Denali Therapeutics Inc. (DNLI)

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans, and expectations related to future events and our future financial performance that involve risks, uncertainties, and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts, and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q.

Forward-looking statements include, but are not limited to, statements about:

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

•the progress, success, cost, and timing of our development activities, preclinical studies and clinical trials, and in particular the development of our blood-brain barrier (“BBB”) platform technology, programs, and biomarkers, including the initiation and completion of studies or trials and related preparatory work, enrollment in such trials, the timing of when data from clinical trials will become available, the advancement of new molecule entities into clinical development and related timing, and the filing of investigational new drug applications or clinical trial applications;

•the impact of preclinical findings on our ability to achieve exposures of our product candidates that allow us to explore a robust pharmacodynamic range of these candidates in humans;

•the expected potential benefits and potential revenue resulting from strategic collaborations with third parties and our ability to attract collaborators with development, regulatory, and commercialization expertise;

•the timing or likelihood of regulatory filings and approvals;

•our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations, and/or warnings in the label of any approved product candidate;

•the extent to which any dosing limitations that we have been subject to, and/or may be subject to in the future, may affect the success of our product candidates;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

•the terms and conditions of licenses granted to us and our ability to license and/or acquire additional intellectual property relating to our product candidates and Transport VehicleTM ("TV");

•our ability to obtain funding for our operations, including funding necessary to develop and commercialize our current and potential future product candidates;

•future agreements with third parties in connection with the commercialization of our product candidates;

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•the size and growth potential of the markets for AVLAYAH and any other product candidates and our ability to serve those markets;

•the rate and degree of market acceptance of our product candidates;

•existing regulations and regulatory developments in the United States and foreign countries;

•potential claims relating to our intellectual property and third-party intellectual property;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•our ability to successfully conduct in-house manufacturing;

•the pricing and reimbursement of AVLAYAH and any other product candidates that receive approval;

•the success of competing products or platform technologies that are or may become available;

•our ability to attract and retain key managerial, scientific, and medical personnel;

•the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

•our ability to enhance operational, financial, and information management systems;

•the impact of adverse economic conditions such as instability in the financial services sector, rising interest rates, rising inflation and increased labor market competition;

•the impact of increased geopolitical uncertainty and related global economic disruptions and social conditions on our business; and

•our financial performance.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Risk Factors.” In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements reflect our beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report on Form 10-Q and are subject to risks and uncertainties. We discuss many of these risks in greater detail in the section entitled “Risk Factors” included in Part II, Item 1A and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

Key elements of our strategy include:

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1)Discover: Invent a new class of barrier-crossing therapeutics by leveraging our TV platforms and deep expertise in blood-brain barrier ("BBB") biology to enhance the delivery of biotherapeutics to the brain and throughout the body.

2)Develop: Accelerate and expand a broad portfolio of TV-based product candidates to fully unlock the potential of barrier-crossing therapeutics, applying patient-informed development and driving biomarker-guided regulatory approvals.

3)Deliver: Launch initial products targeting rare lysosomal storage diseases as a strategic foundation for expansion into common neurodegenerative conditions and other serious diseases, while building integrated capabilities for long-term growth and profitability.

Commercial Product: AVLAYAHTM

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

We began commercial distribution of AVLAYAH in April 2026. Since launch, our commercial activities have focused on executing our commercialization strategy, including supporting product availability through market access, specialty distribution and patient support services.

In connection with the approval of AVLAYAH, the FDA granted us a Rare Pediatric Disease Priority Review Voucher ("PRV"). In June 2026, we entered into an agreement to sell the PRV for gross proceeds of $195.0 million. The transaction closed and proceeds were received in July 2026.

Clinical-Stage Programs

•Tividenofusp alfa-eknm (ETV:IDS), is an ETV-enabled enzyme replacement therapy designed to systemically deliver iduronate 2-sulfatase (IDS) throughout the body, including the brain for the treatment of neurologic manifestations of Hunter syndrome (MPS II). The ongoing global Phase 2/3 COMPASS study is intended to support generation of confirmatory evidence, expansion of the U.S. label to adult patients and future global regulatory submissions;

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

•DNL593 (PTV:PGRN) is an investigational Protein TransportVehicle (PTV)-enabled protein replacement therapy designed to systemically deliver progranulin (PGRN) across the blood-brain barrier for the treatment of granulin (GRN)-related frontotemporal dementia (FTD-GRN);

•DNL952 (ETV:GAA) is an investigational ETV-enabled enzyme replacement therapy designed to systemically deliver acid alpha-glucosidase (GAA) to muscle tissue and the brain by crossing the blood-brain barrier for the treatment of Pompe disease;

•DNL628 (OTV:MAPT) is an investigational Oligonucleotide TransportVehicle (OTV)-enabled antisense oligonucleotide designed for systemic delivery across the blood-brain barrier to reduce tau by targeting the MAPT gene for the treatment of Alzheimer's disease ("AD");

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•DNL921 (ATV:Abeta) is an investigational Antibody TransportVehicle (ATV)-enabled antibody designed for systemic delivery across the blood-brain barrier to target amyloid plaques for the treatment of Alzheimer's disease. In the first half of 2026, we submitted a clinical trial application ("CTA") to initiate a Phase 1/1b study of DNL921;

•DNL151 is an investigational small molecule inhibitor of leucine-rich repeat kinase 2 (LRRK2) for the treatment of Parkinson's disease. Denali conducts the Phase 2a BEACON study evaluating DNL151 in individuals with Parkinson's disease who are confirmed by genetic testing to be carriers of a pathogenic LRRK2 variant; and

•Eclitasertib (SAR443122/DNL758), a peripheral and non-central nervous system ("CNS") penetrant small molecule RIPK1 inhibitor, is being developed by Sanofi to address peripheral inflammatory diseases such as ulcerative colitis ("UC").

The following table summarizes key information about our ongoing clinical studies for our approved product and clinical-stage programs:

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes to those statements included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this report.

Overview

Key elements of our strategy include:

1)Discover: Invent a new class of barrier-crossing therapeutics by leveraging our TV platforms and deep expertise in blood-brain barrier biology to enhance the delivery of biotherapeutics to the brain and throughout the body.

2)Develop: Accelerate and expand a broad portfolio of TV-based product candidates to fully unlock the potential of barrier-crossing therapeutics, applying patient-informed development and driving biomarker-guided regulatory approvals.

3)Deliver: Launch initial products targeting rare lysosomal storage diseases as a strategic foundation for expansion into common neurodegenerative conditions and other serious diseases, while building integrated capabilities for long-term growth and profitability.

Our clinical programs are as follows:

•Tividenofusp alfa (DNL310, ETV:IDS), composed of IDS fused to TV, is designed to deliver IDS into cells and tissues throughout the body, including the brain by crossing the BBB, with the goal of addressing the behavioral, cognitive, and physical manifestations of MPS II (Hunter syndrome);

•DNL126 (ETV:SGSH), composed of SGSH fused to TV, is designed to deliver SGSH into cells and tissues throughout the body, including the brain by crossing the BBB, with the goal of treating MPS IIIA (Sanfilippo syndrome type A);

•TAK-594/DNL593 (PTV:PGRN), composed of PGRN fused to TV, is designed to restore PGRN levels in the brain with the goal of treating FTD-GRN and is being developed in collaboration with Takeda;

•DNL952 (ETV:GAA), composed of acid alpha-glucosidase ("GAA") fused to TV and engineered to replace GAA in all tissues, with the goal of treating Pompe disease;

•DNL628 (OTV:MAPT), composed of an antisense oligonucleotide ("ASO") against MAPT fused to TV, designed to suppress gene expression of MAPT encoding the tau protein with the goal of treating Alzheimer's disease;

•BIIB122/DNL151, a small molecule LRRK2 inhibitor, is being developed in collaboration with Biogen for the potential treatment of Parkinson's disease; and

•Eclitasertib (SAR443122/DNL758), a peripheral and non-CNS penetrant small molecule RIPK1 inhibitor, is being developed by Sanofi, to address peripheral inflammatory diseases such as ulcerative colitis ("UC").

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The following table summarizes key information about our clinical stage programs:

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*Regulatory application to begin clinical testing has been approved by Health Authorities.

Since we commenced operations, we have devoted substantially all of our resources to discovering, acquiring and developing product candidates, building our TV platform, assembling our core capabilities in understanding key neurodegenerative and lysosomal storage disease pathways, operationalizing clinical trials, building manufacturing capabilities and establishing commercial capabilities.

Key operational and financing milestones for the year ended December 31, 2025 and in 2026 to date include:

•Tividenofusp alfa DNL310 (ETV:IDS)

◦In January 2025, we announced that the U.S. Food and Drug Administration ("FDA") granted Breakthrough Therapy Designation for tividenofusp alfa (DNL310) for the treatment of individuals with MPS II.

◦In February 2025, at the WORLD Symposium conference, we presented the primary analysis of the Phase 1/2 study in 47 participants with Hunter syndrome in the 24-week treatment period and additional long-term follow-up.

◦In May 2025, we completed a rolling submission of a Biologics License Application ("BLA") for tividenofusp alfa under the accelerated approval pathway;

◦In July 2025, we announced that the FDA accepted our BLA for tividenofusp alfa for priority review, assigning a Prescription Drug User Fee Act (PDUFA) target action date of January 5, 2026; In October 2025, we announced that the FDA extended its review timeline of the BLA seeking accelerated approval of tividenofusp alfa from January 5, 2026, to April 5, 2026;

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◦In December 2025, we entered into a synthetic royalty funding agreement with Royalty Pharma plc (“Royalty Pharma”), pursuant to which Royalty Pharma has agreed to provide us with up to $275.0 million in funding in exchange for a 9.25% royalty on future worldwide net sales of tividenofusp alfa, which will cease upon reaching a multiple of 3.0x, or 2.5x if achieved by the first quarter of 2039. The agreement is subject to various closing conditions, including Denali achieving U.S. FDA accelerated approval of tividenofusp alfa on or before June 30, 2026. At the closing, Royalty Pharma will make an initial payment of $200.0 million. Denali will be receive an additional payment of $75.0 million upon approval of tividenofusp alfa by the EMA on or before December 31, 2029. Denali will retain all worldwide development and commercialization rights to tividenofusp alfa;

◦In December 2025, we announced that we are in ongoing dialogue with the FDA related to the eligibility of tividenofusp alfa to receive a Rare Pediatric Disease Priority Review Voucher (“PRV”) upon approval. Because we submitted a filing of our intent to request a PRV after the initial BLA submission, based on discussions with the FDA, we may not be eligible to receive the PRV. Therefore, we are not including any potential future proceeds from the sale of a PRV in our financial planning. We continue to work with the FDA and the FDA will determine whether to award a PRV upon approval of tividenofusp alfa. We also announced that a Late Cycle Meeting with the FDA was completed and labeling discussions were underway;

◦In December 2025, we announced that The New England Journal of Medicine published the Phase 1/2 study results; and

◦In January 2026, we announced that we are is preparing for commercial launch in anticipation of a regulatory decision on the BLA for tividenofusp alfa under the FDA accelerated approval pathway with a PDUFA target action date of April 5, 2026, and that enrollment in Cohort A (neuronopathic participants) was completed in the ongoing global Phase 2/3 COMPASS study in December 2025.

•DNL126 (ETV:SGSH)

◦In April 2025, we announced productive collaboration and discussions with the FDA under the START program (“Support for clinical Trials Advancing Rare Disease Therapeutics”) around the potential for an accelerated development and approval path for DNL126 in the treatment of Sanfilippo syndrome;

◦In August 2025, we announced we reached alignment with the FDA that cerebrospinal fluid heparan sulfate (CSF HS) may be considered a reasonably likely surrogate endpoint to predict clinical benefit and may therefore be used to support accelerated approval of DNL126 for MPS IIIA. We also announced that additional 49-week data from the ongoing open-label Phase 1/2 study were consistent with previously announced 25-week data, demonstrating a significant reduction in CSF HS from baseline, including normalization, and a safety profile that supports continued development; and

◦In September 2025, we completed enrollment in the ongoing Phase 1/2 study, and in December 2025 we announced that the Phase 1/2 study remains on track for completion in 2026, supporting a potential accelerated approval pathway and commercial launch by the second half of 2027, with planning for a global Phase 3 confirmatory study underway; and

◦In February 2026, we presented preliminary open-label Phase 1/2 data at the 2026 WORLD Symposium demonstrating substantial reductions in CSF HS, including normalization from baseline, and in urine HS with a safety profile consistent with other enzyme replacement therapies.

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•DNL 952 (ETV:GAA)

◦In October 2025, we submitted an Investigational New Drug ("IND") application for DNL952 (ETV:GAA) to initiate a Phase 1 study, and in December 2025 we announced that the IND had been placed on clinical hold. In January 2026 we announced that the FDA has lifted the clinical hold on the IND application for DNL952, and we are proceeding with the Phase 1 study.

•DNL 628 (OTV:MAPT)

◦In January 2026, we announced that the Clinical Trial Application ("CTA") for DNL628 (OTV:MAPT) to initiate a Phase 1b study in Alzheimer’s disease was approved and study start-up activities are underway.

•BIIB122/DNL151 (LRRK2)

◦In May 2025, Biogen announced completion of enrollment in the Phase 2b LUMA study for early-stage Parkinson's disease with a readout expected in 2026.

•Other

◦In January 2025, we announced topline results that the primary endpoint was not met in Regimen G of the Phase 2/3 HEALEY ALS Platform Trial evaluating DNL343 in the treatment of ALS. In March 2025, we provided an update that additional analyses did not demonstrate a treatment effect on neurofilament light ("NfL"), a biomarker of neuronal damage, over the 24-week, double-blind period and in a subset of participants that completed an additional 28 weeks in the open-label active treatment extension. Based on these outcomes, the active treatment extension in Regimen G was discontinued. Overall, DNL343 was found to be generally well tolerated;

◦In February 2025, we and Sanofi executed a side letter terminating Sanofi's license to the CNS Products program including SAR443820/DNL788;

◦In February 2025, after mutual agreement to discontinue preclinical activities on ATV:TREM2, Takeda delivered notice of its election to terminate the ATV:TREM2 program on February 26, 2025, as per the terms of the Takeda Collaboration Agreement. The ATV:TREM2 program termination became effective in April 2025; and

◦In December 2025, we sold 9,142,857 shares of common stock through an underwritten public offering at a price of $17.50 per share, and issued pre-funded warrants to purchase 2,285,714 shares of common stock at a price of $17.49, for aggregate net proceeds of $189.2 million. The pre-funded warrants have an exercise price of $0.01 per share of common stock, and are immediately exercisable and will remain exercisable until exercised in full. In January 2026, the underwriters partially exercised their option to purchase additional shares, and we issued 746,468 shares of common shares for net proceeds of $12.4 million.

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