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Denali Therapeutics Reports Fourth Quarter and Full Year 2023 Financial Results and Business Highlights

SOUTH SAN FRANCISCO, Calif., Feb. 27, 2024 (GLOBE NEWSWIRE) — Denali Therapeutics Inc. (Nasdaq: DNLI), a biopharmaceutical company developing a broad portfolio of product candidates engineered to cross the blood-brain barrier (BBB) for the treatment of neurodegenerative diseases and lysosomal storage diseases, today reported financial results for the fourth quarter and year ended December 31, 2023, and provided business highlights.

“2023 was a year of significant progress across our broad therapeutic portfolio and further clinical validation of our BBB-crossing Transport Vehicle (TV) platform,” said Ryan Watts, Ph.D., Chief Executive Officer of Denali. “In 2024, we expect to complete enrollment of our late-stage trials in MPS II and ALS as we establish commercial readiness for our product candidates in our first peak of programs. In addition, we are well positioned to expand our TV-enabled portfolio to address large neurodegenerative diseases with TV-enabled enzymes, antibodies, and oligonucleotides. We recognize the urgent needs of patients and families living with neurodegenerative and lysosomal storage diseases and we will continue to push for the fastest path to approval of effective medicines.”

Fourth Quarter 2023 and Recent Program Updates:

Late-stage and mid-stage clinical programs

Tividenofusp alfa (DNL310): Enzyme Transport Vehicle (ETV)-enabled, iduronate-2-sulfatase (IDS) replacement therapy in development for MPS II (Hunter syndrome)

DNL343: eIF2B activator in development for the treatment of amyotrophic lateral sclerosis (ALS)

SAR443820/DNL788: CNS-penetrant RIPK1 inhibitor in development for the treatment of multiple sclerosis (MS)

BIIB122/DNL151: LRRK2 inhibitor in development for the treatment of Parkinson’s disease (PD)

Eclitasertib (SAR443122/DNL758): Peripheral RIPK1 inhibitor in development for the treatment of ulcerative colitis (UC)

Early-stage clinical and preclinical programs

DNL126: ETV-enabled N-sulfoglucosamine sulfohydrolase (SGSH) replacement therapy in development for the treatment of MPS IIIA (Sanfilippo syndrome Type A)

TAK-594/DNL593: Protein Transport Vehicle (PTV)-enabled progranulin (PGRN) replacement therapy in development for the treatment of frontotemporal dementia-granulin (FTD-GRN)

Oligonucleotide Transport Vehicle (OTV) platform

Antibody Transport Vehicle Amyloid beta (ATV:Abeta) program

Discovery programs

Denali continues to use deep scientific expertise in neurodegeneration biology and the BBB to discover and develop medicines and platforms with the focus on programs enabled by the TV technology and targeting neurodegenerative disease, including Alzheimer’s and Parkinson’s, and lysosomal storage diseases.

Corporate Updates

2024 Guidance on Operating Expenses:

Cash, cash equivalents, and marketable securities were approximately $1.03 billion as of December 31, 2023. For the full year 2024, Denali anticipates its operating expenses will be less than or equal to those in 2023 based on prioritization of its portfolio. With the anticipated proceeds from the PIPE financing, Denali expects the company’s cash runway to extend into 2028.

Participation in Upcoming Investor Conferences:

Fourth Quarter 2023 Financial Results

Net losses were $119.5 million and $145.2 million for the quarter and year ended December 31, 2023, compared to net losses of $98.7 million and $326.0 million for the quarter and year ended December 31, 2022, respectively.

There was no collaboration revenue for the quarter ended December 31, 2023, compared to $10.3 million for the quarter ended December 31, 2022. Collaboration revenue was $330.5 million for the year ended December 31, 2023, compared to $108.5 million for the year ended December 31, 2022. The decrease in collaboration revenue of $10.3 million for the quarter ended December 31, 2023, compared to the comparative period in the prior quarter was primarily due to a decrease of revenue earned under the Sanofi Collaboration of $10.0 million for a milestone triggered in December 2022 upon first patient dosed in a Phase 2 study of SAR443122/DNL758 in individuals with UC. The increase in collaboration revenue of $222.0 million for the year ended December 31, 2023 compared to the previous year was primarily due to $293.9 million in revenue recognized in April 2023 under the Biogen Collaboration Agreement as a result of Biogen exercising its option to license our ATV:Abeta program, partially offset by a decrease of $41.9 million in revenue earned under the Takeda Collaboration Agreement, as well as a decrease of $28.4 million in milestone revenue earned under the Sanofi Collaboration Agreement. The decreases in revenues from the Sanofi and Takeda Collaboration Agreements are due to the timing of underlying activities and achievement of milestones under the collaboration agreements.

Total research and development expenses were $107.8 million and $423.9 million for the quarter and year ended December 31, 2023, compared to $92.1 million and $358.7 million for the quarter and year ended December 31, 2022, respectively. The increases of approximately $15.7 million and $65.2 million for the quarter and year ended December 31, 2023 compared to the comparative period in the prior year were primarily attributable to increases in ETV:IDS and eIF2B program external expenses reflecting the continued progress of these programs in clinical trials; and an increase in personnel-related expenses mainly driven by increased salary costs as a result of higher headcount. Furthermore, net cost sharing with collaboration partners shifted from reimbursements to payments due to decreased reimbursements from Takeda and increased payments to Biogen. These expense increases were partially offset by decreases in TV platform and other program external expenses, PTV:PGRN program external expenses and other external research and development expenses due to the timing of significant external research and manufacturing related activities period over period, and LRRK2 program external expenses due to the transition of LRRK2 clinical activities to Biogen. Further, for the quarter ended December 31, 2023, there was also a decrease in other unallocated research and development expenses as a result of reduced facility costs.

General and administrative expenses were $24.8 million and $103.4 million for the quarter and year ended December 31, 2023, compared to $23.5 million and $90.5 million for the quarter and year ended December 31, 2022, respectively. The increases of approximately $1.3 million and $12.9 million for the quarter and year ended December 31, 2023, respectively, were primarily attributable to an increase in personnel-related expenses, including employee compensation and stock-based compensation expenses, driven by higher headcount and equity award grants. Additionally, there was an increase in facility and other corporate costs for the year ended December 31, 2023 associated with the new Salt Lake City manufacturing facility.

Cash, cash equivalents, and marketable securities were approximately $1.03 billion as of December 31, 2023.

About Denali Therapeutics

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

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements expressed or implied in this press release include, but are not limited to, statements regarding expectations regarding Denali’s TV technology platform; statements made by Denali’s Chief Executive Officer; plans, timelines, and expectations regarding DNL310 and the ongoing Phase 2/3 COMPASS and Phase 1/2 studies as well as the timing of approval; plans and timelines regarding DNL343, including enrollment for Regimen G of the Phase 2/3 HEALEY ALS Platform Trial; plans, timelines, and expectations of both Denali and Sanofi regarding DNL788, including the Phase 2 study in MS and the timing of data in the Phase 2 study in ALS; plans, timelines, and expectations regarding DNL151, including with respect to the ongoing LUMA study as well as enrollment and timing of the proposed Phase 2a study in PD patients with LRRK2 mutations, the potential for commercialization, and the achievement of milestones under the third-party agreement; expectations regarding DNL758, including the ongoing Phase 2 study in patients with UC; plans, timelines, and expectations related to DNL126, including the timing and availability of data in the ongoing Phase 1/2 study; plans, timelines, and expectations of both Denali and Takeda regarding DNL593 and the ongoing Phase 1/2 study, including the implementation of protocol modifications and timing of continuation of the study; plans, timelines, and expectations regarding the advancement of OTV candidates towards clinical development; plans, timelines, and expectations of both Denali and Biogen regarding the ATV:Abeta; plans and expectations for Denali’s preclinical programs and the CD98hc-targeting TV platform; Denali’s future operating expenses and anticipated cash runway; Denali’s PIPE financing, including the number of shares and warrants and the anticipated proceeds; and Denali’s participation in upcoming investor conferences. Actual results are subject to risks and uncertainties and may differ materially from those indicated by these forward-looking statements as a result of these risks and uncertainties, including but not limited to, risks related to: any and all risks to Denali’s business and operations caused by adverse economic conditions; risk of the occurrence of any event, change, or other circumstance that could give rise to the termination of Denali’s agreements with Sanofi, Takeda, or Biogen, or any of Denali’s other collaboration agreements; Denali’s transition to a late-stage clinical drug development company; Denali’s and its collaborators’ ability to complete the development and, if approved, commercialization of its product candidates; Denali’s and its collaborators’ ability to enroll patients in its ongoing and future clinical trials; Denali’s reliance on third parties for the manufacture and supply of its product candidates for clinical trials; Denali’s dependence on successful development of its blood-brain barrier platform technology and its programs and product candidates; Denali’s and its collaborators’ ability to conduct or complete clinical trials on expected timelines; the risk that preclinical profiles of Denali’s product candidates may not translate in clinical trials; the potential for clinical trials to differ from preclinical, early clinical, preliminary or expected results; the risk of significant adverse events, toxicities or other undesirable side effects; the uncertainty that product candidates will receive regulatory approval necessary to be commercialized; Denali’s ability to continue to create a pipeline of product candidates or develop commercially successful products; developments relating to Denali’s competitors and its industry, including competing product candidates and therapies; Denali’s ability to obtain, maintain, or protect intellectual property rights related to its product candidates; implementation of Denali’s strategic plans for its business, product candidates, and blood-brain barrier platform technology; Denali’s ability to obtain additional capital to finance its operations, as needed; Denali’s ability to accurately forecast future financial results in the current environment; and other risks and uncertainties, including those described in Denali’s most recent Annual and Quarterly Reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission (SEC) on February 27, 2023 and November 7, 2023, respectively, and Denali’s future reports to be filed with the SEC. Denali does not undertake any obligation to update or revise any forward-looking statements, to conform these statements to actual results, or to make changes in Denali’s expectations, except as required by law.

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

  Three Months Ended December 31,   Twelve Months Ended December 31,
    2023       2022       2023       2022  
Collaboration revenue:              
Collaboration revenue from customers(1) $     $ 10,260     $ 330,531     $ 105,065  
Other collaboration revenue         23             3,398  
Total collaboration revenue         10,283       330,531       108,463  
Operating expenses:              
Research and development(2)   107,803       92,111       423,876       358,732  
General and administrative   24,769       23,516       103,354       90,475  
Total operating expenses   132,572       115,627       527,230       449,207  
Loss from operations   (132,572 )     (105,344 )     (196,699 )     (340,744 )
Interest and other income, net   13,129       6,660       51,505       14,774  
Loss before income taxes   (119,443 )     (98,684 )     (145,194 )     (325,970 )
Income tax benefit (expense)   (30 )     6       (30 )     (21 )
Net loss $ (119,473 )   $ (98,678 )   $ (145,224 )   $ (325,991 )
Net loss per share, basic and diluted $ (0.86 )   $ (0.75 )   $ (1.06 )   $ (2.60 )
Weighted average number of shares outstanding, basic and diluted   138,245,382       132,877,411       137,370,897       125,530,703  

__________________________________________________

(1)   Includes related-party collaboration revenue from customers of $0.3 million for the quarter ended December 31, 2022, and $295.5 million and $3.2 million for the year ended December 31, 2023 and 2022, respectively. There is no related-party collaboration revenue from customers for quarter ended December 31, 2023
(2)   Includes expenses for cost sharing payments due to a related party of $3.2 million and $17.7 million for the quarter end year ended December 31, 2023, respectively, and $4.4 million and $8.2 million for the quarter and year ended December 31, 2022.

Denali Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

  December 31, 2023   December 31, 2022
Assets      
Current assets:      
Cash and cash equivalents $ 127,106   $ 218,044
Short-term marketable securities   907,405     1,118,171
Prepaid expenses and other current assets   29,626     36,104
Total current assets   1,064,137     1,372,319
Property and equipment, net   45,589     44,087
Operating lease right-of-use asset   26,048     30,437
Other non-current assets   18,143     13,399
Total assets $ 1,153,917   $ 1,460,242
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 9,483   $ 2,790
Cost sharing payments due to related party       4,388
Accrued expenses and other current liabilities   68,499     66,691
Related-party contract liability, current       290,053
Total current liabilities   77,982     363,922
Related-party contract liability, less current portion       479
Operating lease liability, less current portion   44,981     53,032
Other non-current liabilities       379
Total liabilities   122,963     417,812
Total stockholders’ equity   1,030,954     1,042,430
Total liabilities and stockholders’ equity $ 1,153,917   $ 1,460,242
 

Investor and Media Contact:

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


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