Company: DNLI
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001714899-25-000066
Chunk: 107

Company: Denali Therapeutics Inc.
Filing Date: 2025-02-27
Form: 10-K
Item: Item 7
Chunk 107
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 arrangement and at each reporting period (estimating valuation of share premium payments, constraint of future variable consideration); (3) Allocation of the transaction price to the performance obligations at the outset of a collaboration arrangement (estimating the standalone selling price of identified performance obligations); and (4) Recognition of revenue when (or as) we satisfy each performance obligation, assessed at each reporting period (when the performance obligation has been satisfied for point-in time recognition, the extent of satisfaction of an obligation for recognition over time).

Research and Development Expenses

A significant portion of our research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss are external costs. These research and development expenses include the conduct of preclinical studies and clinical trials, contract manufacturing activities and consulting services. The measurement of these research and development expenses can impact the measurement of research and development expenses in the Consolidated Statements of Operations and Comprehensive Loss, and of prepaid assets and accrued liabilities on the Consolidated Balance Sheets. 

The level of judgment required to estimate research and development expenses varies based on the nature of the services being performed and the underlying support obtained. We estimate the amount of work completed based on information received from internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, incomplete or inaccurate data from vendors could impact our understanding of the status and timing of services performed which could result in us reporting expenses that are too high or too low in any particular period. 

In some cases, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. For other activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. To date, there have been no material true ups from estimated to actual external research and development expenses. However, we expect that the level of judgment in estimating research and development expenses may increase over time as we are entering later stage, more extensive, clinical trials. 

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Research and development expenses also include reimbursements owed or owing to a