DNLI

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; 25 Table of Contents •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: 26 Table of Contents 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"); 27 Table of Contents •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: Program Product Candidate Clinical Study(ies) Indication Operational Control ETV:IDS tividenofusp alfa Ph 1/2 Hunter syndrome (MPS II) Denali Ph 2/3 ETV:SGSH zafinofusp alfa Ph 1/2 Sanfilippo syndrome Type A (MPS IIIA) Denali PTV:PGRN DNL593 Ph 1/2 FTD-GRN Denali ETV:GAA DNL952 Ph 1 Pompe disease Denali OTV:MAPT DNL628 Ph 1b Alzheimer’s disease Denali ATV: Abeta DNL 921 Ph 1/1b Alzheimer’s disease Denali LRRK2 DNL151 Ph 2a Parkinson's disease Denali RIPK1 (Peripheral) eclitasertib, or SAR443122/DNL758 Ph 2 UC Sanofi ______________________________________________________________________________ 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 in 2026 to date include: •In January 2026, we announced that the FDA has lifted the clinical hold on the IND application for DNL952 (ETV:GAA), and we are enrolling the Phase 1 study; •In January 2026, we announced that the CTA for DNL628 (OTV:MAPT) to initiate a Phase 1b study in Alzheimer’s disease was approved. In March 2026, the first patient was dosed in the Phase 1b study of DNL628; •In February 2026, we presented preliminary open-label Phase 1/2 data for our zafinofusp alfa study at the 2026 WORLDSymposium demonstrating that treatment with zafinofusp alfa resulted in substantial reductions in both cerebrospinal fluid (CSF) and urine heparan sulfate (HS), including normalization of CSF HS, with a safety profile generally consistent with established enzyme replacement therapies; 28 Table of Contents •In March 2026, we announced the FDA granted accelerated approval for AVLAYAH, the first FDA-approved biologic specifically designed to cross the blood-brain barrier and reach the whole body, including the brain. We began commercial distribution of AVLAYAH in April 2026. In connection with the approval of AVLAYAH, the FDA granted us a Rare Pediatric Disease PRV; •In March 2026, we received $200.0 million in gross proceeds in connection with the closing of the synthetic royalty funding agreement with Royalty Pharma Investments 2023 ICAV (“Royalty Pharma”); •In April 2026, we received notification from Takeda of its decision to terminate the collaboration agreement to co-develop and co-commercialize DNL593 (PTV:PGRN) for FTD-GRN. The termination became effective in June 2026, at which time all rights in the DNL593 program reverted to Denali. Takeda’s decision to terminate the collaboration agreement for DNL593 was driven by strategic considerations and not related to efficacy or safety data. We continue to conduct the Phase 1/2 study of DNL593 for FTD-GRN; •In May 2026, we and Biogen announced topline results from the Phase 2b LUMA study of BIIB122/DNL151 in individuals with early-stage Parkinson's disease. The LUMA study did not meet its primary or secondary endpoints, and we and Biogen decided to discontinue further development of BIIB122/DNL151 in idiopathic Parkinson's disease. We continue to independently conduct the Phase 2a BEACON study evaluating DNL151 in individuals with Parkinson's disease who carry a pathogenic LRRK2 variant; •In June 2026, we entered into a definitive agreement to sell our Rare Pediatric Disease Priority Review Voucher for gross proceeds of $195.0 million. The transaction closed and proceeds were received in July 2026; and •In the first half of 2026, we submitted a clinical trial application to initiate a Phase 1/1b study of DNL921 (ATV:Abeta) in healthy volunteers and participants with Alzheimer's disease, and we are conducting the study; Until March 2026, we had no clinical products approved for commercial sale and thus had not generated any revenue from product candidates that are or were under development. Subsequent to receiving FDA approval for AVLAYAH, we began commercial distribution in April 2026. We expect it to take time to generate sufficient revenue to offset our expenses, and we can provide no assurance as to when, if ever, this will occur. Through June 30, 2026, we have funded our operations primarily from the issuance and sale of convertible preferred stock, the sale of common stock and pre-funded warrants to purchase shares of our common stock in public offerings and private placements, and payments received from our collaboration, synthetic royalty and other funding agreements with Takeda, Sanofi, Biogen, Royalty Pharma and other third parties. We have incurred significant operating losses to date and expect to continue to incur operating losses for the foreseeable future. We had net losses of $127.6 million and $256.0 million for the three and six months ended June 30, 2026, respectively, and $124.1 million and $257.1 for the three and six months ended June 30, 2025, respectively. As of June 30, 2026, we had an accumulated deficit of $2.31 billion. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates. We expect to continue to incur significant expenses and operating losses as we advance our approved product AVLAYAH to full US and broader global approval; advance our current clinical stage programs through healthy volunteer and patient trials; broaden and improve our TV platform; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. 29 Table of Contents Through 2024, we relied entirely on third-party contract manufacturers to manufacture and supply our preclinical and clinical materials to be used during the development of our product candidates through 2024. In early 2025, we opened our clinical biomanufacturing facility in Salt Lake City, Utah, expanding U.S. manufacturing capabilities and strengthening supply chain control and operational efficiency. Going forward, we plan to use both our SLC facility and third-party contract manufacturers to supply our preclinical and clinical materials. We currently use third-party contract manufacturers to supply commercial product of AVLAYAH, and expect to continue to do so for the foreseeable future. Components of Operating Results Product Revenue Following FDA approval of AVLAYAH in March 2026, we commenced commercial distribution in the United States during the second quarter of 2026. Product revenue consists of sales of AVLAYAH, our only commercial product, and is recognized at the net selling price. Product revenue is reduced by estimates of variable consideration, including distributor service fees, government rebates, product returns and other fees and incentives. Product revenue may fluctuate based on patient demand, reimbursement, payer mix and distributor ordering patterns. Operating Expenses Cost of Goods Sold Cost of goods sold consists primarily of direct and indirect costs related to the manufacture of AVLAYAH for commercial distribution, including third-party manufacturing costs, raw material and component costs, packaging services, freight, and storage costs. Research and Development Research and development activities account for a significant portion of our operating expenses. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and TV platform include: •external research and development expenses, including: –expenses incurred under arrangements with third parties, such as contract research organizations ("CROs"), preclinical testing organizations, contract development and manufacturing organizations ("CDMOs"), academic and non-profit institutions and consultants; –expenses to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; –fees related to our license and collaboration agreements; •personnel related expenses, including salaries, benefits and stock-based compensation expense; and •other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis once a program has commenced late-stage IND-enabling studies. 30 Table of Contents Program expenses include expenses associated with our most advanced product candidates and the discovery and development of backup or next-generation molecules. We also track external expenses associated with our TV platform. These expenses include external expenses incurred by us relating to our Takeda Collaboration Agreement and Biogen Collaboration Agreement. All external costs associated with earlier stage programs, or that benefit the entire portfolio, are tracked as a group. We also incur personnel and other operating expenses for our research and development programs which are presented in aggregate. These expenses primarily relate to salaries and benefits, stock-based compensation, facility expenses including rent and depreciation, and lab consumables. Where we share costs with our collaboration partners, such as in our Biogen Collaboration Agreement and Takeda Collaboration Agreement, research and development expenses may include cost sharing reimbursements from, or payments to, our collaboration partners. Further, where we receive R&D funding from third parties, this may be recognized as a reduction to research and development expenses. It is challenging to predict the nature, timing and estimated long-range costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. This is made more challenging by events outside of our control, such as increased geopolitical uncertainty. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of: •our ability to add and retain key research and development and commercial, sales and marketing personnel; •our ability to establish an appropriate safety profile with IND-enabling toxicology studies; •our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates; •our successful enrollment in and completion of clinical trials; •the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations; •our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules; •our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved; •the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; •our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved; •our receipt of marketing approvals from applicable regulatory authorities; •our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and •the continued acceptable safety profiles of the product candidates following approval. 31 Table of Contents A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase at least over the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Selling, General and Administrative Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and stock-based compensation expense, expenses for outside professional services, commercialization activities, and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees, including those associated with our commercial organization. Allocated expenses consist of rent, depreciation and other expenses related to our office and research and development facility not otherwise included in research and development expenses. We have increased our headcount to support the commercialization of AVLAYAH and may continue to increase headcount to support our commercial and research and development activities, which we expect will increase selling, general and administrative expenses. Intangible Asset Amortization Intangible asset amortization consists of amortization of our intangible asset, which represents the developed technology recognized in connection with the FDA approval of AVLAYAH in March 2026. We amortize this asset on a straight-line basis over its estimated useful life. We began recognizing intangible asset amortization in the second quarter of 2026 and did not record any such expense prior to that period. Interest and Other Income, Net Interest and other income, net, consists primarily of interest income, investment income earned on our cash, cash equivalents and marketable securities, and sublease income, as well as an offset for non-cash interest expense related to the revenue participation right liability and interest expense on our finance lease liability. 32 Table of Contents Results of Operations Comparison of the three and six months ended June 30, 2026 and 2025 The following table sets forth the significant components of our results of operations (in thousands): Three Months Ended June 30, Change 2026 2025 $ % Revenue: Product revenue, net $ 3,604 $ — $ 3,604 * % Total revenue 3,604 — 3,604 * Operating expenses: Cost of goods sold 93 — 93 * Research and development 97,019 102,696 (5,677) (6) Selling, general and administrative 36,283 32,267 4,016 12 Intangible asset amortization 750 — 750 * Total operating expenses 134,145 134,963 (818) (1) Loss from operations (130,541) (134,963) 4,422 (3) Interest and other income, net 2,988 10,844 (7,856) (72) Net loss $ (127,553) $ (124,119) $ (3,434) 3 % Six Months Ended June 30, Change 2026 2025 $ % Revenue: Product revenue, net $ 3,604 $ — $ 3,604 * % Total revenue 3,604 — 3,604 * Operating expenses: Cost of goods sold 93 — 93 * Research and development 200,865 218,923 (18,058) (8) Selling, general and administrative 69,794 61,620 8,174 13 Intangible asset amortization 750 — 750 * Total operating expenses 271,502 280,543 (9,041) (3) Loss from operations (267,898) (280,543) 12,645 (5) Interest and other income, net 11,898 23,454 (11,556) (49) Net loss $ (256,000) $ (257,089) $ 1,089 — % _____________________________________________ *Percentage is not meaningful. Product revenue, net Product revenue was $3.6 million for the three and six months ended June 30, 2026, compared to no product revenue in the prior-year periods. The increase was due to the FDA approval of AVLAYAH in March 2026 and commencement of commercial sales in the United States during the second quarter of 2026. Product revenue reflects sales of AVLAYAH, net of estimates for variable consideration, including distributor service fees, government rebates, product returns and other fees and incentives. Cost of goods sold 33 Table of Contents Cost of goods sold was $0.1 million for the three and six months ended June 30, 2026, compared to no cost of goods sold in the prior-year periods. Because manufacturing costs incurred prior to FDA approval of AVLAYAH were expensed to research and development, cost of goods sold during the initial commercialization period reflects a lower average per-unit cost of materials as previously expensed inventory is sold. Research and development expenses Research and development expenses were $97.0 million and $102.7 million for the three months ended June 30, 2026 and 2025, respectively, and $200.9 million and $218.9 million for the six months ended June 30, 2026 and 2025, respectively. The following tables provide a breakdown of our research and development expenses by category (in thousands): Three Months Ended June 30, Change 2026 2025 $ % External research and development expenses - TV programs, including cost sharing $ 40,419 $ 37,594 $ 2,825 8 % Other research and development expenses, including small molecule programs 16,494 24,847 (8,353) (34) Personnel related expenses(1) 40,106 40,255 (149) — Total research and development expenses $ 97,019 $ 102,696 $ (5,677) (6) % __________________________________________________ (1)Personnel related expenses include stock-based compensation expense of $13.5 million and $15.2 million for the three months ended June 30, 2026 and 2025, respectively, reflecting a decrease of $1.7 million. The decrease in research and development expenses of approximately $5.7 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, was primarily attributable to the following: •a decrease of $8.4 million in other research and development expenses is driven by lower cost for BIIB122/DNL151 and DNL343; partially offset by increased purchasing of raw materials at our large molecule manufacturing facility in Salt Lake City, Utah; •an increase of $2.8 million in TV programs external research and development expenses is driven by manufacturing expenses and clinical expenses for zafinofusp alfa; partially offset by lower manufacturing expenses for DNL628, and lower clinical expense for tividenofusp alfa. Six Months Ended June 30, Change 2026 2025 $ % External research and development expenses - TV programs, including cost sharing $ 78,883 $ 84,052 $ (5,169) (6) % Other research and development expenses 40,048 54,347 (14,299) (26) Personnel related expenses(1) 81,934 80,524 1,410 2 Total research and development expenses $ 200,865 $ 218,923 $ (18,058) (8) % (1)Personnel related expenses include stock-based compensation expense of $27.0 million and $30.3 million for the six months ended June 30, 2026 and 2025 respectively, reflecting a decrease of $3.3 million. The decrease in research and development expenses of approximately $18.1 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, was primarily attributable to the following: 34 Table of Contents •a decrease of $14.3 million in other research and development expenses is driven by lower clinical expenses for BIIB122/DNL151 and DNL343; partially offset by increased purchasing of raw material at our large molecule manufacturing facility in Salt Lake City, Utah; •a decrease of $5.2 million in external TV research and development expenses driven by lower external manufacturing expense partially offset by higher clinical expenses for zafinofusp alfa, DNL952 and DNL628, and higher pre-clinical expenses; •an increase of $1.4 million in personnel-related expenses driven by increased headcount year over year. Selling general and administrative expenses Selling, general and administrative expense was $36.3 million and $32.3 million for the three months ended June 30, 2026 and 2025 respectively. The $4.0 million increase was primarily driven by: •An increase of $2.8 million in personnel expenses driven by increased headcount related to the commercial launch of AVLAYAH •An increase of $1.2 million in other selling general and administration costs driven by increased South San Francisco site costs Selling, general and administrative expense was $69.8 million and $61.6 million for the six months ended June 30, 2026, and 2025, respectively. The $8.2 million increase was primarily driven by: •An increase of $6.6 million in personnel expenses driven by increased headcount related to the commercial launch of AVLAYAH •An increase of $1.5 million in other selling general and administration costs driven by increased South San Francisco site costs; partially offset by lower IT project expenses Intangible Asset Amortization Intangible asset amortization was $0.7 million and zero for both the three and six months ended June 30, 2026 and 2025, respectively. The intangible asset, which consists of developed technology recognized in connection with the FDA approval of AVLAYAH in March 2026, began amortizing in the second quarter of 2026 on a straight-line basis over its estimated useful life. Interest and other income, net Interest and other income, net was $3.0 million and $10.8 million for the three months ended June 30, 2026 and 2025, respectively. The decrease of approximately $7.8 million was primarily driven by $5.9 million of non-cash interest expense related to the revenue participation right liability under the Royalty Pharma synthetic royalty funding agreement, which commenced in the second quarter of 2026. Interest and other income, net was $11.9 million and $23.5 million for the six months ended June 30, 2026 and 2025, respectively. The decrease of approximately $11.6 million was primarily driven by: •Lower interest income due to lower average cash and investment balances; •Lower yields on our investment portfolio; and •$5.9 million of non-cash interest expense related to the revenue participation right liability under the Royalty Pharma funding agreement, which commenced in the second quarter of 2026. 35 Table of Contents Liquidity and Capital Resources Sources of Liquidity As of June 30, 2026, we had cash, cash equivalents and marketable securities in the amount of $940.0 million. We fund our operations primarily with the proceeds from the sale of common stock and payments received from our collaboration partners, including those received under agreements with Takeda, Sanofi, and Biogen. Following the commercial launch of AVLAYAH, we expect product revenue to contribute to funding our operations, and our liquidity requirements will include working capital to support commercial inventory, patient support programs, market access activities, distribution arrangements, pharmacovigilance obligations and continued investment in commercial infrastructure. Although we expect AVLAYAH product revenue to contribute to funding our operations, we do not expect such revenue to be sufficient to offset our operating expenses in the near term. We have sold common stock and other securities in public offerings, a private placement, and stock purchase agreements with Takeda and Biogen. Through June 30, 2026, we have obtained aggregate net proceeds of approximately $956.1 million from public offerings of our common stock, including $12.4 million obtained through the sale of 746,468 shares of common stock in January 2026. In March 2026, we received $200.0 million in gross proceeds in connection with the closing of the synthetic royalty funding agreement with Royalty Pharma, triggered by the U.S. Food and Drug and Administration’s accelerated approval of AVLAYAH. Under stock purchase agreements with collaboration partners we have received a further $575.0 million through June 30, 2026. Further, in February 2024, we received net proceeds of approximately $499.3 million from our private placement through the sale of approximately 3.2 million shares of common stock and pre-funded warrants to purchase approximately 26.0 million shares of our common stock. In February 2025, we established a registered “at-the-market” facility for the potential future sale of up to $400.0 million of shares of common stock from time to time by entering into an equity distribution agreement with Goldman Sachs & Co. LLC and Leerink Partners LLC as sales agents. To date, no shares have been sold under either equity distribution agreement. All sales under the current equity distribution agreement are conditioned upon satisfaction of customary closing conditions. Through June 30, 2026, we have received $115.0 million, $225.0 million, $565.0 million and $62.5 million, pursuant to our collaboration and research and development funding agreements with Takeda, Sanofi, Biogen and an unrelated third party, respectively. These payments include upfront, option and milestone payments. Additionally, we have received $58.2 million and $16.2 million in gross cost sharing reimbursements from Takeda and Biogen, respectively, and received $13.7 million in specified reimbursements from Sanofi. In July 2026, we completed the sale of our Rare Pediatric Disease PRV for gross proceeds of $195.0 million. Future Funding Requirements and Commitments Prior to the FDA approval of AVLAYAH, we had not generated any product revenue. Following the FDA approval of AVLAYAH, we commenced commercialization in April 2026 and have begun generating product revenue; however, we expect it to take time to generate sufficient revenue to offset our expenses, and we can provide no assurance as to when, if ever, this will occur. We do not expect to generate any product revenue from our other product candidates unless and until we obtain regulatory approval for those product candidates, and we do not know when, if ever, this will occur. 36 Table of Contents We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we expand our research and development activities and continue the development of, and seek regulatory approvals for, our product candidates, and commercialize AVLAYAH and any additional approved products. Further, we expect general and administrative expenses to increase as we continue to incur additional costs associated with supporting our growing operations, including commercialization activities. We are subject to all of the risks typically related to the development of new product candidates, as well as risks associated with the commercialization of an approved product, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations. Until we can generate sufficient revenue from the commercialization of AVLAYAH and any future approved products, or from our existing collaboration agreements, or future agreements with other third parties, if ever, we expect to finance our future cash needs through public or private equity, debt or other alternative financings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates, or our commercial operations. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could significantly harm our business, financial condition and prospects. Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $2.31 billion as of June 30, 2026. We expect to incur substantial additional losses in the future as we support the commercialization of AVLAYAH and conduct and expand our research and development activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the twelve months following the filing date of this Quarterly Report on Form 10-Q, including our existing commitments as outlined below. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In the longer term, we anticipate that we will need substantial additional resources to fund our operations and meet future commitments. Our existing commitments primarily relate to our obligations under existing lease agreements, certain commercial product, clinical and manufacturing agreements. As of June 30, 2026, we had total undiscounted lease payment obligations of $47.8 million. We had total non-refundable purchase commitments of $104.7 million as of June 30, 2026. While the lease obligations span multiple years, the majority of the purchase commitments are due within the upcoming twelve months. Further, we may be required to make contingent payments under existing arrangements upon the achievement of defined clinical, regulatory and commercial milestones in certain programs, including contingent consideration payments to former shareholders of F-star under the F-star Gamma license, and milestone and royalty payments to Genentech under the Genentech License Agreement. These commitments are more fully described in Note 10 "Commitments and Contingencies" of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and in Note 4, "Acquisition, License Agreement and Research and Development Funding Collaboration Agreement" and Note 7, "Commitments and Contingencies" to the consolidated financial statements included in Item 8. of our Annual Report on Form 10-K filed on February 26, 2026. 37 Table of Contents In March 2026, we received $200.0 million in gross proceeds under the Royalty Agreement with Royalty Pharma, which was initially recorded as a liability related to the revenue participation right on our Condensed Consolidated Balance Sheet in the first quarter of 2026. Under the Royalty Agreement, we may receive an additional $75.0 million upon approval of AVLAYAH by the EMA on or before December 31, 2029. In exchange, Royalty Pharma is entitled to a 9.25% royalty on worldwide net sales of AVLAYAH until cumulative royalty payments reach a cap of 3.0 times the total funding received, or 2.5 times the total funding received if such cap is reached on or before the first quarter of 2039. These obligations are described in this Quarterly Report on Form 10-Q in Note 9, “Liability Related to the Revenue Participation Right”. Our future funding requirements, including any changes to existing commitments or the establishment of new commitments, will depend on many factors, including: •our ability to obtain regulatory approval for our product candidates, establish sales and marketing capabilities, and successfully market such approved product candidates, including the successful commercialization of AVLAYAH; •the timing and progress of preclinical and clinical development activities; •the number and scope of preclinical and clinical programs we decide to pursue; •the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements; •our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements; •our ability and success in securing manufacturing relationships with third parties or in operating a manufacturing facility; •the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims; •the cost and timing of regulatory approvals; •our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and •the costs and ongoing investments to in-license and/or acquire additional technologies; •the rate and degree of market acceptance of AVLAYAH, including physician adoption, persistence and payer coverage; •the amount and timing of product revenue from AVLAYAH, including the impact of variable consideration, reimbursement timing and distributor ordering patterns; •the cost of commercialization activities, including sales, marketing, market access, medical affairs, patient support, distribution and pharmacovigilance; •our ability to maintain adequate commercial supply of AVLAYAH through third-party manufacturers and manage commercial inventory levels. 38 Table of Contents A change in the outcome of any of these or other variables with respect to the development and delivery of any of our product candidates could significantly change the costs and timing associated with the development and delivery of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. Cash Flows The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below (in thousands): Six Months Ended June 30, 2026 2025 Net cash used in operating activities $ (228,206) $ (206,766) Net cash provided by (used in) investing activities (9,618) 176,683 Net cash provided by (used in) financing activities 234,028 (2,139) Net decrease in cash, cash equivalents and restricted cash $ (3,796) $ (32,222) Net Cash Used In Operating Activities During the six months ended June 30, 2026, net cash used in operating activities was $228.2 million, which consisted of a net loss of $256.0 million, adjusted by non-cash items primarily related to stock-based compensation expense, depreciation and amortization, net accretion of discounts on marketable securities, non-cash interest expense related to revenue participation right liability, and non-cash rent expenses. Cash used in operating activities was also driven by changes in our operating assets and liabilities. Net Cash Used In Investing Activities During the six months ended June 30, 2026, net cash used in investing activities was $9.6 million, which consisted of $394.6 million for purchases of marketable securities, $28.8 million in milestone payments related to intangible assets, and $3.3 million in capital expenditures to purchase property and equipment. partially offset by $417.0 million in proceeds from the maturities of marketable securities. Net Cash Provided By Financing Activities During the six months ended June 30, 2026, cash provided by financing activities was $234.0 million, which consisted of $200.0 million in gross proceeds related to the sale of the revenue participation right under the synthetic royalty funding agreement with Royalty Pharma, $12.4 million in proceeds from public offerings of our common stock, and $21.7 million in proceeds from the exercise of stock options. 39 Table of Contents Critical Accounting Estimates This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in detail in the notes to our condensed consolidated financial statements included elsewhere in this report. In our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, we described the accounting estimates that we believe involve a significant level of estimation uncertainty which could have a material impact on our financial condition or results of operations. There have been no material changes to these critical accounting estimates during the six months ended June 30, 2026, except as discussed in the notes to our condensed consolidated financial statements with respect to accounting policies adopted upon the commercialization of AVLAYAH. Recent Accounting Pronouncements There have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2026, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 26, 2026, that are of significance or potential significance to us. 40 Table of Contents