the period during which an FDA-approved drug is subject to orphan drug exclusivity. In addition to the benefits of regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed with the product in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the “Orange Book.” If there are patents listed in the Orange Book, a generic or 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in the ANDA a “Paragraph IV certification,” challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Notice of the certification must be given to the innovator, too, and if within 45 days of receiving notice the innovator sues to protect its patents, approval of the ANDA is stayed for 30 months, or as lengthened or shortened by the court.

Accordingly, if any of our small molecule product candidates are approved, competitors could file ANDAs for generic versions of our small molecule drug products or 505(b)(2) NDAs that reference our small molecule drug products, respectively. If there are patents listed for our small molecule drug products in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license. Moreover, if any of our owned or in-licensed patents that are listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, the affected product could immediately face generic competition and its sales would likely decline rapidly and materially. Should sales decline, we may have to write off a portion or all of the intangible assets associated with the affected product and our results of operations and cash flows could be materially and adversely affected. See “Risks Related to Our Intellectual Property.”
Our biologic, or large molecule, product candidates for which we intend to seek approval may face competition sooner than anticipated.

Even if we are successful in achieving regulatory approval to commercialize a product candidate faster than our competitors, our large molecule product candidates may face competition from biosimilar products. In the United States, our large molecule product candidates are regulated by the FDA as biologic products and we intend to seek approval for these product candidates pursuant to the biologics license application ("BLA"), pathway. The Biologics Price Competition and Innovation Act of 2009 (the "BPCIA"), created an abbreviated pathway for the approval of biosimilar and interchangeable biologic products. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our large molecule product candidates.

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We believe that any of our large molecule product candidates approved as a biologic product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar product, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biologic products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. In addition, a competitor could decide to forego the biosimilar approval path and submit a full BLA after completing its own preclinical studies and clinical trials. In such cases, any exclusivity to which we may be eligible under the BPCIA would not prevent the competitor from marketing its product as soon as it is approved.
In Europe, if competitors are able to obtain marketing approval for biosimilars referencing our large molecule product candidates, such products may become subject to competition from such biosimilars, with the attendant competitive pressure and potential adverse consequences. Such competitive products may be able to immediately compete with us in each indication for which our product candidates may have received approval.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk when and if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit testing and commercialization of our product candidates. Even successful defense would require significant costs to defend litigation and a diversion of management's time and resources. Regardless of the merits or eventual outcome, liability claims may result in a decreased or interrupted demand for our products, injury to our reputation, withdrawal of clinical trial participants and inability to continue clinical trials, and initiation of investigation by regulators. Any successful liability claims could result in substantial monetary awards to trial participants or patients; product recalls, withdrawals, or labeling, marketing or promotional restrictions; loss of revenue; exhaustion of any available insurance and our capital resources; the inability to commercialize any product candidate; and a decline in our share price.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators. Our insurance policies may have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
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Risks Related to Regulatory Approval and Other Legal Compliance Matters
The regulatory approval processes of the FDA, EMA, and comparable foreign regulatory authorities are lengthy, time consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.
The time required to obtain approval by the FDA, EMA, and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials, and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Recently, the U.S. Supreme Court overruled the Chevron doctrine, which gives deference to regulatory agencies' statutory interpretations in litigation against federal government agencies, such as the FDA, where the law is ambiguous. This landmark Supreme Court decision may invite more companies and other stakeholders to bring lawsuits against the FDA to challenge longstanding decisions and policies of the FDA, including the FDA's statutory interpretations of market exclusivities and the "substantial evidence" requirements for drug approvals, which could undermine the FDA's authority, lead to uncertainties in the industry, and disrupt the FDA's normal operations, any of which could delay the FDA's review of our regulatory submissions. We cannot predict the full impact of this decision, future judicial challenges brought against the FDA, or the nature or extent of government regulation that may arise from future legislation or administrative action.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. Moreover, regulatory authorities may fail to approve companion diagnostics that we contemplate using with our therapeutic product candidates. We have not submitted for, or obtained regulatory approval for any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Applications for our product candidates could fail to receive regulatory approval in an initial or subsequent indication for many reasons, including but not limited to the following:
 
regulatory authorities may disagree with the design, implementation, or results of our clinical trials;

regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective, or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use;

the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy or potency and safety in the full population for which we seek approval;

we may be unable to demonstrate to the regulatory authorities that a product candidate’s risk-benefit ratio when compared to the standard of care is acceptable;

regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA, BLA, or other submission or to obtain regulatory approval in the United States or elsewhere;

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we may be unable to demonstrate to the regulatory authorities that a product candidate’s risk-benefit ratio for its proposed indication is acceptable;

regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

the approval policies or regulations of the regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.
Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.

Adverse events or other undesirable side effects caused by our product candidates could cause us, our collaborators, or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA, or other comparable foreign regulatory authorities.

Our most advanced product candidates, BIIB122/DNL151, DNL310, eclitasertib (SAR443122/DNL758), DNL343, TAK-594/DNL593, and DNL126 are currently our only clinical stage product candidates. Adverse events and other side effects may result from higher dosing, repeated dosing, and/or longer-term exposure to our product candidates and could lead to delays and/or termination of the development of these product candidates. For example, in August 2023, together with our collaboration partner Takeda, we made the strategic decision to discontinue clinical development of TAK-920/DNL919 in Alzheimer's disease following a clinical hold by the FDA.

In 2020, we paused clinical studies with DNL747 in our RIPK1 program. Chronic toxicity studies with DNL747 in cynomolgus monkeys showed dose- and duration-dependent adverse preclinical findings at exposures higher than those tested in the clinic. These findings, which are considered off-target and molecule-specific, may impact the ability to increase the dose of DNL747 and achieve higher levels of target inhibition without time consuming additional clinical safety studies in patients to evaluate the long-term safety and tolerability.

Drug-related side effects could affect patient recruitment, the ability of enrolled patients to complete the trial, and/or result in potential product liability claims. We are required to maintain product liability insurance pursuant to certain of our license agreements. We may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business. In addition, regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, withdrawal of clinical trial participants, costs due to related litigation, distraction of management’s attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our product candidates, and decreased demand for our product candidates, if approved for commercial sale.

Additionally, if one or more of our product candidates receives marketing approval, and we or others, including our collaborators, later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to:
 
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regulatory authorities may withdraw approvals of such product and cause us to recall our product;

regulatory authorities may require additional warnings on the label;

we may be required to change the way the product is administered or conduct additional clinical trials or post-approval studies;

we may be required to create a Risk Evaluation and Mitigation Strategy plan to assure safe use;

we could be sued and held liable for harm caused to patients; and

our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, financial condition, results of operations, and growth prospects. We cannot predict whether our product candidates will cause toxicities in humans that would preclude or lead to the revocation of regulatory approval based on nonclinical studies or early-stage clinical trials.
We currently and may in the future conduct clinical trials for our product candidates outside the United States, and the FDA, EMA, and applicable foreign regulatory authorities may not accept data from such trials.

We currently conduct clinical trials outside the United States, including in Europe, and may continue to do so in the future. The acceptance of data from clinical trials conducted outside the United States or another jurisdiction by the FDA, EMA, or applicable foreign regulatory authority may be subject to certain conditions. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the United States population and United States medical practice; and (ii) the trials were performed by clinical investigators of recognized competence and pursuant to cGCP regulations. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory bodies have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA, EMA, or any applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA, EMA, or any applicable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval or clearance for commercialization in the applicable jurisdiction.
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Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, and a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA or EMA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our products in certain countries. If we or any partner we work with fail to comply with the regulatory requirements in international markets or fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Even if we obtain regulatory approval for a product candidate, our products will remain subject to extensive regulatory scrutiny.

If any of our product candidates are approved, they will be subject to ongoing regulatory requirements, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.
While healthcare professionals are free to use and prescribe drug products for off-label uses, the FDA strictly regulates manufacturers’ promotional claims of drug products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the FDA-approved labeling. A company that is found to have improperly promoted off-label uses may be subject to large civil and criminal fines, penalties, and enforcement actions. If we cannot successfully manage the promotion of our approved product candidates, we could become subject to significant liability, which could materially adversely affect our business and financial condition.
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Any regulatory approvals that we receive for our product candidates will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including the requirement to implement a Risk Evaluation and Mitigation Strategy) or contain requirements for potentially costly post-marketing testing. We will be required to report certain adverse reactions and production problems, if any, to the FDA, EMA, and comparable foreign regulatory authorities. Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to assure compliance. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed, and distributed only for the approved indications and in accordance with the provisions of the approved labeling. We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products for indications or uses for which they do not have approval. The holder of an approved NDA, BLA, or MAA must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our non-biologic products or safety, purity, and potency for our biologic products, in general or in specific patient subsets. If original marketing approval was obtained via the accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial to confirm clinical benefit for our products. The Food and Drug Omnibus Reform Act reformed the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval.

Manufacturers and manufacturers’ facilities are required to comply with extensive requirements imposed by the FDA, EMA, and comparable foreign regulatory authorities, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing, or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things, issue warning letters, impose penalties, suspend regulatory approvals, or require a product recall. Any of these actions by a regulatory agency could require us to expend significant time and resources, generate negative publicity, and adversely affect the value of our company.
To the extent we seek orphan drug designation for any of our product candidates, we may be unable to obtain such designations or to maintain the benefits associated with orphan drug status, including market exclusivity, which may cause our revenue, if any, to be reduced.
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition where there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Once granted, orphan drug designation entitles a party to financial incentives and certain exclusivity protections. In February 2019, the FDA granted orphan drug designation for our DNL310 program in Hunter syndrome. However, the FDA can still approve other drugs that have a different active ingredient for use in treating the same indication or disease, and can waive orphan exclusivity if we are unable to manufacture sufficient supply of our product. We plan to seek orphan drug designations for some other product candidates, but we may be unable to obtain such designations.

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Further, in response to Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the FDA clarified in a January 2023 notice that the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved. It is unclear how future litigation, legislation, agency decisions, and administrative actions will impact the scope of the orphan drug exclusivity.
Healthcare legislative measures aimed at reducing healthcare costs may have a material adverse effect on our business and results of operations.

We may face difficulties from changes to current regulations and future legislation. Current and future legislation may increase the difficulty and cost for us to commercialize our drugs, if approved, and affect the prices we may obtain, including changes in coverage and reimbursement policies in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates, if approved, profitably. Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. These include the enactment of the Affordable Care Act of 2010 (“ACA”), the American Rescue Plan Act of 2021, which will eliminate a statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs, and the July 2021 executive order, "Promoting Competition in the American Economy," with multiple provisions aimed at increasing competition for prescription drugs. In August 2022, Congress passed the Inflation Reduction Act of 2022 ("IRA"), which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. Various industry stakeholders, including pharmaceutical companies, the U.S. Chamber of Commerce, and the Pharmaceutical Research and Manufacturers of America, have initiated lawsuits against the federal government asserting that the price negotiation provisions of the Inflation Reduction Act ("IRA") are unconstitutional. The impact of these judicial changes, future litigation brought in view of
the Supreme Court’s overrule of the Chevron doctrine, legislative, executive, and administrative actions and any future healthcare measures and agency rules implemented by the government on us and the pharmaceutical industry as a whole is unclear. At the state level, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products.

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Since its enactment, there have been executive, judicial and congressional challenges to certain aspects of the ACA and IRA. It is unclear how future litigation or healthcare measures promulgated by the Biden administration will impact our business, financial condition, and results of operations. Complying with any new legislation or changes in healthcare regulation could be time-intensive and expensive, resulting in material adverse effect on our business. We expect that the ACA and IRA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for any approved product. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our product candidates, if approved. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations, and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect the demand for any product candidates that are approved, our ability to receive or set a price we believe is fair for our products, our ability to attract investment, our ability to generate revenue or achieve profitability, the level of taxes we are required to pay, and the availability of capital.
Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct, or other illegal activity by our employees, independent contractors, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless, and negligent conduct that fails to: comply with the laws of the FDA, EMA, and other comparable foreign regulatory authorities; provide true, complete, and accurate information to regulatory authorities; comply with manufacturing standards we have established; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, research, sales, marketing, education, and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, educating, marketing and promotion, sales and commission, certain customer incentive programs, and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
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If we fail to comply with healthcare laws, we could face substantial penalties and our business, operations, and financial conditions could be adversely affected.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations will be subject to various federal, state, local, and foreign healthcare fraud and abuse laws. The laws that may impact our operations include the federal Anti-Kickback Statute, the False Claims Act, the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 ("HITECH"), the federal Physician Payment Sunshine Act, federal consumer protection and unfair competition laws, and analogous state and foreign laws and regulations. These laws may impact, among other things, our clinical research program, as well as our proposed and future sales, marketing, and education programs. In particular, the promotion, sales, and marketing of healthcare items and services is subject to extensive laws and regulations designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive, and other business arrangements.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could, despite our efforts to comply, be subject to challenge under one or more of such laws. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations, or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal, and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
Our business is subject to complex and evolving U.S. and foreign laws and regulations, information security policies, and contractual obligations relating to privacy and data protection, including the use, processing, and cross-border transfer of personal information. These laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, or monetary penalties, and otherwise may harm our business.

We receive, generate, and store significant and increasing volumes of sensitive information and business-critical information, including employee and personal data (including protected health information), research and development information, commercial information, and business and financial information. We heavily rely on external security and infrastructure vendors to manage our information technology systems and data centers. We face a number of risks relative to protecting this critical information, including the loss of access, inappropriate use or disclosure, inappropriate modification, and the risk of our being unable to adequately monitor, audit, and modify our controls over our critical information. This risk extends to third-party vendors and subcontractors we use to manage this sensitive data.
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A wide variety of provincial, state, national, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data. These laws and regulations are evolving and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. For example, the collection and use of personal data in the EU are governed by the EU General Data Protection Regulation ("GDPR"), which became fully effective on May 25, 2018. The GDPR imposes stringent data protection requirements, including, for example, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to special categories of data, such as health data, and additional obligations when we contract with third-party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States and other countries, and in the context of clinical trials we currently rely on patient informed consent as the legal basis for such transfers. In addition, the GDPR provides that EU member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data. The GDPR provides for penalties for noncompliance of up to the greater of €20 million or four percent of worldwide annual revenues. The GDPR applies extraterritorially, and we may be subject to the GDPR because of our data processing activities that involve the personal data of individuals located in the EU, such as in connection with any EU clinical trials. Additionally, the UK has implemented legislation that substantially implements the GDPR (the "UK GDPR"), with substantial penalties for noncompliance.

We may incur liabilities, expenses, costs, and other operational losses under the GDPR and UK GDPR as well as privacy and data protection laws of Switzerland, the United Kingdom, and applicable EU member states. We may find it necessary or appropriate to make additional changes to the ways we or our service providers collect, disclose, transfer, and otherwise process data within the EEA, Switzerland, and the UK, and to our related policies and practices. This may be onerous and may interrupt or delay our development activities, and adversely affect our business, financial condition, results of operations and prospects.

Further, various states, such as California, Massachusetts, and Washington have implemented privacy laws and regulations that impose restrictive requirements regulating the use and disclosure of health information and other personal information. Where state laws are more protective than HIPAA, we must comply with the stricter provisions. In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. For example, California has enacted legislation, the California Consumer Privacy Act ("CCPA"), that, among other things, requires covered companies to provide new disclosures to California consumers, and affords such consumers new abilities to opt-out of certain sales of personal information. The CCPA, as amended and expanded by the California Privacy Rights Act ("CPRA"), requires covered companies to provide new disclosures to individuals and consumers in California, and afford such individuals and consumers new data protection rights, including the ability to opt-out of certain sales of personal information. Numerous other states in the United States have proposed or enacted similar legislation. Further, some states have enacted more specific legislation, such as Washington's enactment of the My Health, My Data Act, which includes a private right of action. The U.S. federal government is also contemplating federal privacy legislation. The GDPR, UK GDPR, CCPA, CPRA, and many other federal, state, and foreign laws and regulations relating to privacy and data protection are still being tested in courts, and they are subject to new and differing interpretations by courts and regulatory officials. Additionally, the interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and data we receive, use and share, potentially exposing us to additional expense, adverse publicity and liability.
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It is possible that the GDPR, UK GDPR, CCPA, CPRA, or other laws and regulations relating to privacy and data protection may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction or inconsistent with our current policies and practices. We cannot guarantee that we are in compliance with all such applicable data protection laws and regulations and we cannot be sure how these regulations will be interpreted, enforced or applied to our operations. Furthermore, other jurisdictions outside the EU are similarly introducing or enhancing privacy and data security laws, rules, and regulations, which could increase our compliance costs and the risks associated with noncompliance. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with the evolving data protection rules may be unsuccessful. We cannot guarantee that we or our vendors may be in compliance with all applicable international laws and regulations as they are enforced now or as they evolve. For example, our privacy policies may be insufficient to protect any personal information we collect, or may not comply with applicable laws. Our non-compliance could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems. In addition, if we are unable to properly protect the privacy and security of protected health information, we could be alleged or found to have breached our contracts.

Our actual or perceived failure to adequately comply with applicable laws and regulations or other actual or asserted obligations relating to privacy and data protection, or to protect personal data and other data we process or maintain, could result in regulatory enforcement actions against us, including fines, imprisonment of company officials and public censure, claims for damages by affected individuals, other lawsuits or reputational damage, all of which could materially affect our business, financial condition, results of operations and growth prospects.
If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We and any contract manufacturers and suppliers we engage are subject to numerous federal, state, and local environmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.
Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research, product development, and manufacturing efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty, and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
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Our business activities may be subject to the Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws, as well as U.S. and certain foreign export controls, trade sanctions, and import laws and regulations.

Our business activities may be subject to the Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), and similar anti-bribery or anti-corruption laws, regulations, or rules of other countries in which we operate, including the U.K. Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect certain transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the health care providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. Recently the Securities and Exchange Commission (the "SEC"), and Department of Justice have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of our employees, agents, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition.

In addition, in the future once we enter a commercialization phase, our products may be subject to U.S. and foreign export controls, trade sanctions and import laws and regulations. Governmental regulation of the import or export of our products, or our failure to obtain any required import or export authorization for our products, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of our products may create delays in the introduction of our products in international markets or, in some cases, prevent the export of our products to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. If we fail to comply with export and import regulations and such economic sanctions, we may be fined or other penalties could be imposed, including a denial of certain export privileges. Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export our products to existing or potential customers with international operations. Any limitation on our ability to export or sell access to our products would likely adversely affect our business.
Inadequate funding for the FDA, the SEC, and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

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Disruptions at the FDA and other government agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years the U.S. government shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical government employees and stop critical activities. While the FDA has largely caught up with domestic preapproval inspections since the start of the COVID-19 pandemic, it continues to work through its backlog of foreign inspections. If a prolonged government shutdown or other disruption occurs, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, or to provide feedback on our clinical development plans, which could have a material adverse effect on our business. Further, future government shutdowns or other disruptions to normal operations could impact our ability to access the public markets and obtain the funding necessary to properly capitalize and continue our operations.
Risks Related to Our Reliance on Third Parties
We depend on collaborations with third parties for the research, development, and commercialization of certain product candidates. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

We anticipate seeking third-party collaborators for the research, development, and commercialization of certain of the product candidates we may develop. For example, we have collaborations with F-star, Takeda, Sanofi, Biogen, and others to further our development of product candidates and to enhance our research efforts directed to better understanding neurodegenerative and lysosomal storage diseases. Our likely collaborators for any other collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies, biotechnology companies, and academic institutions. If we enter into any such arrangements with any third parties, we will likely have shared or limited control over the amount and timing of resources that our collaborators dedicate to the development or potential commercialization of any product candidates we may seek to develop with them. Our ability to generate revenue from these arrangements with commercial entities will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.

Collaborations involving our research programs, or any product candidates we may develop, pose the following risks to us:
 
collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations;

collaborators may not properly obtain, maintain, enforce, or defend intellectual property or proprietary rights relating to our product candidates or research programs or may use our proprietary information in such a way as to expose us to potential litigation or other intellectual property related proceedings, including proceedings challenging the scope, ownership, validity and enforceability of our intellectual property;

collaborators may own or co-own intellectual property covering our product candidates or research programs that results from our collaboration with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates or research programs;

we may need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us;

collaborators may control certain interactions with regulatory authorities, which may impact on our ability to obtain and maintain regulatory approval of our products candidates;
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disputes may arise between the collaborators and us that result in the delay or termination of the research, development, or commercialization of our product candidates or research programs or that result in costly litigation or arbitration that diverts management attention and resources;

collaborators may decide to not pursue development and commercialization of any product candidates we develop or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or research programs if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

collaborators may restrict us from researching, developing, or commercializing certain products or technologies without their involvement;

collaborators with marketing and distribution rights to one or more product candidates may not commit sufficient resources to the marketing and distribution of such product candidates;

we may lose certain valuable rights under circumstances identified in our agreements with our collaborators, including if we undergo a change of control;

collaborators may grant sublicenses to our technology or product candidates or undergo a change of control and the sublicensees or new owners may decide to take the collaboration in a direction which is not in our best interest;

collaborators may become bankrupt, which may significantly delay our research or development programs, or may cause us to lose access to valuable technology, know-how, or intellectual property of the collaborator relating to our products, product candidates, or research programs;

key personnel at our collaborators may leave, which could negatively impact our ability to productively work with our collaborators;

collaborations may require us to incur short and long-term expenditures, issue securities that dilute our stockholders, or disrupt our management and business;

if our collaborators do not satisfy their obligations under our agreements with them, or if they terminate our collaborations with them, we may not be able to develop or commercialize product candidates as planned;

collaborations may require us to share in development and commercialization costs pursuant to budgets that we do not fully control and our failure to share in such costs could have a detrimental impact on the collaboration or our ability to share in revenue generated under the collaboration;

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collaborations may be terminated in their entirety or with respect to certain product candidates or technologies and, if so terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates or technologies, including our BBB platform technology; and

collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our development or commercialization program under such collaboration could be delayed, diminished, or terminated.

We may face significant competition in seeking appropriate collaborations. Recent business combinations among biotechnology and pharmaceutical companies have resulted in a reduced number of potential collaborators. In addition, the negotiation process is time-consuming and complex, and we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or bring them to market and generate product revenue.

If we enter into collaborations to develop and potentially commercialize any product candidates, we may not be able to realize the benefit of such transactions if we or our collaborator elects not to exercise the rights granted under the agreement or if we or our collaborator are unable to successfully integrate a product candidate into existing operations and company culture. The failure to develop and commercialize a product candidate pursuant to our agreements with our current or future collaborators could prevent us from receiving future payments under such agreements, which could negatively impact our revenues. In addition, if our agreement with any of our collaborators terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidates utilizing the collaborator’s technology or intellectual property or require us to stop development of those product candidates completely. We may also find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected. Many of the risks relating to product development, regulatory approval, and commercialization described in this “Risk Factors” section also apply to the activities of our collaborators and any negative impact on our collaborators may adversely affect us.
We rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research, or testing.
We currently rely and expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators, to conduct some aspects of our research and preclinical testing and our clinical trials. Any of these third parties may terminate their engagements with us or be unable to fulfill their contractual obligations. If we need to enter into alternative arrangements, it would delay our product development activities.

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Our reliance on these third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with cGCPs for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible, reproducible, and accurate and that the rights, integrity, and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database within certain time frames. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions.

Our third-party service providers are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These third-party service providers may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any product candidates we may develop and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.

We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors, including with the shipment of any drug supplies, could delay clinical development or marketing approval of any product candidates we may develop or commercialization of our medicines, producing additional losses and depriving us of potential product revenue.
Our reliance on third parties for the manufacture of the significant majority of the materials for our research programs, preclinical studies, and clinical trials may increase the risk that we will not have sufficient quantities of such materials, product candidates, or any medicines that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts.

Although we have initiated the build-out of our Utah site to expand our clinical manufacturing capabilities for biologic therapeutics, we do not have any operational manufacturing facilities. We currently rely on third-party manufacturers for the manufacture of our materials for preclinical studies and clinical trials and expect to continue to do so for some or all of our materials for preclinical studies, clinical trials, and for commercial supply of any product candidates that we may develop.
We may be unable to establish any further agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including the possible breach, termination, or non-renewal of the agreement by the third party, which may be costly or inconvenient, and the inability of the third party to produce the required volume in a timely manner. We may also be exposed to the risks of relying on the third party for regulatory compliance, quality assurance, safety, and pharmacovigilance and related reporting.

Third-party manufacturers may not be able to comply with U.S. export control regulations, cGMP regulations, or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in a need to replace current third-party manufacturers including the possibility of supply delays, clinical holds on our trials, sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocations, seizures or recalls of product candidates or medicines, operating restrictions, and criminal prosecutions, any of which could significantly and adversely affect supplies of our medicines and harm our business, financial condition, results of operations, and growth prospects.

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Any medicines that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply for many components of our product candidates. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer and may incur added costs and delays in identifying and qualifying any such replacement. Furthermore, securing and reserving production capacity with contract manufacturers may result in significant costs.

Our current and anticipated future dependence upon third parties for the manufacture of any product candidates we may develop or medicines may adversely affect our future profit margins and our ability to commercialize any medicines that receive marketing approval on a timely and competitive basis.
We depend on third-party suppliers for key raw materials used in our manufacturing processes, and the loss of these third-party suppliers or their inability to supply us with adequate raw materials could harm our business.

We rely on third-party suppliers for the raw materials required for the production of our product candidates. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of raw materials involve several risks, including limited control over pricing, availability, quality, and delivery schedules. As a small company, our negotiation leverage is limited and we are likely to get lower priority than our larger competitors. We cannot be certain that our suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements.

Further, we have in the past and may in the future experience delayed shipments of raw materials due to interruptions relating to the aforementioned events. We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for any product candidates we develop or for our BBB platform technology, our competitors could develop and commercialize products or technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected.
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Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our BBB platform technology and any proprietary product candidates and other technologies we may develop. We seek to protect our proprietary position by in-licensing intellectual property and filing patent applications in the United States and abroad relating to our BBB platform technology, programs and product candidates, as well as other technologies that are important to our business. Given that the development of our technology and product candidates is at an early stage, our intellectual property portfolio with respect to certain aspects of our technology and product candidates is also at an early stage. In addition, we cannot be certain that any patents we own or in-license in the United States adequately cover the Fc domain portion of our BBB platform technology that binds to transferrin receptor, or adequately cover the antibodies, enzymes or proteins being developed in our TV-enabled programs. We have filed or intend to file patent applications on these aspects of our technology and product candidates; however, there can be no assurance that any such patent applications will issue as granted patents. Furthermore, in some cases, we have only filed provisional patent applications on certain aspects of our technology and product candidates and each of these provisional patent applications is not eligible to become an issued patent until, among other things, we file a non-provisional patent application within twelve months of the filing date of the applicable provisional patent application. Any failure to file a non-provisional patent application within this timeline could cause us to lose the ability to obtain patent protection for the inventions disclosed in the associated provisional patent applications. Furthermore, in some cases, we may not be able to obtain issued claims covering compositions relating to our BBB platform technology, programs and product candidates, as well as other technologies that are important to our business, and instead may need to rely on filing patent applications with claims covering a method of use and/or method of manufacture for protection of such BBB platform technology, programs, product candidates, and other technologies. There can be no assurance that any such patent applications will issue as granted patents, and even if they do issue, such patent claims may be insufficient to prevent third parties, such as our competitors, from utilizing our technology. Any failure to obtain or maintain patent protection with respect to our BBB platform technology, programs and product candidates could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
If any of our owned or in-licensed patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.

Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our owned and licensed patents. With respect to both in-licensed and owned intellectual property, we cannot predict whether the patent applications we and our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors or other third parties.

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The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner, including delays as a result of the COVID-19 pandemic impacting our or our licensors' operations. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Although we enter into nondisclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in any of our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our owned or in-licensed pending and future patent applications may not result in patents being issued which protect our BBB platform technology, product candidates or other technologies or which effectively prevent others from commercializing competitive technologies and product candidates.

Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we own or in-license may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether our BBB platform technology, product candidates or other technologies will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations and growth prospects.

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The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. We or our licensors may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings or other similar proceedings challenging our owned or licensed patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned or in-licensed patent rights, allow third parties to commercialize our BBB platform technology, product candidates or other technologies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we, or one of our licensors, may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge our or our licensor’s priority of invention or other features of patentability with respect to our owned or in-licensed patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our BBB platform technology, product candidates and other technologies. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. If we or our collaborators are unsuccessful in any such proceeding or other priority or inventorship dispute, we may be required to obtain and maintain licenses from third parties, including parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or more of the product candidates we may develop. The loss of exclusivity or the narrowing of our owned and licensed patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products.

In addition, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Some of our owned and in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. For example, we currently, and may in the future, co-own certain patents and patent applications relating to our BBB platform technology with F-star. In addition, certain of our licensors co-own the patents and patent applications we in-license with other third parties with whom we do not have a direct relationship. Our exclusive rights to certain of these patents and patent applications are dependent, in part, on inter-institutional or other operating agreements between the joint owners of such patents and patent applications, who are not parties to our license agreements. If our licensors do not have exclusive control of the grant of licenses under any such third-party co-owners’ interest in such patents or patent applications or we are otherwise unable to secure such exclusive rights, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and growth prospects.
Our rights to develop and commercialize our BBB platform technology and product candidates are subject, in part, to the terms and conditions of licenses granted to us by others or licenses granted by us to others.

We are heavily reliant upon licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of our BBB platform technology and product candidates. For example, in June 2016, we entered into a license agreement with Genentech pursuant to which we received an exclusive license to certain of Genentech’s intellectual property relating to our LRRK2 program, including our BIIB122/DNL151 product candidate.
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Our agreements with F-star and other license agreements may not provide exclusive rights to use certain licensed intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future. For example, F-star retains the right to use itself, and to license to others, its modular antibody technology for any purpose other than the targets which we have agreed with F-star would or may be exclusively available to us. As a result, we may not be able to prevent competitors or other third parties from developing and commercializing competitive products that also utilizes technology that we have in-licensed.

In addition, subject to the terms of any such license agreements, we do not have the right to control the preparation, filing, prosecution and maintenance, and we may not have the right to control the enforcement, and defense of patents and patent applications covering the technology that we license from third parties. For example, under our agreements with F-star and Genentech, the licensors control prosecution and, in the case of F-star and in specified circumstances, enforcement of certain of the patents and patent applications licensed to us. Also, under our agreements with Takeda, Sanofi and Biogen, they control prosecution, and in specified circumstances, enforcement of certain of the patents and patent applications licensed to them. We cannot be certain that our in-licensed or out-licensed patents and patent applications that are controlled by our licensors or licensees will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our business. If our licensors or licensees fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, our right to develop and commercialize our BBB platform technology and any of our product candidates that are subject of such licensed rights could be adversely affected, and we may not be able to prevent competitors from making, using and selling competing products. In addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensees, our licensors and their counsel that took place prior to the date upon which we assumed control over patent prosecution.
Furthermore, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties. For example, our license to certain intellectual property owned by Genentech is subject to certain research rights Genentech granted to third parties prior to our license agreement. In addition, certain of our in-licensed intellectual property relating to RIPK1 was funded in part by the U.S. government. As a result, the U.S. government may have certain rights to such intellectual property.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We have entered into license agreements with third parties and may need to obtain additional licenses from others to advance our research or allow commercialization of product candidates we may develop or our BBB platform technology. It is possible that we may be unable to obtain additional licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates or continue to utilize our existing BBB platform technology, which could harm our business, financial condition, results of operations, and growth prospects significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current technology, including our BBB platform technology, manufacturing methods, product candidates, or future methods or products resulting in either an injunction prohibiting our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.

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In addition, each of our current license agreements, and we expect our future agreements, will impose various development, diligence, commercialization, and other obligations on us. Certain of our license agreements also require us to meet development timelines, or to exercise commercially reasonable efforts to develop and commercialize licensed products, in order to maintain the licenses. In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements and might therefore terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties would have the freedom to seek regulatory approval of, and to market, products identical to ours and we may be required to cease our development and commercialization of certain of our product candidates or of our current BBB platform technology. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and growth prospects.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:

the scope of rights granted under the license agreement and other interpretation-related issues;

the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

the sublicensing of patent and other rights under our collaborative development relationships;

our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

the priority of invention of patented technology.

In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations and growth prospects.

In addition, the United States federal government retains certain rights in inventions produced with its financial assistance under the Patent and Trademark Law Amendments Act, or the Bayh-Dole Act. The federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” for its own benefit. The Bayh-Dole Act also provides federal agencies with “march-in rights.” March-in rights allow the government, in specified circumstances, to require the contractor or successors in title to the patent to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants.” If the patent owner refuses to do so, the government may grant the license itself. If, in the future, we co-own or license in technology which is critical to our business that is developed in whole or in part with federal funds subject to the Bayh-Dole Act, our ability to enforce or otherwise exploit patents covering such technology may be adversely affected.
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We may not be able to protect our intellectual property and proprietary rights throughout the world.

Filing, prosecuting, and defending patents on our BBB platform technology, product candidates and other technologies in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Further, our ability to pursue patents throughout the world may be delayed or affected due to a public health crisis such as the COVID-19 global pandemic. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. In Europe, as of June 1, 2023, the Unitary Patent Court (UPC) has exclusive jurisdiction over Unitary Patents and offers a uniform and specialized framework for patent litigation at the European level. Furthermore, European applications have the option, upon grant of a patent, of becoming a Unitary Patent and therefore subject to UPC. As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Geopolitical actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of our patent applications or those of any current or future licensors and the maintenance, enforcement or defense of our issued patents or those of any current or future licensors. For example, the United States and foreign government actions related to Russia's invasion of Ukraine may limit or prevent filing, prosecution, and maintenance of patent applications in Russia. Government actions may also prevent maintenance of issued patents in Russia. These actions could result in abandonment or lapse of our patents or patent applications, resulting in partial or complete loss of patent rights in Russia. If such an event were to occur, it could have a material adverse effect on our business. In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees that have citizenship or nationality in, are registered in, or predominately have primary place of business or profit-making activities in the United States and other countries that Russia has deemed unfriendly without consent or compensation. Consequently, we may be unable to prevent third parties from practicing our inventions in Russia or from selling or importing products made using our inventions in and into Russia. Accordingly, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

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Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and growth prospects may be adversely affected.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our owned or licensed patents and applications. In certain circumstances, we rely on our licensing partners to pay these fees due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. government agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. We are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Geopolitical actions in the United States and in foreign countries could prevent us from continuing to make these periodic payments in certain locations. For example, the United States and foreign government actions related to Russia's invasion of Ukraine may limit our ability to make or prevent us from making these payments in Russia. These actions could result in abandonment or lapse of our patents or patent applications, resulting in partial or complete loss of patent rights in Russia, which could adversely affect our business.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act (the "America Invents Act"), enacted in September 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i) file any patent application related to our BBB platform technology, product candidates or other technologies or (ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications.

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The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. For example, the Supreme Court of the United States held in Amgen v. Sanofi (2023) that a functionally claimed genus was invalid for failing to comply with the enablement requirement of the Patent Act. In addition, the Federal circuit recently issued a decision involving the interaction of patent term adjustment (PTA), terminal disclaimers, and obvious-type double patenting. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future. For example, in Assoc. for Molecular Pathology v. Myriad Genetics, Inc. (2013), the U.S. Supreme Court held that certain claims to DNA molecules are not patentable. While we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patents. For example, the Inflation Reduction Act (IRA) passed by Congress authorizes the Secretary of the Department of Health and Human Services (HHS) to negotiate prices directly with participating manufacturers for selected medicines covered by Medicare even if these medicines are protected by an existing patent. For small molecule medicines, the process begins seven years after initial approval by the FDA. While we do not believe that the IRA or its effects will impact our ability to obtain patents in the near future, we cannot be certain whether it will affect our patent strategy in the long run.
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Issued patents covering our BBB platform technology, product candidates and other technologies could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
If we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering our BBB platform technology, product candidates or other technologies, the defendant could counterclaim that such patent is invalid or unenforceable or raise a defense to infringement. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of subject matter eligibility for patenting, novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Grounds for defenses to infringement include statutory exemptions to patent infringement for uses related to submitting information to regulatory authorities to seek certain regulatory approvals. Third parties may raise claims challenging the validity or enforceability of our owned or in-licensed patents before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover our BBB platform technology, product candidates or other technologies. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, a judge or jury could find that our patent claims laws of nature or are otherwise ineligible for patenting, and we cannot be certain that there is no invalidating prior art, of which we or our licensing partners and the patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our BBB platform technology, product candidates or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations and growth prospects.
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Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.

Patent rights are of limited duration. In the United States, if all maintenance fees are paid timely, the natural expiration of a patent is generally 20 years after its first effective filing date. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such product candidates are commercialized. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar or generic products. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours. Upon issuance in the United States, the term of a patent can be increased by patent term adjustment, which is based on certain delays caused by the USPTO, but this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. The term of a United States patent may also be shortened if the patent is terminally disclaimed over an earlier-filed patent. A patent term extension (PTE) based on regulatory delay may be available in the United States. However, only a single patent can be extended for each marketing approval, and any patent can be extended only once, for a single product. Moreover, the scope of protection during the period of the PTE does not extend to the full scope of the claim, but instead only to the scope of the product as approved. Laws governing analogous PTEs in foreign jurisdictions vary widely, as do laws governing the ability to obtain multiple patents from a single patent family. Additionally, we may not receive an extension if we fail to exercise due diligence during the testing phase or regulatory review process, apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. If we are unable to obtain PTE or restoration, or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtain approval of competing products following our patent expiration and may take advantage of our investment in development and clinical trials by referencing our clinical and nonclinical data to launch their product earlier than might otherwise be the case, and our revenue could be reduced, possibly materially.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our BBB platform technology, product candidates, or other technologies. Litigation may be necessary to defend against these and other claims challenging inventorship or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets, or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our BBB platform technology, product candidates and other technologies. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for our BBB platform technology, product candidates and other technologies, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. Trade secrets and know-how can be difficult to protect. We expect our trade secrets and know-how to over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel from academic to industry scientific positions.
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We seek to protect these trade secrets and other proprietary technology, in part, by entering into nondisclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants as well as train our employees not to bring or use proprietary information or technology from former employers to us or in their work, and remind former employees when they leave their employment of their confidentiality obligations. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite our efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed.
We may not be successful in obtaining, through acquisitions, in-licenses or otherwise, necessary rights to our BBB platform technology, product candidates or other technologies.

We currently have rights to intellectual property, through licenses from third parties, to identify and develop our BBB platform technology and product candidates. Many pharmaceutical companies, biotechnology companies, and academic institutions are competing with us in the fields of neurodegenerative and lysosomal storage diseases and BBB technology and may have patents and have filed and plan to file patent applications potentially relevant to our business. In order to avoid infringing these third-party patents, we may find it necessary or prudent to obtain licenses to such patents from such third-party intellectual property holders. We may also require licenses from third parties for certain BBB technologies that we are evaluating for use with our current or future product candidates. In addition, with respect to any patents we co-own with third parties, we may require licenses to such co-owners’ interest to such patents. However, we may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes, or other intellectual property rights from third parties that we identify as necessary for our current or future product candidates and our BBB platform technology. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.
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Many of our employees, consultants, and advisors are currently or were previously employed at universities or other biotechnology or pharmaceutical companies, including our licensors, competitors, and potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties or defend claims that they may bring against us to determine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
Third-party claims of intellectual property infringement, misappropriation, or other violation against us, our licensors, or our collaborators may prevent or delay the development and commercialization of our BBB platform technology, product candidates, and other technologies.

The fields of discovering treatments for neurodegenerative and lysosomal storage diseases, especially using BBB technology, is highly competitive and dynamic. Due to the focused research and development that is taking place by several companies, including us and our competitors, in these fields, the intellectual property landscape is in flux, and it may remain uncertain in the future. As such, there may be significant intellectual property litigation and proceedings relating to our owned, in-licensed, and other third-party intellectual property and proprietary rights in the future.

Our commercial success depends in part on our, our licensors’ and our collaborators’ ability to avoid infringing, misappropriating, and otherwise violating the patents and other intellectual property rights of third parties. There is a substantial amount of complex litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. As discussed above, recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grant review have been implemented. As stated above, this reform adds uncertainty to the possibility of challenge to our patents in the future.

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Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist relating to BBB technology and in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our BBB platform technology, product candidates, and other technologies may give rise to claims of infringement of the patent rights of others. We cannot assure you that our BBB platform technology, product candidates, and other technologies that we have developed, are developing or may develop in the future will not infringe existing or future patents owned by third parties. We may not be aware of patents that have already been issued and that a third party, for example, a competitor in the fields in which we are developing our BBB platform technology, product candidates, and other technologies might assert are infringed by our current or future BBB platform technology, product candidates or other technologies, including claims to compositions, formulations, methods of manufacture or methods of use or treatment that cover our BBB platform technology, product candidates, or other technologies. It is also possible that patents owned by third parties of which we are aware, but which we do not believe are relevant to our BBB platform technology, product candidates, or other technologies, could be found to be infringed by our BBB platform technology, product candidates, or other technologies. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our BBB platform technology, product candidates, or other technologies may infringe.

Third parties may have patents or obtain patents in the future and claim that the manufacture, use, or sale of our BBB platform technology, product candidates, or other technologies infringes upon these patents. In the event that any third-party claims that we infringe their patents or that we are otherwise employing their proprietary technology without authorization and initiates litigation against us, even if we believe such claims are without merit, a court of competent jurisdiction could hold that such patents are valid, enforceable, and infringed by our BBB platform technology, product candidates, or other technologies. In this case, the holders of such patents may be able to block our ability to commercialize the applicable product candidate or technology unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, we may be unable to commercialize our BBB platform technology, product candidates, or other technologies, or such commercialization efforts may be significantly delayed, which could in turn significantly harm our business.
Defense of infringement claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. In the event of a successful claim of infringement against us, we may be enjoined from further developing or commercializing our infringing BBB platform technology, product candidates, or other technologies. In addition, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties, and/or redesign our infringing product candidates or technologies, which may be impossible or require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize our BBB platform technology, product candidates, or other technologies, which could harm our business significantly.

Engaging in litigation to defend against third parties alleging that we have infringed, misappropriated, or otherwise violated their patents or other intellectual property rights is very expensive, particularly for a company of our size, and time-consuming. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings against us could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, or results of operations or growth prospects.
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We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time consuming, and unsuccessful.

Competitors may infringe our patents or the patents of our licensing partners, or we may be required to defend against claims of infringement. In addition, our patents or the patents of our licensing partners also may become involved in inventorship, priority, or validity disputes. To counter or defend against such claims can be expensive and time consuming. In an infringement proceeding, a court may decide that a patent in which we have an interest is invalid or unenforceable, the other party’s use of our patented technology falls under the safe harbor to patent infringement under 35 U.S.C. §271(e)(1), or may refuse to stop the other party from using the technology at issue on the grounds that our owned and in-licensed patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our owned or in-licensed patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic, or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights, or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations, and growth prospects.
Risks Related to Our Operations
We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

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Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific, and medical personnel. We are highly dependent on our management, particularly our Chief Executive Officer, Dr. Ryan Watts, and our scientific and medical personnel. The loss of the services provided by any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements, could result in delays in the development of our product candidates and harm our business.

We primarily conduct our operations at our facility in South San Francisco, a region that is headquarters to many other biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel is intense and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. We expect that we may need to recruit talent from outside of our region, and doing so may be costly and difficult.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided restricted stock and stock option grants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key man” insurance policies on the lives of all of these individuals or the lives of any of our other employees. If we are unable to attract and incentivize quality personnel on acceptable terms, or at all, it may cause our business and operating results to suffer.
We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

As of September 30, 2024, we had approximately 390 employees, all of whom were full-time. As our development plans and strategies develop, we must add a significant number of additional managerial, operational, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including recruiting, integrating, and retaining additional employees; managing our internal development efforts; and expanding our controls, reporting systems, and procedures.
Our future financial performance and our ability to continue to develop and, if approved, commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth. Our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to manage these growth activities.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors, and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors, and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.

If we are not able to effectively manage our growth, we may not be able to successfully implement the tasks necessary to further develop our product candidates and, accordingly, may not achieve our research, development, and commercialization goals.
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We have engaged in and may in the future engage in acquisitions or strategic partnerships, which may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We have in the past engaged in acquisitions and strategic partnerships, and we may engage in various acquisitions and strategic partnerships in the future, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses as part of our business strategy. For example, we have collaboration agreements with Takeda, Sanofi and Biogen, and issued stock in connection with entering into certain of those agreements in 2018 and 2020. Any such transaction may entail numerous risks, including:
increased operating expenses and cash requirements;

the assumption of indebtedness or contingent liabilities;

the issuance of our equity securities which would result in dilution to our stockholders;

assimilation of operations, intellectual property, products and product candidates of an acquired company, including difficulties associated with integrating new personnel;

the diversion of our management’s attention from our existing product programs and initiatives in pursuing such an acquisition or strategic partnership;

the loss of key employees, and uncertainties in our ability to maintain key business relationships;

risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and

our inability to generate revenue from acquired intellectual property, technology and/or products sufficient to meet our objectives or offset the associated transaction and maintenance costs.

In addition, if we undertake such a transaction, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.

Our internal computer systems, or those used by our third-party research institution collaborators, CROs, or other contractors or consultants, may fail or suffer other breakdowns, cyberattacks, or information security breaches or incidents that could compromise the confidentiality, integrity, and availability of such systems and data, expose us to liability, and affect our reputation.

We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business. We also rely on third-party vendors and their information technology systems. Despite the implementation of security measures, our internal computer systems and those of our collaborators, CROs, and other contractors and consultants may be vulnerable to damage, outages and interruptions resulting from computer viruses and other malicious code or unauthorized access, or breached, compromised, or otherwise subject to security incidents due to operator error, malfeasance, or other system disruptions. Geopolitical events, such as war and armed conflicts, may increase the risks of cyber-attacks, disruptions, and security breaches and incidents that we and these third parties face. As the cyber-threat landscape evolves, attacks are growing in frequency, sophistication, and intensity, and are becoming increasingly difficult to detect. Security threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be broad-based or otherwise generic in nature, or they may be custom-crafted against our information systems or those of our collaborators, CROs, or other contractors or consultants.
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Over the past few years, cyber-attacks have become more prevalent, intense, sophisticated, and much harder to detect and defend against. Such attacks could include the use of key loggers or other harmful and virulent malware, including ransomware or other denials of service, and can be deployed through malicious websites, the use of social engineering and/or other means. We and our collaborators, CROs, or other contractors and consultants may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources. Although to our knowledge we have not experienced any such material system failure or security breach or incident to date, if a breakdown, cyberattack or other information security breach or incident were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to loss or misappropriation of trade secrets or loss of, or unauthorized modification, unavailability, disclosure, or other unauthorized processing of other proprietary information or other similar disruption and we could incur liability and reputational damage. For example, any corruption, loss, or other unavailability of clinical trial data from completed, ongoing or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on our third-party research institution collaborators for research and development of our product candidates and other third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business.

Cyber-attacks, breaches, interruptions, or other data security incidents could result in legal claims or proceedings by private parties or governmental authorities, liability under federal or state laws that protect the privacy of personal information, regulatory penalties, significant remediation costs, disrupt key business operations, and divert attention of management and key information technology resources. In the United States, notice of breaches must be made to affected individuals, the U.S. Secretary of the Department of Health and Human Services ("HHS"), and for extensive breaches, notice may need to be made to the media or U.S. state attorneys general. Such a notice could harm our reputation and our ability to compete. In addition, U.S. state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations that threaten the privacy of state residents. There can be no assurance that we, our collaborators, CROs, contractors, consultants, and any other business counterparties will be successful in efforts to detect, prevent, protect against, or fully recover systems or data from all break-downs, service interruptions, attacks, or security breaches or incidents. Although we maintain standalone cybersecurity insurance, the costs related to significant security breaches, incidents, or disruptions could be material and exceed the limits of any insurance coverage we have, and may result in increases in our insurance costs. Relevant insurance may in the future become unavailable to us on commercially reasonable terms or at all. Any disruption or security breach or incident that results in or is perceived to have resulted in a loss of, or damage to, our data or systems, or inappropriate disclosure, use, acquisition, transfer, modification, unavailability, or other processing of confidential or proprietary information, including data related to our personnel, could result in the loss, unauthorized modification, use, unavailability, disclosure or other unauthorized processing of critical or sensitive data, and could cause us to incur liability. Further, in any such event, the development and commercialization of our product candidates could be delayed and our business and operations could be adversely affected. Any of the foregoing could result in financial, legal, business, or reputational harm to us.
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Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations, and those of our third-party research institution collaborators, CROs, CDMOs, suppliers, and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, public health crises such as COVID-19, and other natural or man-made disasters or business interruptions, for which we are partly uninsured. In addition, we rely on our third-party research institution collaborators for conducting research and development of our product candidates, and they may be affected by bank failures or instability in the financial services sector, government shutdowns, or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce and process our product candidates. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.

The majority of our operations are located in South San Francisco, California and Salt Lake City, Utah. Damage or extended periods of interruption to our corporate, development or research facilities due to fire, extreme weather conditions or natural disaster, power loss, communications failure, unauthorized entry, or other events could cause us to cease or delay development of some or all of our product candidates. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.
Our business is subject to economic, political, regulatory and other risks associated with international operations.

Our business is subject to risks associated with conducting business internationally. In addition to a subsidiary located in Zurich, Switzerland, some of our suppliers and collaborative relationships are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

economic weakness, including inflation, rising interest rates or political instability in certain non-U.S. economies and markets;

differing and changing regulatory requirements in non-U.S. countries;

challenges enforcing our contractual and intellectual property rights, especially in those non-U.S. countries that do not offer the same level of intellectual property protection as the United States;

difficulties in compliance with non-U.S. laws and regulations;

changes in non-U.S. regulations and customs, tariffs, and trade barriers;

changes in non-U.S. currency exchange rates and currency controls;

changes in a specific country’s or region’s political or economic environment;

trade protection measures, import or export licensing requirements, or other restrictive government actions;

negative consequences from changes in tax laws;

compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;
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workforce uncertainty in countries where labor unrest is more common than in the United States;

difficulties associated with staffing and managing international operations, including differing labor relations;

potential liability under the FCPA, UK Bribery Act, or comparable foreign laws;

business interruptions resulting from geopolitical actions, including war and armed conflict, terrorism, natural disasters including earthquakes, typhoons, floods, and fires, or health epidemics; and

cyberattacks, which are growing in frequency, sophistication and intensity, and are becoming increasingly difficult to detect.

In particular, there is currently significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, tariffs, taxes, and other limitations on cross-border operations. The U.S. government has and continues to make significant additional changes in U.S. trade policy and may continue to take future actions that could negatively impact U.S. trade. For example, legislation has been introduced in Congress to limit certain U.S. biotechnology companies from using equipment or services produced or provided by select Chinese biotechnology companies, and others in Congress have advocated for the use of existing executive branch authorities to limit those Chinese service providers’ ability to engage in business in the U.S. We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, what products and services may be subject to such actions or what actions may be taken by the other countries in retaliation. If we are unable to obtain or use services from existing service providers or become unable to export or sell our products to any of our customers or service providers, our business, liquidity, financial condition, and/or results of operations would be materially and adversely affected.

These and other risks associated with our planned international operations may materially adversely affect our ability to attain profitable operations.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2023, we had federal net operating loss carryforwards of approximately $290.6 million, federal research and development tax credit carryforwards of approximately $53.1 million, and orphan tax credit carryforwards of approximately $37.4 million, some of which will begin to expire in 2034. Under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended, (the "Code"), if a corporation undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. We have experienced ownership changes in the past, and we may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, including in connection with our October 2022 offering, some of which are outside our control. Limitations may also apply under state law. For example, recently enacted California legislation limits the use of state net operating loss carryforwards for tax years beginning on or after January 1, 2024 and before January 1, 2027. As a result of this legislation or other unforeseen reasons, we may not be able to utilize some or all of our net operating loss carryforwards, even if we attain profitability.
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We may be subject to adverse legislative or regulatory tax changes that could negatively impact our financial condition.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by legislators and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) have occurred and are likely to continue to occur in the future, which could adversely affect our shareholders. For example, in August 2022, the United States enacted the Inflation Reduction Act, which implemented a 15% minimum tax on book income for certain companies and introduced a 1% excise tax on stock buybacks. Changes in tax laws, regulation, or enforcement could adversely affect our stockholders or require us to implement changes to minimize increases in our tax liability.
Risks Related to Ownership of Our Common Stock
The market price of our common stock has been and may continue to be volatile, which could result in substantial losses for investors.
The trading price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this report, these factors include: 

the success of existing or new competitive products or technologies;

the timing and results of clinical trials for our current product candidates and any future product candidates that we may develop;

commencement or termination of collaborations for our product development and research programs;

failure to achieve development, regulatory, or commercialization milestones under our collaborations;

failure or discontinuation of any of our product development and research programs;

failure to develop our BBB platform technology;

results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors, or announcements about new research programs or product candidates of our competitors;

regulatory or legal developments in the United States and other countries;

developments or disputes concerning patent applications, issued patents, or other proprietary rights;

the recruitment or departure of key personnel;

the level of expenses related to any of our research programs, clinical development programs, or product candidates that we may develop;

the results of our efforts to develop additional product candidates or products;

actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts;

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announcement or expectation of additional financing efforts;

sales of our common stock by us, our insiders, or other stockholders;

variations in our financial results or those of companies that are perceived to be similar to us;

changes in the structure of healthcare payment systems or in accounting standards;

ineffectiveness of our internal controls;

significant lawsuits, including patent or stockholder litigation;

market conditions in the pharmaceutical and biotechnology sectors; and

other events or factors affecting general economic, industry, and market conditions, including bank failures or instability in the financial services sector, geopolitical events such as war and armed conflict, and public health crises such as COVID-19.

In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of any such lawsuits could be costly and divert the time and attention of our management and harm our operating results, regardless of the merits of such a claim.
If securities analysts publish negative evaluations of our stock, or if they do not publish research or reports about our business, the price of our stock and trading volume could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. If one or more of the analysts covering our business downgrade their evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price or trading volume to decline.
Sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur, could cause the market price of our common stock to decline significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

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Sales of our common stock by current stockholders may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, and make it more difficult for you to sell shares of our common stock. Certain holders of shares of our common stock have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. For example, on February 27, 2024, we entered into a Purchase Agreement with certain existing accredited investors in connection with a strategic private offering transaction. Pursuant to this Purchase Agreement, we entered into an agreement granting an investor certain registration rights following such time that the investor may be deemed an affiliate of the Company. Any sales of securities by these stockholders, or the perception that sales will be made in the public market, could have a material adverse effect on the market price for our common stock.

We have registered on Form S-8 all shares of common stock that are issuable under our 2017 Equity Incentive Plan and 2017 Employee Stock Purchase Plan. As a consequence, these shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations, or require us to relinquish rights to our technologies or product candidates.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances, and licensing arrangements. For example, in August 2020, we entered into the Provisional Biogen Collaboration Agreement, and in connection therewith issued and sold 13,310,243 shares of our common stock to Biogen in September 2020 for an aggregate purchase price of $465.0 million. We, and indirectly, our stockholders, will bear the cost of issuing and servicing all such securities. Additionally, 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. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.

In January 2020, we sold 9.0 million shares of common stock in an underwritten follow-on offering pursuant to a shelf registration statement filed in March 2019 and, in October 2022, we sold 11.9 million shares of common stock in an underwritten public offering pursuant to a second shelf registration statement filed in February 2022. Also in February 2022, we entered into an equity distribution agreement with Goldman Sachs & Co. LLC, SVB Securities LLC, and Cantor Fitzgerald & Co., as sales agents, to establish an at-the-market facility pursuant to which we may offer and sell from time to time up to $400.0 million in shares of our common stock. On February 27, 2024, we announced a strategic private offering transaction in which we sold 3,244,689 shares of our common stock and pre-funded warrants to purchase 26,046,065 shares of our common stock, resulting in net proceeds of approximately $499.3 million.

Our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, and therefore we cannot predict or estimate the amount, timing, or nature of any future offerings. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, 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. In addition, any sales of our common stock or other securities under our shelf registration statement could put downward pressure on our stock price. Additionally, 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. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.
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Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.

Our directors, executive officers, holders of more than 5% of our outstanding stock, and their respective affiliates beneficially own a significant percentage of our outstanding common stock. As a result, these stockholders, if they act together, may significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company that our other stockholders may believe is in their best interests. This in turn could have a material adverse effect on our stock price and may prevent attempts by our stockholders to replace or remove the board of directors or management.
If we are unable to maintain effective internal controls, our business, financial position and results of operations and growth prospects could be adversely affected.

As a public company, we are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, ("Exchange Act"), including the requirements of Section 404 of the Sarbanes-Oxley Act, which require annual management assessments of the effectiveness of our internal control over financial reporting.

The rules governing the standards that must be met for management and our auditors to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management or auditors may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. These reporting and other obligations place significant demands on our management and administrative and operational resources, including accounting resources.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Any failure to maintain effective internal controls could have an adverse effect on our business, financial position, results of operations, and growth prospects.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
We do not expect to pay any dividends for the foreseeable future. Investors may never obtain a return on their investment.
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We have never paid cash dividends on our common stock and do not anticipate that we will pay any dividends in the foreseeable future. We currently intend to retain our future earnings, if any, to maintain and expand our existing operations. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates, which may never occur.
Delaware law and provisions in our charter documents might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our charter documents:

establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with each class serving staggered three-year terms;

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

provide that our directors may only be removed for cause;

eliminate cumulative voting in the election of directors;

authorize our board of directors to issues shares of preferred stock and determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval;

provide our board of directors with the exclusive right to elect a director to fill a vacancy or newly created directorship;

permit stockholders to only take actions at a duly called annual or special meeting and not by written consent;

prohibit stockholders from calling a special meeting of stockholders;

require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings;

authorize our board of directors, by a majority vote, to amend the bylaws; and

require the affirmative vote of at least 66 2/3% or more of the outstanding shares of common stock to amend many of the provisions described above.

In addition, Section 203 of the General Corporation Law of the State of Delaware, (the "DGCL"), prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15.0% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

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Any provision of our amended and restated certificate of incorporation, amended and restated bylaws, or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for:

any derivative action or proceeding brought on our behalf;

any action asserting a claim of breach of fiduciary duty;

any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws; and

any action asserting a claim against us that is governed by the internal-affairs doctrine.

Our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action or we do not enforce such provision, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities

On February 27, 2024, we entered into a Purchase Agreement with certain existing accredited investors for the private placement of (i) 3,244,689 shares of our common stock at a price of $17.07 per share and (ii) Pre-Funded Warrants to purchase an aggregate of 26,046,065 shares of our common stock at a purchase price of $17.06 per Pre-Funded Warrant, resulting in net proceeds of approximately $499.3 million. The Pre-Funded Warrants are exercisable at an exercise price of $0.01 and will be exercisable until exercised in full. The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 4.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise. The holders of Pre-Funded Warrants may increase or decrease such percentage not in excess of 19.99%, in the case of an increase, by providing at least 61 days’ prior notice to the Company. The private placement closed on February 29, 2024, subject to customary closing conditions. We intend to use the net proceeds from the private placement to support our ongoing research and development activities, the acceleration and expansion of our proprietary BBB-crossing TV technology, as well as general corporate purposes and working capital. We filed a registration statement on March 22, 2024 for purposes of registering the shares of common stock sold in the private placement (including the shares of common stock underlying the Pre-Funded Warrants). We also granted a certain investor certain director nomination and additional registration rights, subject to certain exceptions, conditions, and limitations.
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We are relying on the exemptions from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering, and we filed a Form D with respect to the private placement.
Use of Proceeds from Registered Securities
In October 2022, we sold 11.9 million shares of common stock (inclusive of shares sold pursuant to an over-allotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of $26.50 per share for aggregate net proceeds of approximately $296.2 million.
There have been no material changes in the planned use of the net proceeds from the follow-on public offering as described in the final prospectus supplement filed with the SEC on October 20, 2022. We have invested the funds received in short to intermediate term, interest-bearing investment-grade securities and government securities.
Issuer Purchases of Equity Securities

Not applicable.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.    OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
Our policy governing transactions in our securities by our directors, officers, and employees permits our officers, directors and employees to enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. As disclosed in the table below, during the third quarter of 2024, certain directors adopted a “Rule 10b5-1 trading arrangement”. These plans provide for the sale of our common stock and are intended to satisfy the affirmative defense in Rule 10b5-1(c).
NamePositionDate of Plan Adoption
Scheduled End Date of Trading Arrangement(1)
Maximum Total Shares of Common Stock to be Sold Under the Plan(2)
David SchenkeinDirector8/12/20242/15/2026110,524 
Ryan WattsChief Executive Officer9/16/20248/1/2025495,282 
__________________________________________________
(1)In each case, the trading arrangement may expire on an earlier date if and when all transactions under the arrangement are completed.
(2)This amount represents the maximum total shares that could be sold under the plan, but the amounts may change for executive officers due to the sale of shares to satisfy tax withholding requirements.

No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated of a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the third quarter ended September 30, 2024.
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ITEM 6.     EXHIBITS

EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
DescriptionFormFile No.NumberFiling Date
31.1Filed herewith
31.2Filed herewith
32.1*Furnished herewith
32.2*Furnished herewith
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Incline XBRL documentFurnished herewith
101.SCHInline XBRL Taxonomy Extension Schema Document.Furnished herewith
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.Furnished herewith
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.Furnished herewith
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.Furnished herewith
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.Furnished herewith
104
The cover page from the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2024, formatted in Inline XBRL (contained in Exhibit 101)
Furnished herewith
*The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Denali Therapeutics Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
#Portions of this exhibit have been omitted pursuant to a request for confidential treatment and this exhibit has been filed separately with the SEC.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
DENALI THERAPEUTICS INC.
Date:November 6, 2024By:/s/ Ryan J. Watts
Ryan J. Watts, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
Date:November 6, 2024By:/s/ Alexander O. Schuth
Alexander O. Schuth, M.D.
Chief Operating and Financial Officer
(Principal Financial and Accounting Officer)




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