10-Q 1 dnli-20210930.htm 10-Q dnli-20210930
2021Q3false0001714899--12-31000017148992021-01-012021-09-30xbrli:shares00017148992021-10-29iso4217:USD00017148992021-09-3000017148992020-12-31iso4217:USDxbrli:shares00017148992021-07-012021-09-3000017148992020-07-012020-09-3000017148992020-01-012020-09-300001714899us-gaap:CommonStockMember2020-12-310001714899us-gaap:AdditionalPaidInCapitalMember2020-12-310001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001714899us-gaap:RetainedEarningsMember2020-12-310001714899us-gaap:CommonStockMember2021-01-012021-09-300001714899us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300001714899us-gaap:RetainedEarningsMember2021-01-012021-09-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-300001714899us-gaap:CommonStockMember2021-09-300001714899us-gaap:AdditionalPaidInCapitalMember2021-09-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001714899us-gaap:RetainedEarningsMember2021-09-300001714899us-gaap:CommonStockMember2021-06-300001714899us-gaap:AdditionalPaidInCapitalMember2021-06-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001714899us-gaap:RetainedEarningsMember2021-06-3000017148992021-06-300001714899us-gaap:CommonStockMember2021-07-012021-09-300001714899us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001714899us-gaap:RetainedEarningsMember2021-07-012021-09-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001714899us-gaap:CommonStockMember2019-12-310001714899us-gaap:AdditionalPaidInCapitalMember2019-12-310001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001714899us-gaap:RetainedEarningsMember2019-12-3100017148992019-12-310001714899us-gaap:CommonStockMember2020-01-012020-09-300001714899us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001714899us-gaap:RetainedEarningsMember2020-01-012020-09-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001714899us-gaap:CommonStockMember2020-09-300001714899us-gaap:AdditionalPaidInCapitalMember2020-09-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001714899us-gaap:RetainedEarningsMember2020-09-3000017148992020-09-300001714899us-gaap:CommonStockMember2020-06-300001714899us-gaap:AdditionalPaidInCapitalMember2020-06-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001714899us-gaap:RetainedEarningsMember2020-06-3000017148992020-06-300001714899us-gaap:CommonStockMember2020-07-012020-09-300001714899us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001714899us-gaap:RetainedEarningsMember2020-07-012020-09-300001714899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-30dnli:Segment0001714899us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2021-09-300001714899us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2021-09-300001714899us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2021-09-300001714899us-gaap:MoneyMarketFundsMember2021-09-300001714899us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2021-09-300001714899us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-09-300001714899us-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMember2021-09-300001714899us-gaap:USTreasurySecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USTreasurySecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2021-09-300001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMember2021-09-300001714899us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMemberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Memberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Memberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:USTreasurySecuritiesMemberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:CorporateDebtSecuritiesMemberdnli:LongTermInvestmentsMember2021-09-300001714899us-gaap:FairValueInputsLevel1Member2021-09-300001714899us-gaap:FairValueInputsLevel2Member2021-09-300001714899us-gaap:FairValueInputsLevel3Member2021-09-300001714899us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2020-12-310001714899us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2020-12-310001714899us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2020-12-310001714899us-gaap:MoneyMarketFundsMember2020-12-310001714899us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2020-12-310001714899us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-12-310001714899us-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMember2020-12-310001714899us-gaap:USTreasurySecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Member2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USTreasurySecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2020-12-310001714899us-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMember2020-12-310001714899us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMemberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Memberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Memberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:USTreasurySecuritiesMemberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:CorporateDebtSecuritiesMemberdnli:LongTermInvestmentsMember2020-12-310001714899us-gaap:FairValueInputsLevel1Member2020-12-310001714899us-gaap:FairValueInputsLevel2Member2020-12-310001714899us-gaap:FairValueInputsLevel3Member2020-12-310001714899us-gaap:USTreasurySecuritiesMemberdnli:ShortTermMarketableSecuritiesMember2021-09-300001714899dnli:ShortTermMarketableSecuritiesMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-09-300001714899us-gaap:CorporateDebtSecuritiesMemberdnli:ShortTermMarketableSecuritiesMember2021-09-300001714899dnli:ShortTermMarketableSecuritiesMemberus-gaap:CommercialPaperNotIncludedWithCashAndCashEquivalentsMember2021-09-300001714899dnli:ShortTermMarketableSecuritiesMember2021-09-300001714899us-gaap:USTreasurySecuritiesMemberdnli:LongTermMarketableSecuritiesMember2021-09-300001714899us-gaap:CorporateDebtSecuritiesMemberdnli:LongTermMarketableSecuritiesMember2021-09-300001714899dnli:LongTermMarketableSecuritiesMember2021-09-30dnli:security0001714899us-gaap:USTreasurySecuritiesMemberdnli:ShortTermMarketableSecuritiesMember2020-12-310001714899dnli:ShortTermMarketableSecuritiesMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001714899us-gaap:CorporateDebtSecuritiesMemberdnli:ShortTermMarketableSecuritiesMember2020-12-310001714899dnli:ShortTermMarketableSecuritiesMemberus-gaap:CommercialPaperNotIncludedWithCashAndCashEquivalentsMember2020-12-310001714899dnli:ShortTermMarketableSecuritiesMember2020-12-310001714899us-gaap:USTreasurySecuritiesMemberdnli:LongTermMarketableSecuritiesMember2020-12-310001714899us-gaap:CorporateDebtSecuritiesMemberdnli:LongTermMarketableSecuritiesMember2020-12-310001714899dnli:LongTermMarketableSecuritiesMember2020-12-31dnli:derivative_instrument0001714899us-gaap:DesignatedAsHedgingInstrumentMemberdnli:ForeignExchangeForwardEurosMember2021-09-30iso4217:EUR0001714899dnli:ForeignExchangeForwardBritishPoundsMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-09-30iso4217:GBP0001714899us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-09-300001714899us-gaap:DesignatedAsHedgingInstrumentMemberdnli:ForeignExchangeForwardEurosMember2020-12-310001714899dnli:ForeignExchangeForwardBritishPoundsMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-12-310001714899us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-12-310001714899dnli:BiogenMemberdnli:BiogenCollaborativeArrangementMember2021-01-012021-09-300001714899dnli:BiogenMemberdnli:BiogenCollaborativeArrangementMember2021-07-012021-09-300001714899srt:AffiliatedEntityMemberdnli:BiogenMember2021-09-300001714899srt:AffiliatedEntityMemberdnli:BiogenMemberdnli:ROFNAndOptionAgreementCollaborativeArrangementMember2021-09-300001714899srt:AffiliatedEntityMemberdnli:BiogenMemberdnli:BiogenCollaborativeArrangementMemberdnli:OptionResearchServicesMember2021-09-300001714899dnli:BiogenMemberdnli:BiogenCollaborativeArrangementMember2021-09-300001714899dnli:BiogenMemberdnli:BiogenCollaborativeArrangementMember2020-12-31dnli:milestone0001714899dnli:MilestoneTriggeredMemberus-gaap:CollaborativeArrangementMemberdnli:SanofiMember2021-07-012021-09-300001714899dnli:MilestoneTriggeredMemberus-gaap:CollaborativeArrangementMemberdnli:SanofiMember2021-01-012021-09-300001714899dnli:MilestoneTriggeredMemberus-gaap:CollaborativeArrangementMemberdnli:SanofiMember2021-06-012021-06-300001714899us-gaap:CollaborativeArrangementMemberdnli:SanofiMemberdnli:MilestoneTriggeredAndRetainedActivitiesMember2020-07-012020-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:SanofiMemberdnli:MilestoneTriggeredAndRetainedActivitiesMember2020-01-012020-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:SanofiMemberdnli:AlzheimersDiseaseServicesMember2021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:SanofiMemberdnli:AlzheimersDiseaseServicesMember2020-12-310001714899us-gaap:CollaborativeArrangementMemberdnli:SanofiMember2021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:SanofiMember2020-12-310001714899dnli:MilestoneTriggeredMemberus-gaap:CollaborativeArrangementMemberdnli:SanofiMember2018-10-012021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:SanofiMemberus-gaap:ProductMember2018-10-012021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:TakedaPharmaceuticalCompanyLimitedMember2021-01-012021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:TakedaPharmaceuticalCompanyLimitedMember2021-07-012021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:TakedaPharmaceuticalCompanyLimitedMember2021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:TakedaPharmaceuticalCompanyLimitedMember2020-12-31dnli:program0001714899us-gaap:CollaborativeArrangementMemberdnli:TakedaPharmaceuticalCompanyLimitedMember2018-01-310001714899dnli:TakedaPharmaceuticalCompanyLimitedMemberdnli:CollaborativeArrangementPTVPGRNMember2020-12-310001714899dnli:MilestoneTriggeredMemberus-gaap:CollaborativeArrangementMemberdnli:TakedaPharmaceuticalCompanyLimitedMember2018-01-012021-09-300001714899us-gaap:CollaborativeArrangementMemberdnli:TakedaPharmaceuticalCompanyLimitedMemberus-gaap:ProductMember2018-01-012021-09-300001714899dnli:TakedaCollaborationAgreementMember2021-07-012021-09-300001714899dnli:TakedaCollaborationAgreementMember2020-07-012020-09-300001714899dnli:TakedaCollaborationAgreementMember2021-01-012021-09-300001714899dnli:TakedaCollaborationAgreementMember2020-01-012020-09-300001714899dnli:PeripheralProductMemberdnli:SanofiCollaborationAgreementMember2021-07-012021-09-300001714899dnli:PeripheralProductMemberdnli:SanofiCollaborationAgreementMember2020-07-012020-09-300001714899dnli:PeripheralProductMemberdnli:SanofiCollaborationAgreementMember2021-01-012021-09-300001714899dnli:PeripheralProductMemberdnli:SanofiCollaborationAgreementMember2020-01-012020-09-300001714899dnli:RetainedActivitiesMemberdnli:SanofiCollaborationAgreementMember2021-07-012021-09-300001714899dnli:RetainedActivitiesMemberdnli:SanofiCollaborationAgreementMember2020-07-012020-09-300001714899dnli:RetainedActivitiesMemberdnli:SanofiCollaborationAgreementMember2021-01-012021-09-300001714899dnli:RetainedActivitiesMemberdnli:SanofiCollaborationAgreementMember2020-01-012020-09-300001714899dnli:SanofiCollaborationAgreementMemberdnli:AlzheimersDiseaseServicesMember2021-07-012021-09-300001714899dnli:SanofiCollaborationAgreementMemberdnli:AlzheimersDiseaseServicesMember2020-07-012020-09-300001714899dnli:SanofiCollaborationAgreementMemberdnli:AlzheimersDiseaseServicesMember2021-01-012021-09-300001714899dnli:SanofiCollaborationAgreementMemberdnli:AlzheimersDiseaseServicesMember2020-01-012020-09-300001714899dnli:SanofiCollaborationAgreementMember2021-07-012021-09-300001714899dnli:SanofiCollaborationAgreementMember2020-07-012020-09-300001714899dnli:SanofiCollaborationAgreementMember2021-01-012021-09-300001714899dnli:SanofiCollaborationAgreementMember2020-01-012020-09-300001714899dnli:BiogenMemberdnli:OptionServicesMember2021-07-012021-09-300001714899dnli:BiogenMemberdnli:OptionServicesMember2020-07-012020-09-300001714899dnli:BiogenMemberdnli:OptionServicesMember2021-01-012021-09-300001714899dnli:BiogenMemberdnli:OptionServicesMember2020-01-012020-09-300001714899dnli:BiogenMember2021-07-012021-09-300001714899dnli:BiogenMember2020-07-012020-09-300001714899dnli:BiogenMember2021-01-012021-09-300001714899dnli:BiogenMember2020-01-012020-09-300001714899dnli:BiogenMemberdnli:BiogenCollaborativeArrangementMemberus-gaap:ProductMember2021-01-012021-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMemberdnli:GenentechIncMemberdnli:LicenseAgreementMember2021-07-012021-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMemberdnli:GenentechIncMemberdnli:LicenseAgreementMember2020-07-012020-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMemberdnli:GenentechIncMemberdnli:LicenseAgreementMember2021-01-012021-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMemberdnli:GenentechIncMemberdnli:LicenseAgreementMember2020-01-012020-09-30utr:sqft0001714899dnli:OperatingLeaseEightYearLeaseAgreementMemberus-gaap:BuildingMember2021-08-012021-08-310001714899dnli:OperatingLeaseEightYearLeaseAgreementMemberus-gaap:BuildingMember2021-08-310001714899dnli:OperatingLeaseEightYearLeaseAgreementMemberus-gaap:BuildingMember2021-09-300001714899dnli:OperatingLeaseEightYearLeaseAgreementMemberus-gaap:BuildingMember2021-07-012021-09-300001714899dnli:OperatingLeaseEightYearLeaseAgreementMemberus-gaap:BuildingMember2021-01-012021-09-30xbrli:pure0001714899dnli:DMSAMember2021-09-300001714899dnli:DMSAMember2020-12-310001714899dnli:DMSAMember2021-07-012021-09-300001714899dnli:DMSAMember2020-07-012020-09-300001714899dnli:DMSAMember2021-01-012021-09-300001714899dnli:DMSAMember2020-01-012020-09-300001714899us-gaap:EmployeeStockOptionMembersrt:MinimumMember2021-01-012021-09-300001714899srt:MaximumMemberus-gaap:EmployeeStockOptionMember2021-01-012021-09-300001714899us-gaap:EmployeeStockOptionMembersrt:MinimumMember2020-01-012020-09-300001714899srt:MaximumMemberus-gaap:EmployeeStockOptionMember2020-01-012020-09-300001714899us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001714899us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001714899us-gaap:RestrictedStockUnitsRSUMember2020-12-310001714899us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001714899us-gaap:RestrictedStockUnitsRSUMember2021-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-300001714899us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-09-300001714899us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001714899us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001714899us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001714899us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001714899dnli:EmployeeAndNonEmployeeStockOptionMember2021-07-012021-09-300001714899dnli:EmployeeAndNonEmployeeStockOptionMember2021-01-012021-09-300001714899dnli:EmployeeAndNonEmployeeStockOptionMember2020-07-012020-09-300001714899dnli:EmployeeAndNonEmployeeStockOptionMember2020-01-012020-09-300001714899dnli:RestrictedSharesSubjectToFutureVestingMember2021-01-012021-09-300001714899dnli:RestrictedSharesSubjectToFutureVestingMember2021-07-012021-09-300001714899dnli:RestrictedSharesSubjectToFutureVestingMember2020-07-012020-09-300001714899dnli:RestrictedSharesSubjectToFutureVestingMember2020-01-012020-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38311
Denali Therapeutics Inc.
(Exact name of registrant as specified in its charter)
Delaware46-3872213
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
161 Oyster Point Blvd.
South San Francisco, CA, 94080
(Address of principal executive offices and zip code)
(650) 866-8548
(Registrant’s telephone number, including area code)
_______________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareDNLINASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
The number of outstanding shares of the registrant’s common stock as of October 29, 2021 was 122,125,581.




TABLE OF CONTENTS

Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
Denali Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)

September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$394,553 $507,144 
Short-term marketable securities644,622 962,553 
Cost sharing reimbursements due from related party1,194 5,674 
Prepaid expenses and other current assets15,140 20,284 
Total current assets1,055,509 1,495,655 
Long-term marketable securities319,472 32,699 
Property and equipment, net40,012 40,846 
Operating lease right-of-use asset31,196 32,618 
Other non-current assets3,777 2,462 
Total assets$1,449,966 $1,604,280 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$4,817 $1,071 
Accrued compensation10,534 20,503 
Accrued manufacturing costs13,142 7,140 
Accrued clinical and other research & development costs13,380 11,775 
Other accrued costs and current liabilities2,364 3,037 
Operating lease liability, current5,252 4,690 
Related party contract liability, current3,438 3,569 
Contract liabilities, current1,324 19,914 
Total current liabilities54,251 71,699 
Related party contract liability, less current portion291,434 293,849 
Contract liabilities, less current portion31,313 23,325 
Operating lease liability, less current portion59,990 64,175 
Other non-current liabilities701 701 
Total liabilities437,689 453,749 
Commitments and contingencies (Note 7)
Stockholders' equity:
Convertible preferred stock, $0.01 par value; 40,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020
  
Common stock, $0.01 par value; 400,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 122,011,151 shares and 120,531,333 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
1,545 1,531 
Additional paid-in capital1,580,988 1,503,660 
Accumulated other comprehensive loss(521)(245)
Accumulated deficit(569,735)(354,415)
Total stockholders' equity1,012,277 1,150,531 
Total liabilities and stockholders’ equity$1,449,966 $1,604,280 
See accompanying notes to unaudited condensed consolidated financial statements.
3

Denali Therapeutics Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Collaboration revenue:
Collaboration revenue from customers(1)
$5,285 $9,388 $36,143 $18,751 
Other collaboration revenue 5 4 93 
Total collaboration revenue5,285 9,393 36,147 18,844 
Operating expenses:
Research and development(2)
71,559 53,704 197,477 157,872 
General and administrative19,319 15,805 57,300 42,332 
Total operating expenses90,878 69,509 254,777 200,204 
Loss from operations(85,593)(60,116)(218,630)(181,360)
Interest and other income, net1,005 1,944 3,310 7,611 
Loss before income taxes(84,588)(58,172)(215,320)(173,749)
Income tax expense  (56)  
Net loss(84,588)(58,228)(215,320)(173,749)
Other comprehensive loss:
Net unrealized loss on marketable securities, net of tax(153)(540)(276)(339)
Comprehensive loss$(84,741)$(58,768)$(215,596)$(174,088)
Net loss per share, basic and diluted$(0.69)$(0.54)$(1.77)$(1.65)
Weighted average number of shares outstanding, basic and diluted121,742,067107,490,702121,309,197105,217,770
__________________________________________________
(1)Includes related party collaboration revenue from a customer of $0.9 million and $2.5 million for the three and nine months ended September 30, 2021, respectively.
(2)Includes an offset to expense from related party cost reimbursement of $1.2 million and $5.3 million for the three and nine months ended September 30, 2021, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.
 

4


Denali Therapeutics Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)    
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at December 31, 2020120,531,333 $1,531 $1,503,660 $(245)$(354,415)$1,150,531 
Issuances under equity incentive plans
880,560 8 14,172 — — 14,180 
Vesting of restricted stock units
599,258 6 (6)— —  
Stock-based compensation
— — 63,162 — — 63,162 
Net loss
— — — — (215,320)(215,320)
Other comprehensive loss— — — (276)— (276)
Balance at September 30, 2021122,011,151 $1,545 $1,580,988 $(521)$(569,735)$1,012,277 
Balance at June 30, 2021121,531,952 $1,541 $1,556,679 $(368)$(485,147)$1,072,705 
Issuances under equity incentive plans228,048 2 3,313 — — 3,315 
Vesting of restricted stock units251,151 2 (2)— —  
Stock-based compensation— — 20,998 — — 20,998 
Net loss— — — — (84,588)(84,588)
Other comprehensive loss— — — (153)— (153)
Balance at September 30, 2021122,011,151 $1,545 $1,580,988 $(521)$(569,735)$1,012,277 
Balance at December 31, 201996,189,935 $1,288 $818,803 $350 $(425,551)$394,890 
Issuance of common stock upon public offering, net of issuance costs of $632
9,000,000 90 193,858 — — 193,948 
Issuance of common stock in connection with the Biogen Stock Purchase Agreement13,310,243 133 420,013 — — 420,146 
Issuances under equity incentive plans1,001,905 10 11,123 — — 11,133 
Vesting of restricted stock units293,133 3 (3)— —  
Stock-based compensation— — 36,521 — — 36,521 
Net loss— — — — (173,749)(173,749)
Other comprehensive loss— — — (339)— (339)
Balance at September 30, 2020119,795,216 $1,524 $1,480,315 $11 $(599,300)$882,550 
Balance at June 30, 2020105,897,872 $1,385 $1,041,303 $551 $(541,072)$502,167 
Issuance of common stock in connection with the Biogen Stock Purchase Agreement13,310,243 133 420,013 — — 420,146 
Issuances under equity incentive plans
412,389 4 5,749 — — 5,753 
Vesting of restricted stock units174,712 2 (2)— —  
Stock-based compensation
— — 13,252 — — 13,252 
Net loss
— — — — (58,228)(58,228)
Other comprehensive loss— — — (540)— (540)
Balance at September 30, 2020119,795,216 $1,524 $1,480,315 $11 $(599,300)$882,550 
See accompanying notes to unaudited condensed consolidated financial statements.
5

Denali Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
20212020
Operating activities
Net loss$(215,320)$(173,749)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization6,499 6,410 
Stock–based compensation expense63,162 36,521 
Net amortization of premiums (discounts) on marketable securities6,316 (1,074)
Non-cash adjustment to operating lease expense(2,201)(1,669)
Other non-cash items 18 
Changes in operating assets and liabilities:
Prepaid expenses and other assets8,049 3,819 
Accounts payable3,783 147 
Accruals and other current liabilities(3,036)4,880 
Contract liabilities(10,601)(17,920)
Related party contract liability(2,546)44,854 
Net cash used in operating activities(145,895)(97,763)
Investing activities
Purchases of marketable securities(1,191,491)(687,523)
Purchases of property and equipment(5,447)(1,900)
Maturities and sales of marketable securities1,216,062 433,557 
Net cash provided by (used in) investing activities19,124 (255,866)
Financing activities
Proceeds from issuance of common stock in connection with Collaboration Agreements 420,146 
Proceeds from public offering of common stock, net of issuance costs 193,948 
Proceeds from exercise of awards under equity incentive plans14,180 11,133 
Net cash provided by financing activities14,180 625,227 
Net increase (decrease) in cash, cash equivalents and restricted cash(112,591)271,598 
Cash, cash equivalents and restricted cash at beginning of period508,644 80,949 
Cash, cash equivalents and restricted cash at end of period$396,053 $352,547 
Supplemental disclosures of cash flow information
Property and equipment purchases accrued but not yet paid$29 $32 

See accompanying notes to unaudited condensed consolidated financial statements.
6

Denali Therapeutics Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.    Significant Accounting Policies
Organization and Description of Business

Denali Therapeutics Inc. ("Denali" or the “Company”) is a biopharmaceutical company, incorporated in Delaware, that discovers and develops therapeutics to defeat neurodegenerative diseases. The Company is headquartered in South San Francisco, California.
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of SEC Regulation S-X for interim financial information.

These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on February 26, 2021 (the "2020 Annual Report on Form 10-K"). The Condensed Consolidated Balance Sheet as of December 31, 2020 was derived from the audited annual consolidated financial statements as of and for the period then ended. Certain information and footnote disclosures typically included in the Company's annual consolidated financial statements have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All such adjustments are of a normal recurring nature except for the impacts of adopting new accounting standards, if any, discussed below. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

During the nine months ended September 30, 2021, except as discussed below in the section titled "Recently Adopted Accounting Pronouncement," there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the 2020 Annual Report on Form 10-K. For further information with regard to the Company’s Significant Accounting Policies, please refer to Note 1, "Significant Accounting Policies," to the Company’s Consolidated Financial Statements included in the 2020 Annual Report on Form 10-K.
Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. For the Company and its subsidiaries, the functional currency has been determined to be U.S. dollars. Monetary assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates. Non-monetary assets and liabilities denominated in foreign currencies are remeasured at historical rates. Foreign currency transaction gains and losses resulting from remeasurement are recognized in interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
7

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material to the Condensed Consolidated Balance Sheets and Statements of Operations and Comprehensive Loss.
Reclassifications

Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation. Such reclassifications have not materially affected previously reported amounts.
Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and forward foreign currency exchange contracts. Substantially all of the Company’s cash and cash equivalents are deposited in accounts with financial institutions that management believes are of high credit quality. Such deposits have and will continue to exceed federally insured limits. The Company maintains its cash with accredited financial institutions and accordingly, such funds are subject to minimal credit risk.

The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities and issuers of marketable securities to the extent recorded on the Condensed Consolidated Balance Sheets. As of September 30, 2021 and December 31, 2020, the Company had no off balance sheet concentrations of credit risk.

The Company is exposed to counterparty credit risk on all of its derivative financial instruments. The Company has established and maintains strict counterparty credit guidelines and enters into hedges only with financial institutions that are investment grade or better to minimize the Company’s exposure to potential defaults. The Company does not require collateral to be pledged under these agreements.

The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, protection of proprietary technology, the ability to make milestone, royalty or other payments due under any license or collaboration agreements, and the need to secure and maintain adequate manufacturing arrangements with third parties. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

The COVID-19 pandemic has caused increased risk and uncertainty for the Company. Credit risk associated with investments in securities may increase if any institution with which the Company has an investment is significantly impacted by the COVID-19 pandemic. As of September 30, 2021, the Company has not realized any losses on its cash deposits or investments. COVID-19 may impact the timelines and progress of the Company's preclinical activities and clinical trials, and may impact its ability to raise capital in the near term.
8

Segments

The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of allocating resources.
Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of 90 days or less at the date of purchase to be cash and cash equivalents. Cash equivalents are reported at fair value.

Cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Statements of Cash Flows is composed of Cash and Cash equivalents reported in the Condensed Consolidated Balance Sheets and $1.5 million of restricted cash for the letter of credit for the Company’s headquarters building lease, which is included within other non-current assets in the Condensed Consolidated Balance Sheets.
Marketable Securities

The Company generally invests its excess cash in money market funds and investment grade short to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, short-term marketable securities, or long-term marketable securities on the Condensed Consolidated Balance Sheets, are considered available-for-sale, and reported at fair value with net unrealized gains and losses included as a component of stockholders’ equity.

The Company classifies investments in securities with remaining maturities of less than one year, or where its intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments. The Company classifies investments in securities with remaining maturities of over one year as long-term investments. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Realized gains and losses and declines in value determined to be due to credit losses on marketable securities, if any, are included in interest and other income, net.

The Company periodically evaluates the need for an allowance for credit losses. This evaluation includes consideration of several qualitative and quantitative factors, including whether it has plans to sell the security, whether it is more likely than not it will be required to sell any marketable securities before recovery of its amortized cost basis, and if the entity has the ability and intent to hold the security to maturity, and the portion of any unrealized loss that is the result of a credit loss. Factors considered in making these evaluations include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, expected cash flows from securities, other publicly available information that may affect the value of the marketable security, duration and severity of the decline in value, and the Company's strategy and intentions for holding the marketable security.
Accounts Receivable

Accounts receivable are included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. The accounts receivable balance represents amounts receivable from the Company's collaboration partners, excluding related parties, net of an allowance for credit losses, if required.
9

Derivatives and Hedging Activities
The Company measures its derivative instruments at fair value, and accounts for them as either assets or liabilities included within Prepaid expenses and other current assets and Other accruals and other current liabilities, respectively, on the Condensed Consolidated Balance Sheets. Derivatives are adjusted to fair value through interest and other income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Leases

The Company leases real estate, and certain equipment for use in its operations. A determination is made as to whether an arrangement is a lease at inception. A right-of-use (“ROU”) asset and operating lease liability is recognized for identified operating leases in the Condensed Consolidated Balance Sheets. The changes in operating lease ROU assets and operating lease liabilities are presented net within non-cash adjustment to operating lease expense in the Condensed Consolidated Statements of Cash Flows.

ROU assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments due over the lease term, with the ROU assets adjusted for lease incentives received. When determining the present value of lease payments, the Company uses its incremental borrowing rate on the date of lease commencement, or the rate implicit in the lease, if known. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed by management to be reasonably certain at lease inception.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, unless they include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes lease expenses on a straight-line basis over the lease term. The Company has leases with lease and non-lease components, which the Company has elected to account for as a single lease component.
Revenue Recognition

License and Collaboration Revenue

The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of Topic 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606. The accounting treatment pursuant to Topic 606 is outlined below.
10

The terms of licensing and collaboration agreements entered into typically include payment of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply and research and development services and royalties on net sales of licensed products. Each of these payments results in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenue. The core principle of Topic 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. The Company may also receive reimbursement or make payments to a collaboration partner to satisfy cost sharing requirements. These payments are accounted for pursuant to ASC 808 and are recorded as an offset or increase to research and development expenses, respectively.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Amounts received prior to satisfying the revenue recognition criteria are recorded as contract liabilities in the Company’s Condensed Consolidated Balance Sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Amounts recognized as revenue prior to the Company having an unconditional right (other than a right that is conditioned only on the passage of time) to receipt are recorded as contract assets in the Company's Condensed Consolidated Balance Sheets. If the Company expects to have an unconditional right to receive the consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the promised good or service does not provide the customer with a material right.

The Company considers the terms of the contract to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices ("SSP"). The relative SSP for each deliverable is estimated using external sourced evidence if it is available. If external sourced evidence is not available, the Company uses its best estimate of the SSP for the deliverable.

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the service promised to the customer.
11

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception, or to a single performance obligation as applicable.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the SSP of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.
Comprehensive Loss

Comprehensive loss is composed of net loss and certain changes in stockholders’ equity that are excluded from net loss, primarily unrealized gains or losses on the Company’s marketable securities.
Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.
Recently Adopted Accounting Pronouncement

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. ASU No. 2019-12 modifies ASC 740 to simplify several aspects of accounting for income taxes, including eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted, and is required to be adopted prospectively, with the exception of certain specific amendments, which were not applicable to the Company. The Company adopted this standard as of January 1, 2021 using a prospective approach. Adoption of the standard did not have a material impact on its Condensed Consolidated Financial Statements.
12

2.    Fair Value Measurements
Assets and liabilities measured at fair value at each balance sheet date are as follows (in thousands):
September 30, 2021
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$350,803 $ $ $350,803 
U.S. government treasuries24,998   24,998 
Short-term marketable securities:
U.S. government treasuries472,214   472,214 
U.S. government agency securities 15,003  15,003 
Corporate debt securities 61,182  61,182 
Commercial paper 96,223  96,223 
Long-term marketable securities:
U.S. government treasuries299,069   299,069 
Corporate debt securities 20,403  20,403 
Total$1,147,084 $192,811 $ $1,339,895 
Liabilities:
Foreign currency derivative contracts$ $201 $ $201 
Total$ $201 $ $201 
December 31, 2020
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$335,284 $ $ $335,284 
U.S. government treasuries149,997   149,997 
Short-term marketable securities:
U.S. government treasuries878,938   878,938 
U.S. government agency securities 25,217  25,217 
Corporate debt securities 27,180  27,180 
Commercial paper 31,218  31,218 
Long-term marketable securities:
U.S. government treasuries2,561   2,561 
Corporate debt securities 30,138  30,138 
Foreign currency derivative contracts 185  185 
Total$1,366,780 $113,938 $ $1,480,718 
Liabilities:
Foreign currency derivative contracts$ $11 $ $11 
Total$ $11 $ $11 
The carrying amounts of cost sharing reimbursements due from related party, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.

The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly.
The company has not transferred any assets or liabilities between the fair value measurement levels.
13

3.    Marketable Securities
All marketable securities were considered available-for-sale at September 30, 2021 and December 31, 2020. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs as discussed in Note 2, "Fair Value Measurements". The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):
September 30, 2021
Amortized CostUnrealized Holding GainsUnrealized Holding LossesAggregate Fair Value
Short-term marketable securities:
U.S. government treasuries(1)
$472,214 $13 $(13)$472,214 
U.S. government agency securities
15,003   15,003 
Corporate debt securities(2)
61,187 5 (10)61,182 
Commercial paper
96,223   96,223 
Total short-term marketable securities
644,627 18 (23)644,622 
Long-term marketable securities:
U.S. government treasuries(3)
299,225 17 (173)299,069 
Corporate debt securities(4)
20,413 2 (12)20,403 
Total long-term marketable securities
319,638 19 (185)319,472 
Total
$964,265 $37 $(208)$964,094 
__________________________________________________
(1)Unrealized holding losses on 7 securities with an aggregate fair value of $271.8 million.
(2)Unrealized holding losses on 8 securities with an aggregate fair value of $27.8 million.
(3)Unrealized holding losses on 11 securities with an aggregate fair value of $251.5 million.
(4)Unrealized holding losses on 5 securities with an aggregate fair value of $16.8 million.

December 31, 2020
Amortized CostUnrealized Holding GainsUnrealized Holding LossesAggregate Fair Value
Short-term marketable securities:
U.S. government treasuries(1)
$878,906 $44 $(12)$878,938 
U.S. government agency securities(2)
25,214 5 (2)25,217 
Corporate debt securities
27,101 79  27,180 
Commercial paper
31,218   31,218 
Total short-term marketable securities
962,439 128 (14)962,553 
Long-term marketable securities:
U.S. government treasuries
2,561   2,561 
Corporate debt securities(3)
30,147 2 (11)30,138 
Total long-term marketable securities
32,708 2 (11)32,699 
Total
$995,147 $130 $(25)$995,252 
__________________________________________________
(1)Unrealized holding losses on 19 securities with an aggregate fair value of $369.9 million.
(2)Unrealized holding losses on 2 securities with an aggregate fair value of $10.1 million.
(3)Unrealized holding losses on 1 security with an aggregate fair value of $20.1 million.

14

As of September 30, 2021 and December 31, 2020, some of the Company's marketable securities were in an unrealized loss position. The Company has not recognized an allowance for credit losses as of September 30, 2021 or December 31, 2020. The Company determined that it had the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery. Further, these marketable securities were initially, and continue to be, held with investment grade, high credit quality institutions. All marketable securities with unrealized losses as of each balance sheet date have been in a loss position for less than twelve months or the loss is not material.

All of the Company’s marketable securities have an effective maturity of less than two years.
4.    Derivative Financial Instruments
Foreign Currency Exchange Rate Exposure

The Company uses forward foreign currency exchange contracts to hedge certain operational exposures resulting from potential changes in foreign currency exchange rates. Such exposures result from portions of the Company’s forecasted cash flows being denominated in currencies other than the U.S. dollar, primarily the Euro and British Pound. The derivative instruments the Company uses to hedge this exposure are not designated as cash flow hedges, and as a result, changes in their fair value are recorded in interest and other income, net, on the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss.

The fair values of forward foreign currency exchange contracts are estimated using current exchange rates and interest rates and take into consideration the current creditworthiness of the counterparties. Information regarding the specific instruments used by the Company to hedge its exposure to foreign currency exchange rate fluctuations is provided below.
The following table summarizes the Company’s forward foreign currency exchange contracts outstanding as of September 30, 2021 and December 31, 2020, respectively (notional amounts in thousands):
Foreign Exchange ContractsNumber of Contracts
Aggregate Notional(1) Amount in Foreign Currency
Maturity
Euros
12 1,700 Oct 2021 - Jun 2022
British Pounds
11 1,725 Oct 2021 - Jun 2022
Total at September 30, 2021
23 
Euros
26 3,855 Jan 2021 - Nov 2021
British Pounds
21 2,658 Jan 2021 - Nov 2021
Total at December 31, 2020
47 
_________________________________________________
(1) The notional amount represents the net amount of foreign currency that will be received upon maturity of the forward contracts.
15

5.    Collaboration Agreements
Biogen

On August 5, 2020, the Company entered into a binding Provisional Collaboration and License Agreement (“Provisional Biogen Collaboration Agreement”) with Biogen Inc.’s subsidiaries, Biogen MA Inc. (“BIMA”) and Biogen International GmbH (“BIG”) (BIMA and BIG, collectively, “Biogen”), which expired in October 2020 upon the execution of a Definitive LRRK2 Collaboration and License Agreement (“LRRK2 Agreement”) with Biogen on October 4, 2020 and a Right of First Negotiation, Option and License Agreement (the “ROFN and Option Agreement”) on October 6, 2020 (collectively, the "Biogen Collaboration Agreement"). The details of the Provisional Biogen Collaboration Agreement and the Biogen Collaboration Agreement and the payments the Company has received, and is entitled to receive, are further described in Note 6, Collaboration Agreements, to the consolidated financial statements in the Company's 2020 Annual Report on Form 10-K. During the third quarter of 2021, there were no changes to the terms of the Company’s collaboration agreement with Biogen, and no change in the transaction price for the Biogen Collaboration Agreement has been recorded during the three and nine months ended September 30, 2021.
A related party contract liability of $294.9 million was recorded on the Consolidated Balance Sheet as of September 30, 2021. Approximately $288.9 million of this contract liability relates to the revenue allocated to the material right for an option under the ROFN and Option Agreement which is being deferred until resolution of the option, which is expected to be at least a year from the balance sheet date, and $6.0 million of this contract liability relates to the portion of the Option Research Services performance obligation yet to be satisfied, with such amount to be recognized over the estimated period of the services, which is expected to be several years. The Company recorded $1.2 million and $5.3 million of cost sharing reimbursements for LRRK2 Development Activities as an offset to research and development expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021, respectively. The Company recorded cost sharing reimbursements due from related party on the Condensed Consolidated Balance Sheet as of September 30, 2021 and December 31, 2020 of $1.2 million and $5.7 million, respectively.

As of September 30, 2021, the Company had not achieved any milestones or recorded any product sales under the Biogen Collaboration Agreement.
Sanofi

In October 2018, the Company entered into a Collaboration and License Agreement ("Sanofi Collaboration Agreement") with Genzyme Corporation, a wholly owned subsidiary of Sanofi S.A. ("Sanofi"). The details of the Sanofi Collaboration Agreement and the payments the Company has received, and is entitled to receive, are further described in Note 6, Collaboration Agreements, to the consolidated financial statements in the Company's 2020 Annual Report on Form 10-K. During the third quarter of 2021, there were no changes to the terms of the Company’s collaboration agreement with Sanofi.

The transaction price of the Sanofi Collaboration Agreement did not change in the three months ended September 30, 2021, and increased by $15.0 million in the nine months ended September 30, 2021. This increase related to the $15.0 million milestone triggered in June 2021 upon first patient in a Phase 2 study of DNL758 (SAR443122) in patients with cutaneous lupus erythematosus. The transaction price increased by $0.1 million and $0.9 million for the three and nine months ended September 30, 2020, respectively, related to costs incurred for Retained Activities that were no longer constrained.

16

A contract liability of $3.4 million was recorded on the Condensed Consolidated Balance Sheets as of both September 30, 2021 and December 31, 2020. This contract liability relates to the portion of the Alzheimer's Disease Services performance obligation yet to be satisfied, with such amounts to be recognized over the estimated period of the services, which is expected to be several years. The Company recorded no receivable and a receivable of $44,303 associated with the Sanofi Collaboration Agreement on the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively.

Through September 30, 2021, the Company has earned milestone payments of $25.0 million, and the Company has not recorded any product sales under the Sanofi Collaboration Agreement.
Takeda

In January 2018, the Company entered into a Collaboration and Option Agreement ("Takeda Collaboration Agreement") with Takeda Pharmaceutical Company Limited ("Takeda"). The details of the Takeda Collaboration Agreement and the payments the Company has received, and is entitled to receive, are further described in Note 6, Collaboration Agreements, to the consolidated financial statements in the Company's 2020 Annual Report on Form 10-K. During the third quarter of 2021, there were no changes to the terms of the Company’s collaboration agreement with Takeda, and no change in the transaction price for the Takeda Collaboration Agreement has been recorded during the three and nine months ended September 30, 2021.

Revenue is recognized under the Takeda Collaboration Agreement when, or as, the Company satisfies its performance obligations by transferring the promised services to Takeda. Revenue is being recognized over time using the input method, based on costs incurred to perform the research services, since the level of costs incurred over time is thought to best reflect the transfer of services to Takeda. There were no material changes in estimates during the three and nine months ended September 30, 2021 or September 30, 2020.

A contract liability of $29.2 million and $39.8 million was recorded on the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively. This contract liability relates to the three performance obligations identified, with such amounts to be recognized over the estimated period of the pre-IND research services, which is expected to be up to several years. There was no receivable as of September 30, 2021 and a receivable of $8.0 million for a preclinical milestone as of December 31, 2020.

Through September 30, 2021, the Company has earned $31.0 million in preclinical milestone payments from Takeda, and has not recorded any product sales under the Takeda Collaboration Agreement.
17

Collaboration Revenue
Revenue disaggregated by collaboration agreement and performance obligation is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Takeda Collaboration Agreement(1)
$4,425 $9,271 $18,597 $17,826 
Sanofi Collaboration Agreement
Peripheral Program License  15,000  
   Retained Activities 117  925 
   Alzheimer's Disease Services(2)
 5 4 93 
Total Sanofi Collaboration Revenue 122 15,004 1,018 
Biogen Collaboration Agreement
Option Research Services(2)
860  2,546  
Total Biogen Collaboration Revenue$860 $ $2,546 $ 
Total Collaboration Revenue$5,285 $9,393 $36,147 $18,844 
_________________________________________________
(1)$15.6 million of revenue for the nine months ended September 30, 2021 was included in the contract liability balance at the beginning of the period. All revenue for the three months ended September 30, 2021 and the three and nine months ended September 30, 2020 was included in the contract liability balance at the beginning of the period.
(2)Revenue for the three and nine months ended September 30, 2021 and September 30, 2020, where applicable, represent amounts that were included in the contract liability balance at the beginning of the respective period.
6.     License Agreements
Genentech
In June 2016, the Company entered into an Exclusive License Agreement with Genentech, Inc. (“Genentech”). The details of the Genentech License Agreement are further described in Note 7, License Agreements, to the consolidated financial statements in the Company's 2020 Annual Report on Form 10-K. No expenses were recorded associated with the Genentech License Agreement in the three and nine months ended September 30, 2021 or 2020.
7.    Commitments and Contingencies
Lease Obligations
In May 2018, the Company entered into an operating lease for its corporate headquarters in South San Francisco (the "Headquarters Lease"). The details of the Headquarters Lease are further described in Note 9, Commitments and Contingencies, to the consolidated financial statements in the Company's 2020 Annual Report on Form 10-K. During the third quarter of 2021, there were no changes to the terms of the Headquarters Lease.
In August 2021, the Company entered into an operating lease for approximately 50,000 square feet of laboratory, office and warehouse premises in Salt Lake City, Utah (“SLC Lease”), with a contractual term of approximately 8.4 years which will commence upon completion of certain improvements by the landlord and the Company, and future undiscounted lease payments totaling approximately $12.5 million. For accounting purposes, the lease has not yet commenced as the landlord has not yet made the underlying asset available for use by Denali, and as such, no lease liability or ROU asset is recorded on the condensed consolidated balance sheet as of September 30, 2021, and no operating lease expense has been recorded for the three and nine months ended September 30, 2021.
18

Management exercised judgment in applying the requirements of ASC 842, including the determination as to whether certain contracts contain a lease and for the headquarters lease, the discount rate used to determine the measurement of the lease liability. The discount rate of our headquarters lease is an approximation of the Company's incremental borrowing rate and is dependent upon the term and economics of the agreement. To estimate the incremental borrowing rate, management considered observable debt yields of comparable market instruments, as well as benchmarks within the headquarters lease agreement that may be indicative of the rate implicit in the lease.
The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the periods presented (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Operating lease cost (1)
$2,863 $2,833 $8,429 $8,341 
Cash paid for amounts included in measurement of lease liability$2,618 $2,536 $7,717 $7,202 
As of September 30,
20212020
Weighted average remaining lease term7.6 years8.6 years
Weighted average discount rate9 %9 %
__________________________________________________
(1)Including variable and short-term lease costs
The following table reconciles the undiscounted cash flows for the next five years and total of the remaining years to the operating lease liability recorded in the Condensed Consolidated Balance Sheet as of September 30, 2021 (in thousands):
Year Ended December 31:
2021 (three months)$2,618 
202210,702 
202311,053 
202411,417 
202511,793 
Thereafter42,148 
Total undiscounted lease payments89,731 
Present value adjustment(24,489)
Net operating lease liabilities$65,242 
Sublease
In October 2018, the Company entered into a sublease agreement ("Sublease Agreement") for space in the corporate headquarters. The details of the Sublease Agreement are further described in Note 9, Commitments and Contingencies, to the consolidated financial statements in the Company's 2020 Annual Report on Form 10-K. During the third quarter of 2021, there were no changes to the terms of the Sublease Agreement. Total sublease income, including rent and variable sublease cost reimbursements, was $1.0 million and $0.9 million for the three months ended September 30, 2021 and 2020, respectively, and $2.9 million and $2.8 million for the nine months ended September 30, 2021 and 2020, respectively.
19

The following table details the future undiscounted cash inflows relating to the Sublease Agreement as of September 30, 2021 (in thousands):
Year Ended December 31:
2021 (three months)$737 
20223,009 
20233,096 
2024876 
Total undiscounted sublease receipts$7,718 
Indemnification
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners, board members, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company, negligence or willful misconduct of the Company, violations of law by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Comprehensive Loss, or Condensed Consolidated Statements of Cash Flows.
Commitments
Effective September 2017, the Company entered into a Development and Manufacturing Services Agreement as amended (“DMSA”) with Lonza Sales AG (“Lonza”) for the development and manufacture of biologic products. Under the DMSA, the Company will execute purchase orders based on project plans authorizing Lonza to provide development and manufacturing services with respect to certain of the Company's antibody and enzyme products, and will pay for the services provided and batches delivered in accordance with the DMSA and project plan. Unless earlier terminated, the DMSA will expire on September 6, 2022.
As of September 30, 2021 and December 31, 2020, the Company had open purchase orders for biological product development and manufacturing costs totaling $42.0 million and $33.0 million, respectively. The activities under these purchase orders are expected to be completed by July 2027. As of September 30, 2021 and December 31, 2020, the Company had total non-cancellable purchase commitments under the DMSA of $27.6 million and $27.1 million, respectively, under the DMSA.
During the three months ended September 30, 2021 and 2020, the Company incurred costs of $5.8 million and $1.4 million, respectively, and made payments of $4.0 million and $0.8 million, respectively, for the development and manufacturing services rendered under the DMSA. During the nine months ended September 30, 2021 and 2020, the Company incurred costs of $14.2 million and $6.2 million, respectively, and made payments of $10.4 million and $6.0 million, respectively, for the development and manufacturing services rendered under the DMSA.
Contingencies
From time to time, the Company may be involved in lawsuits, arbitration, claims, investigations and proceedings consisting of intellectual property, employment and other matters which arise in the ordinary course of business. The Company records accruals for loss contingencies to the extent that the Company concludes that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated.
20

8.    Stock-Based Awards
The Company has issued stock-based awards from various equity incentive and stock purchase plans, as more fully described in Note 10, "Stock-Based Awards" to the consolidated financial statements in the Company's 2020 Annual Report on Form 10-K.
Stock Option Activity
The following table summarizes stock option activity for the nine months ended September 30, 2021:
Number of Options
Weighted-Average
Exercise Price
Balance at December 31, 202012,959,926 $16.31 
Granted
1,944,717 73.31 
Exercised
(831,207)14.27 
Forfeited
(259,060)34.89