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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 2024
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: 001-39263
Zentalis Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware82-3607803
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
10275 Science Center Dr., Suite 200
San Diego,
 California
92121
(Address of principal executive offices)(Zip Code)
(858) 263-4333
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock,
$0.001 par value per share
ZNTL
The Nasdaq Stock Market LLC (The Nasdaq Global 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 filer
☒
  Accelerated filer☐
Non-accelerated Filer☐  Smaller 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  ☒
As of August 7, 2024, the registrant had 71,107,967 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements within the meaning of the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “design,” “aim,” “support,” “advance,” “continue,” “goal,” “milestone,” “foreseeable,” “may prove,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•our ability to resolve the previously disclosed partial clinical hold placed by the U.S. Food and Drug Administration, or FDA, on certain of our azenosertib (ZN-c3) clinical studies;
•our plans to update certain guidance following resolution of the partial clinical hold;
•our competitive position and our industry;
•our expectations, projections and estimates regarding our capital requirements, need for additional capital, financing our future cash needs, costs, expenses, revenues, capital resources, cash flows, financial performance, profitability, tax obligations, liquidity, growth, contractual obligations, the period of time our cash resources will fund our current operating plan, our internal control over financial reporting and disclosure controls and procedures;
•the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
•the global macroeconomic environment and increased inflation and interest rates;
•the timing and focus of our ongoing and future preclinical studies and clinical trials, including the reporting of data from those studies and trials and the timing thereof;
•the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;
•the potential for azenosertib to be first-in-class and best-in-class;
•our and our collaborators’ strategy, plans and expectations with respect to the development, manufacturing, supply, approval and commercialization of our product candidates and the timing thereof;
•the designs of our studies and the type of information and data expected from our studies and the expected benefits thereof;
•our ability to obtain and maintain any marketing authorizations and our ability to complete post-marketing requirements with respect thereto;
•the timing and amounts of payments from or to our collaborators, licensors and licensees, and the anticipated arrangements and benefits under our collaboration and license agreements, including with respect to milestones and royalties;
•our pipeline, including its potential, and our related research and development activities;
•our plans relating to our biomarker enrichment strategies targeting tumors with high levels of replication stress, such as Cyclin E1 positive tumors, homologous recombination deficient tumors, and tumors with oncogenic driver mutations;
•our plans relating to the further development of our product candidates, including program timelines, potential paths to registration, and additional indications we may pursue;
•our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms and processes on a timely basis, or at all, with third-party payors for our product candidates, if approved;
•our plans, including the costs thereof, of development of any diagnostic tools;
•our plans to evaluate additional strategic opportunities to maximize the value of our pipeline;
•our plans to advance our ongoing research on protein degrader programs as well as novel small molecule inhibitors designed to inhibit undisclosed targets;
•our plans to develop our product candidates in combination with other therapies;
•our existing collaborations and our ability to obtain, and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
•timing and likelihood of success of our research, development and commercialization efforts;
•timing of expected milestones, and the announcement thereof;
•the size of the market opportunity for our product candidates;
ii

•our expectations regarding the approval and use of our product candidates as first, second or subsequent lines of therapy or in combination with other drugs;
•the timing or likelihood of regulatory filings and approvals;
•our ability to obtain and maintain regulatory approval of our product candidates;
•existing regulations and regulatory developments in the United States, the European Union, or the EU, and other jurisdictions;
•our intellectual property position, including obtaining and maintaining patents, and the timing, outcome and impact of administrative, regulatory, legal and other proceedings relating to our patents and other proprietary and intellectual property rights, and the timing and resolution thereof;
•our facilities, lease commitments, and future availability of facilities;
•accounting standards and estimates, their impact, and their expected timing of completion;
•cybersecurity and information security;
•expected ongoing reliance on third parties, including with respect to the development, manufacturing, supply and commercialization of our product candidates;
•insurance coverage;
•estimated periods of performance of key contracts; and
•the need to hire additional personnel and our ability to attract and retain personnel, and our ability to provide competitive compensation and benefits.
The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties, assumptions and other important factors, including those described under “Summary Risk Factors” below and in the sections in this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, they may turn out to be inaccurate and you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results, financial condition, performance or achievements could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

ZENTALIS® and its associated logo are registered trademarks of Zentalis. All other trademarks, trade names and service marks appearing in this Quarterly Report are the property of their respective owners. All website addresses given in this Quarterly Report are for information only and are not intended to be an active link or to incorporate any website information into this document.


iii

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

•We have a limited operating history and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.
•We have incurred significant net losses since inception and we expect to continue to incur significant net losses for the foreseeable future.
•We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts.
•We are substantially dependent on the success of our lead product candidate, azenosertib. If we are unable to resolve the partial clinical hold, complete development of, obtain approval for and commercialize azenosertib in a timely manner, our business will be harmed.
•The clinical trials of our product candidates may not demonstrate safety and efficacy to the satisfaction of the FDA or other comparable ex-U.S. regulatory authorities or otherwise produce positive results.
•If we are unable to successfully develop diagnostic tools for biomarkers that enable patient selection, or experience significant delays in doing so, we may not realize the full commercial potential of our product candidates.
•We are developing our product candidates in combination with other therapies, which exposes us to additional risks.
•The regulatory approval processes of the FDA and other comparable ex-U.S. regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.
•We face significant competition and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.
•Our success depends on our ability to protect our intellectual property and our proprietary platform. If we are unable to adequately protect our intellectual property and our proprietary platform, or to obtain and maintain issued patents which are sufficient to protect our product candidates, then others could compete against us more directly, which would negatively impact our business.
•Our existing collaborations are important to our business and future licenses may also be important to us and, if we are unable to maintain any of these collaborations, or if these arrangements are not successful, our business could be adversely affected.
•We rely, and expect to continue to rely, on third parties, including independent clinical investigators and CROs, to conduct certain aspects of our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
•Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.
•The competition for qualified personnel is particularly intense in our industry. If we are unable to retain or hire key personnel, then we may not be able to sustain or grow our business.
•Unfavorable U.S., global, political or economic conditions could adversely affect our business, financial condition or results of operations.
•Business interruptions could adversely affect our operations.
iv

PART I—FINANCIAL INFORMATION
3

Item 1. Financial Statements.
Zentalis Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts and par value)
June 30,December 31,
 20242023
ASSETS
Current assets
Cash and cash equivalents$36,976 $28,038 
Marketable securities, available-for-sale389,409 454,881 
Prepaid expenses and other current assets13,231 13,799 
Total current assets439,616 496,718 
Property and equipment, net5,337 5,819 
Operating lease right-of-use assets33,474 35,916 
Prepaid expenses and other assets6,836 6,818 
Goodwill3,736 3,736 
Restricted cash2,681 2,681 
Total assets$491,680 $551,688 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$20,440 $14,926 
Accrued expenses46,252 54,441 
Total current liabilities66,692 69,367 
Long-term lease liability41,318 43,150 
Other long-term liabilities1,089 1,780 
Total liabilities109,099 114,297 
Commitments and contingencies
EQUITY
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2024 and December 31, 2023
— — 
Common stock, $0.001 par value; 250,000,000 shares authorized; 71,106,719 and 70,765,554 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
71 70 
Additional paid-in capital
1,349,135 1,323,576 
Accumulated other comprehensive income
140 2,194 
Accumulated deficit(966,765)(888,556)
Total stockholders’ equity382,581 437,284 
Noncontrolling interests— 107 
Total equity382,581 437,391 
Total liabilities and stockholders’ equity$491,680 $551,688 

See notes to condensed consolidated financial statements.


4

Zentalis Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2024 202320242023
License Revenue
$— $— $40,560 $— 
Operating Expenses 
Research and development48,386 42,684 $97,971 $91,268 
Zentera in-process research and development— 45,568 — 45,568 
General and administrative16,762 15,664 32,502 32,033 
Total operating expenses65,148 103,916 130,473 168,869 
Loss from operations
(65,148)(103,916)(89,913)(168,869)
Other Income (Expense)
Investment and other income (expense), net
(22,863)4,451 12,085 8,560 
Net loss before income taxes
(88,011)(99,465)(77,828)(160,309)
Income tax expense (benefit)
266 (605)409 (497)
Loss on equity method investment— 13,704 — 16,014 
Net loss
(88,277)(112,564)(78,237)(175,826)
Net loss attributable to noncontrolling interests— (37)(28)(80)
Net loss attributable to Zentalis
$(88,277)$(112,527)$(78,209)$(175,746)
Net loss per common share outstanding, basic and diluted$(1.24)$(1.85)$(1.10)$(2.93)
Common shares used in computing net loss per share, basic and diluted71,040 60,790 70,969 60,038 

See notes to condensed consolidated financial statements.
5

Zentalis Pharmaceuticals, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Net loss$(88,277)$(112,564)$(78,237)$(175,826)
Other comprehensive income (loss):
Unrealized income (loss) on marketable securities(633)218 (2,054)1,015 
Total comprehensive loss(88,910)(112,346)(80,291)(174,811)
Comprehensive loss attributable to noncontrolling interests— (37)(28)(80)
Comprehensive loss attributable to Zentalis$(88,910)$(112,309)$(80,263)$(174,731)

See notes to condensed consolidated financial statements.
6

Zentalis Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 Six Months Ended
June 30,
 20242023
Operating Activities: 
Consolidated net loss
$(78,237)$(175,826)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization651 704 
Operating lease right-of-use asset and fixed asset impairment — 4,953 
Noncash consideration portion of Zentera in-process research and development— 15,045 
Loss on equity method investment— 16,014 
Share-based compensation25,544 27,075 
Loss on disposal of equipment
(13)(4)
Non-cash impact of license revenue
(25,560)— 
Non-cash recognized mark-to-market of equity securities
(2,253)— 
Accretion of discounts on marketable securities, net
(4,960)(6,483)
Deferred income taxes— (853)
Deconsolidation of Kalyra
(79)— 
Changes in operating assets and liabilities:
Prepaid expenses and other assets550 (3,922)
Accounts payable and accrued liabilities(3,452)(5,805)
Operating lease right-of-use assets and liabilities, net696 544 
Net cash used in operating activities(87,113)(128,558)
Investing Activities:
Purchases of marketable securities(29,509)(189,085)
Proceeds from maturities of marketable securities125,700 304,457 
Proceeds from sale of property and equipment
65 — 
Purchases of property and equipment(221)(319)
Net cash provided by investing activities
96,035 115,053 
Financing Activities:
Proceeds from issuance of common stock, net— 235,680 
Proceeds from issuance of common stock under equity incentive plans257 1,314 
Net-settlement of restricted stock unit vesting
(241)— 
Net cash provided by financing activities16 236,994 
Net increase in cash, cash equivalents and restricted cash
8,938 223,489 
Cash, cash equivalents and restricted cash at beginning of period30,719 45,696 
Cash, cash equivalents and restricted cash at end of period$39,657 $269,185 

7

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Statements of Cash Flows for the periods presented:
June 30,
20242023
Cash and cash equivalents$36,976 $266,558 
Restricted cash2,681 2,627 
Total cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statement of Cash Flows$39,657 $269,185 
See notes to condensed consolidated financial statements.
8



Zentalis Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)

Three Months Ended June 30, 2024
CommonAdditional
Paid-In
Capital		Accumulated Other Comprehensive IncomeAccumulated
Deficit
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at March 31, 202471,013 $70 $1,336,416 $773 $(878,488)$— $458,771 
Share-based compensation expense— — 12,711 — — — 12,711 
Other comprehensive loss
— — — (633)— — (633)
Issuance and withholding of common stock in connection with restricted stock unit vesting, net
94 1 — — — 1 
Issuance of common stock upon exercise of options, net— — 8 — — — 8 
Net loss attributable to Zentalis
— — — — (88,277)— (88,277)
Balance at June 30, 202471,107 $71 $1,349,135 $140 $(966,765)$— $382,581 

Six Months Ended June 30, 2024
CommonAdditional
Paid-In
Capital		Accumulated Other Comprehensive IncomeAccumulated
Deficit
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at December 31, 202370,767 $70 $1,323,576 $2,194 $(888,556)$107 $437,391 
Share-based compensation expense— — 25,544 — — — 25,544 
Other comprehensive loss
— — — (2,054)— — (2,054)
Issuance and withholding of common stock in connection with restricted stock unit vesting, net
322 1 (241)— — — (240)
Deconsolidation of Kalyra
— — — — — (79)(79)
Issuance of common stock upon exercise of options, net— — 8 — — — 8 
Shares issued under employee stock purchase plan18 — 248 — — — 248 
Net loss attributable to non-controlling interest— — — — — (28)(28)
Net loss attributable to Zentalis
— — — — (78,209)— (78,209)
Balance at June 30, 202471,107 $71 $1,349,135 $140 $(966,765)$— $382,581 



9

Three Months Ended June 30, 2023
CommonAdditional
Paid-In
Capital		Accumulated Other Comprehensive IncomeAccumulated
Deficit
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at March 31, 202359,442 $59 $1,045,568 $(556)$(659,584)$178 $385,665 
Share-based compensation expense— — 13,342 — — — 13,342 
Other comprehensive income
— — — 218 — — 218 
Issuance of common stock in connection with an equity offering, net of underwriting discounts, commissions and offering costs11,033 11 235,669 — — — 235,680 
Issuance of common stock in connection with restricted stock unit vesting79 — — — — — — 
Issuance of common stock upon exercise of options, net51 — 941 — — — 941 
Cancellation of restricted stock awards(1)— — — — — — 
Net loss attributable to non-controlling interest— — — — — (37)(37)
Net loss attributable to Zentalis — — — — (112,527)— (112,527)
Balance at June 30, 202370,604 $70 $1,295,520 $(338)$(772,111)$141 $523,282 
Six Months Ended June 30, 2023
CommonAdditional
Paid-In
Capital		Accumulated Other Comprehensive IncomeAccumulated
Deficit
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at December 31, 202259,280 $59 $1,031,462 $(1,353)$(596,365)$221 $434,024 
Share-based compensation expense— — 27,075 — — — 27,075 
Other comprehensive income
— — — 1,015 — — 1,015 
Issuance of common stock in connection with an equity offering, net of underwriting discounts, commissions and offering costs11,033 11 235,669 — — — 235,680 
Issuance of common stock in connection with restricted stock unit vesting, net218 — — — — — — 
Issuance of common stock upon exercise of options, net51 — 941 — — — 941 
Shares issued under employee stock purchase plan25 — 373 — — — 373 
Cancellation of restricted stock awards(3)— — — — — 
Net loss attributable to non-controlling interest— — — — (80)(80)
Net loss attributable to Zentalis — — — — (175,746)— (175,746)
Balance at June 30, 202370,604 $70 $1,295,520 $(338)$(772,111)$141 $523,282 


See notes to condensed consolidated financial statements.
10


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business
Organization
Zentalis Pharmaceuticals, Inc. (“Zentalis,” “We” or the “Company”) is a clinical-stage biopharmaceutical company discovering and developing small molecule therapeutics targeting fundamental biological pathways of cancers. The Company’s lead product candidate, azenosertib (ZN-c3), is a potentially first-in-class and best-in-class WEE1 inhibitor for advanced solid tumors and hematologic malignancies. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. All of the Company’s tangible assets are held in the United States.
Liquidity
Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that the interim unaudited condensed consolidated financial statements for the quarter ended June 30, 2024 are issued.
2. Interim Unaudited Financial Statements
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. The year-end condensed consolidated balance sheet data was derived from the Company’s audited financial statements but do not include all disclosures required by U.S. GAAP. These interim unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024. The unaudited financial information for the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operation for the periods presented, with such adjustments consisting only of normal recurring adjustments. Certain reclassifications have been made to the prior period condensed consolidated balance sheet to conform to the current period presentation.
The accompanying interim unaudited condensed consolidated financial statements include our wholly-owned subsidiaries and Kalyra Pharmaceuticals, Inc. (“Kalyra”), a variable interest entity (“VIE”) for which we were the primary beneficiary until Kalyra was dissolved in January 2024 (See Note 4 - Business Combinations for additional information). All intercompany transactions and balances have been eliminated in consolidation. Following the dissolution of Kalyra, we no longer have an interest in any VIEs.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable
11

under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Goodwill
Our goodwill, which has an indefinite useful life, represents the excess of the cost over the fair value of net assets acquired from its business combination. The determination of the value of goodwill and intangible assets arising from business combinations and asset acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired, including capitalized in-process research and development (“IPR&D”).
Goodwill is reviewed for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment. During the impairment review process, we consider qualitative factors to determine whether it is more likely than not the fair value of the reporting unit is less than the carrying amount, including goodwill. If we determine that it is not more likely than not that the fair value of our reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair values of the reporting units with the carrying values, including goodwill. If the carrying amounts of the reporting units exceed the fair values, we record an impairment loss based on the difference. We completed our most recent annual evaluation for impairment for goodwill as of June 30, 2024 using the qualitative and quantitative assessment and determined that no impairment existed, and no charges were recorded.
Significant Accounting Policies
During the six months ended June 30, 2024 we adopted the following significant accounting policies not previously reported in the Company’s significant accounting policies as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Investments in equity securities
We carry investments in equity securities at fair value and record the changes in fair values in the Consolidated Statement of Operations as a component of Investment and other income, net.
3. Significant Transactions
Immunome
In January 2024, Immunome, Inc. (“Immunome”) and Zentalis Pharmaceuticals, Inc. entered into an exclusive, worldwide license agreement under which Immunome licensed from Zentalis ZPC-21, a preclinical ROR1 antibody-drug conjugate (“ADC”) and stock issuance agreement (the “Stock Issuance Agreement”). The upfront consideration from Immunome amounted to $15.0 million in cash and $20.0 million in shares of Immunome common stock, with the shares valued at the trailing 30-day volume-weighted average price. On the date of execution of the transaction, the Immunome common stock was valued at $25.6 million. The performance obligation associated with this upfront payment was met as of March 31, 2024, and $40.6 million, comprised of cash and the fair value of the Immunome stock on the date of execution of the transaction, was recognized as license revenue, within the condensed consolidated statement of operations. The stock acquired was recorded at fair value on the date of acquisition, within marketable securities, available for sale on the condensed consolidated balance sheet.
Pursuant to the terms of the Stock Issuance Agreement, Zentalis agreed to hold and not sell greater than 50% of the shares until the six-month anniversary of the closing date, subject to certain exceptions. Changes in fair value of the Immunome stock for the three and six months ended June 30, 2024 amounted to a reduction of $28.9 million and an increase of $2.3 million, respectively, recorded as a component of investment and other income, net within the condensed consolidated statement of operations. There were no disposals of the acquired stock during the three and six months ended June 30, 2024.
12

4. Business Combinations
Kalyra Pharmaceuticals, Inc.
On December 21, 2017, we acquired $4.5 million of Kalyra’s Series B Preferred Stock representing a 25% equity interest in Kalyra for purposes of entering the analgesics therapeutic research space. The acquisition price was paid entirely in cash. On January 10, 2024, Kalyra was dissolved and we no longer have an ownership interest in Kalyra. The dissolution and deconsolidation of Kalyra had an immaterial impact on our consolidated financial statements.
In accordance with the authoritative guidance, we concluded that, prior to its dissolution, Kalyra was a business consisting of inputs, employees, intellectual property and processes capable of producing outputs. Additionally, we concluded that Kalyra was a VIE, we were the primary beneficiary and had the power to direct the activities that most significantly affected Kalyra’s economic performance through common management and our board representation. Prior to December 21, 2017, the Company and Kalyra transacted for the delivery of research and development services and support. The financial position and results of operations of Kalyra were included in our consolidated financial statements from the date of the initial investment up until the dissolution of Kalyra on January 10, 2024.
Pursuant with authoritative guidance, we recorded the identifiable assets, liabilities and noncontrolling interests in Kalyra at their fair value upon initial consolidation. The identified goodwill was comprised of the workforce and expected synergies from combining the entities. Total assets and liabilities of Kalyra as of June 30, 2024 and December 31, 2023 are zero and immaterial, respectively. The liabilities recognized as a result of consolidating Kalyra did not represent additional claims on our general assets. Pursuant to the authoritative guidance, the equity interest in Kalyra not owned by Zentalis was reported as a noncontrolling interest on our condensed consolidated balance sheets.
The following is a reconciliation of equity (net assets) attributable to the noncontrolling interest (in thousands):
June 30,December 31,
 20242023
Noncontrolling interest at beginning of period$107 $221 
Net loss attributable to noncontrolling interest(28)(114)
Deconsolidation of Kalyra
(79)— 
Noncontrolling interest at end of period$— $107 

13

5. Fair Value Measurement
Available-for-sale marketable debt securities consisted of the following (in thousands):
June 30, 2024
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Commercial paper
$15,337 $1 $(2)$15,336 
Corporate debt securities
251,641 246 (76)251,811 
US government agencies
40,940 1 (10)40,931 
US treasury securities
53,539 1 (22)53,518 
$361,457 $249 $(110)$361,596 
December 31, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Commercial paper
$75,227 $60 $(15)$75,272 
Corporate debt securities
229,896 2,036 — 231,932 
US government agencies
83,025 100 (78)83,047 
US treasury securities
64,538 103 (11)64,630 
$452,686 $2,299 $(104)$454,881 
As of June 30, 2024, twenty-two of our available-for-sale debt securities with a fair market value of $193.9 million were in a gross unrealized loss position of $0.1 million. Twenty-one have been in a gross unrealized loss position of $0.1 million for less than one year and one has been in a gross unrealized loss position of less than $0.1 million for more than one year. When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, our intent to sell or the likelihood that we would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. Based on our review of these marketable securities, we believe none of the unrealized loss is as a result of a credit loss as of June 30, 2024, because we do not intend to sell these securities, and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis.


14

Contractual maturities of available-for-sale debt securities are as follows (in thousands):
June 30, 2024December 31, 2023
Estimated Fair Value
Due within one year$272,370 $267,336 
After one but within five years89,226 187,545 
$361,596 $454,881 
The Company had $0.5 million in contingent consideration liabilities as of June 30, 2024 related to the agreement to terminate its Collaboration and License Agreements with Zentera. The contingent consideration balance is limited to one potential milestone payment measured at fair value. The fair value of the contingent consideration is estimated based on the monetary value of the milestone discounted for the probability of achieving the milestone and a present value factor based on the timing of when the milestone is expected to be achieved. The value for the contingent consideration balance is based on significant inputs not observable in the market which represents Level 3 measurement within the fair value hierarchy.
The following table summarizes the financial assets and liabilities that are measured on a recurring basis at fair value as of June 30, 2024 and December 31, 2023 (in thousands):
June 30, 2024
Level 1Level 2Level 3Total estimated fair value
Financial assets:
Cash equivalents:
Money market funds
$11,256 $— $— $11,256 
Total cash equivalents:11,256 — — 11,256 
Available-for-sale marketable securities:
Commercial paper
— 15,336 — 15,336 
Corporate debt securities
— 251,811 — 251,811 
US government agencies
— 40,931 — 40,931 
US treasury securities
— 53,518 — 53,518 
Immunome equity securities
27,813 — — 27,813 
Total available-for-sale marketable securities:27,813 361,596 — 389,409 
Total assets measured at fair value
$39,069 $361,596 $— $400,665 
Financial liabilities:
Contingent consideration— — 500 500 
Total financial liabilities$— $— $500 $500 
15

December 31, 2023
Level 1Level 2Level 3Total estimated fair value
Financial assets:
Cash equivalents:
Money market funds
$4,755 $— $— $4,755 
Total cash equivalents:4,755 — — 4,755 
Available-for-sale marketable securities:
Commercial paper— 75,272 — 75,272 
Corporate debt securities
— 231,932 — 231,932 
US government agencies
— 83,047 — 83,047 
US treasury securities
— 64,630 — 64,630 
Total available-for-sale marketable securities:— 454,881 — 454,881 
Total assets measured at fair value
$4,755 $454,881 $— $459,636 
Financial liabilities:
Contingent consideration— — 500 500 
Total financial liabilities$— $— $500 $500 
The following significant unobservable inputs were used in the valuation of the contingent consideration payable to Zentera pursuant to the Termination Agreement at June 30, 2024:
Contingent Consideration Liability
Fair Value
as of
June 30, 2024
Valuation TechniqueUnobservable InputRange
(in thousands)
Milestone payment$500 Discounted cash flowLikelihood of occurrence
1.0% - 2.4%
Discount rate40%
Expected termPerpetuity
The following table reflects the activity for the Company’s contingent consideration, measured at fair value using Level 3 inputs (in thousands):
Contingent consideration at December 31, 2023
500 
Changes in the fair value of contingent consideration— 
Contingent consideration at June 30, 2024
$500 
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2024. We had one instrument that was classified within Level 3 as of June 30, 2024. As of June 30, 2024 and December 31, 2023, no material fair value adjustments were required for non-financial assets and liabilities.
16

6. Prepaid Expenses and Other Assets
Prepaid expenses and other assets consisted of the following (in thousands):
June 30,December 31,
 20242023
Prepaid insurance$778 $747 
Prepaid software licenses and maintenance566 691 
Foreign R&D credit refund821 500 
Prepaid research and development expenses12,567 13,640 
Interest receivable 3,279 3,337 
Sublease assets819 1,471 
Other prepaid expenses1,237 231 
Total prepaid expenses and other assets20,067 20,617 
Less long-term portion6,836 6,818 
Total prepaid expenses and other assets, current$13,231 $13,799 
7. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
June 30,December 31,
 20242023
Lab equipment$3,382 $3,069 
Leasehold improvements4,168 4,235 
Office equipment and furniture1,280 1,340 
Computer equipment143 150 
Construction in progress— 173 
Subtotal8,973 8,967 
Accumulated depreciation and amortization(3,636)(3,148)
Property and equipment, net$5,337 $5,819 
Depreciation and amortization expense for the three months ended June 30, 2024 and 2023 was approximately $327 thousand and $344 thousand, respectively. Depreciation and amortization expense for the six months ended June 30, 2024 and 2023 was $651 thousand and $704 thousand, respectively.
17

8. Accrued Expenses
Accrued expenses consist of the following (in thousands):
June 30,December 31,
20242023
Accrued research and development expenses$36,145 $36,261 
Accrued employee expenses6,471 14,477 
Accrued general and administrative expenses612 1,032 
Lease liability2,709 2,623 
Contingent consideration500 500 
Income Taxes payable425 281 
Accrued legal expenses479 1,047 
       Total accrued expenses47,341 56,221 
Less long-term portion1,089 1,780 
Total accrued expenses$46,252 $54,441 
18

9. Stockholders’ Equity
Follow-on Offering of Common Stock
On June 15, 2023, we completed a follow-on offering in which we issued and sold 11,032,656 shares of common stock at a public offering price of $22.66 per share. The total gross proceeds for the offering were approximately $250.0 million, before deducting offering expenses of $14.3 million payable by us.
Share-based Compensation
Effective April 2020, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the 2020 Incentive Award Plan (the “2020 Plan”), which allows for grants to selected employees, consultants and non-employee members of the Board of Directors. We currently grant stock options and restricted stock units (“RSUs”), under the 2020 Plan. Awards may be made under the 2020 Plan covering up to the sum of (1) 5,600,000 shares of common stock; plus (2) any shares forfeited from the unvested restricted shares of our common stock issued upon conversion of unvested Class B common units (up to 1,250,000 shares); plus (3) an annual increase on the first day of each fiscal year beginning with the fiscal year ending December 31, 2021 and continuing to, and including, the fiscal year ending December 31, 2030, equal to the lesser of (a) 5% of the shares of common stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as determined by our Board of Directors.

At June 30, 2024, 11,480,796 shares were subject to outstanding awards under the 2020 Plan and 2,811,551 shares were available for future grants of share-based awards under the 2020 Plan.
In July 2022, the Company’s Board of Directors approved the Zentalis Pharmaceuticals, Inc. 2022 Employment Inducement Incentive Award Plan (the “2022 Inducement Plan”), which is used exclusively for the grant of equity awards to new employees as an inducement material to the employees’ entering into employment with the Company. The Board of Directors has reserved 3,275,000 shares of the Company’s common stock for issuance pursuant to awards granted under the 2022 Inducement Plan.
At June 30, 2024, 2,409,816 shares were subject to outstanding awards under the 2022 Inducement Plan and 840,184 shares were available for future grants of share-based awards under the 2022 Inducement Plan.
Total share-based compensation expense related to share based awards was comprised of the following (in thousands):
 Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Research and development expense$4,155 $5,985 $8,895 $11,858 
General and administrative expense8,556 7,357 16,649 15,217 
Total share-based compensation expense$12,711 $13,342 $25,544 $27,075 
Share-based compensation expense by type of share-based award (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Stock Options$9,553 $10,205 $19,427 $20,814 
Employee Stock Purchase Plan138 111 191 216 
RSAs and RSUs3,020 3,026 5,926 6,045 
$12,711 $13,342 $25,544 $27,075 
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Stock Options and Restricted Stock Units
The exercise price of stock options granted is equal to the closing price of the Company’s common stock on the date of grant. The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company estimates expected volatility based on the historical volatility of a group of similar companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company uses the “simplified method” for estimating the expected term of employee options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has not issued any dividends and does not expect to issue dividends over the life of the options. As a result, the Company has estimated the dividend yield to be zero. The fair value of the stock options granted during the six months ended June 30, 2024 and June 30, 2023 was determined with the following assumptions:
June 30, 2024June 30, 2023
Expected volatility
75.3% - 78.4%
77.5% - 80.8%
Average expected term (in years)
5.9 - 6.1
5.5 - 6.1
Risk-free interest rate
3.8% - 4.6%
3.4% - 4.2%
Expected dividend yield— %— %
Employee Stock Purchase Plan
Effective April 2020, the Company’s Board of Directors adopted, and the Company’s stockholders approved the Zentalis Pharmaceuticals, Inc. 2020 Employee Stock Purchase Plan (the “ESPP”), which was subsequently amended and restated effective March 15, 2021. The maximum aggregate number of shares of the Company’s common stock available for issuance under the ESPP at June 30, 2024 was 1,894,676. Under the terms of the ESPP, the Company’s employees may elect to have up to 20% of their compensation, up to a maximum value of $25,000 per calendar year, withheld to purchase shares of the Company’s common stock for a purchase price equal to 85% of the lower of the fair market value per share (at closing) of the Company’s common stock on (i) the first trading day of a six-month offering period, or (ii) the applicable purchase date, defined as the last trading day of the six-month offering period. The weighted average assumptions used to estimate the fair value of stock purchase rights under the ESPP during the period ended are as follows:
Ended June 30, 2024
ESPP
Volatility107.3 %
Expected term (years)0.5
Risk free rate5.4 %
Expected dividend yield— 
Compensation Expense Summary
Total unrecognized estimated compensation cost by type of award and the weighted average requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):

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June 30, 2024
Unrecognized
Expense		Remaining
Weighted-Average Recognition Period
(years)
Stock options$80,212 2.64
RSUs28,793 3.01
ESPP$140 0.25

During the six months ended June 30, 2024, we issued less than one thousand shares of common stock in connection with the exercises of stock options. For the six months ended June 30, 2024, less than one thousand shares of common stock issued in conjunction with certain restricted stock awards (“RSAs”), vested. Outstanding stock options and unvested RSUs totaling approximately 11.5 million shares and 2.4 million shares of our common stock, respectively, were outstanding as of June 30, 2024.
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10. Commitments and Contingencies
Legal Contingencies
From time to time, we may be involved in various disputes, including lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. Any of these claims could subject us to costly legal expenses. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in our consolidated financial statements. While we do generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage, or our policy limits may be inadequate to fully satisfy any damage awards or settlement. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We are currently not a party to any legal proceedings that require a loss liability to be recorded.

Lease Termination
In December 2023, we entered into a lease for approximately 4,115 square feet of office space in New York, New York. The lease commenced in December 2023 and had a lease term through August 2027. In June 2024, we entered into an agreement to terminate this lease in exchange for consideration of $0.5 million.

Leases
Our commitments include payments related to operating leases. Approximate annual future minimum operating lease payments as of June 30, 2024 are as follows (in thousands):
YearOperating Leases
2024 (remaining)$3,330 
20256,799 
20267,278 
20277,451 
20287,760 
Thereafter31,019 
Total minimum lease payments:63,637 
       Less: imputed interest
(19,610)
Total operating lease liabilities
44,027 
       Less: current portion
(2,709)
Lease liability, net of current portion
$41,318 
The weighted-average remaining lease term of our operating leases is approximately 8.3 years.
On March 6, 2023, we entered into a sublease agreement pursuant to which we sublet the office space located at 1359 Broadway, Suites 1710 and 1800 in New York, New York to a subtenant. For the six months ended June 30, 2024, we recorded lease income of $0.7 million relating to our New York sublease.
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11. Net Income (Loss) Per Common Share
Basic and diluted net income (loss) per common share were calculated as follows (in thousands except per share amounts):
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Numerator:
Net income (loss) attributable to Zentalis
$(88,277)$(112,527)$(78,209)$(175,746)
Denominator:
Weighted average number of common shares outstanding, basic and diluted 71,040 60,790 70,969 60,038 
Net loss per common share$(1.24)$(1.85)$(1.10)$(2.93)
Our potential and dilutive securities, which include outstanding stock options, unvested RSAs and unvested RSUs have been excluded from the computation of diluted net loss per common share as the effect would be anti-dilutive.
The following common stock equivalents have been excluded from the calculations of diluted net income (loss) per common share because their inclusion would be antidilutive (in thousands).
 June 30,
 20242023
Outstanding stock options11,488 10,085 
Unvested RSAs— 42 
Unvested RSUs 2,403 1,499 
13,891 11,626 


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition and operating results should be read together with our interim unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statements that involve significant risks and uncertainties. As a result of many important factors, such as those set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.
Overview
We are a clinical-stage biopharmaceutical company focused on discovering and developing small molecule therapeutics targeting fundamental biological pathways of cancers. Our lead product candidate, azenosertib (ZN-c3), is a potentially first-in-class and best-in-class WEE1 inhibitor for advanced solid tumors and hematological malignancies. Azenosertib is being evaluated as a monotherapy and in combination across multiple ongoing clinical
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trials. In clinical trials, azenosertib has been well tolerated and has demonstrated anti-tumor activity as a single agent across multiple tumor types and in combination with several chemotherapy backbones. As part of our azenosertib clinical development program, we are exploring enrichment strategies targeting tumors with high levels of replication stress, such as Cyclin E1 positive tumors, homologous recombination deficient tumors, and tumors with oncogenic driver mutations. We currently exclusively in-license or solely own worldwide development and commercialization rights to azenosertib.

We also continue to use our extensive drug discovery experience and capabilities across cancer biology and medicinal chemistry, which we refer to as our Integrated Discovery Engine, to advance our ongoing research on protein degraders of undisclosed targets. We believe our product candidates are differentiated from current programs targeting similar pathways and, if approved, have the potential to significantly impact clinical outcomes of patients with cancer.

Our Pipeline

The following table summarizes our product candidate pipeline:

Updated Pipieline Aug 2024.jpg

Our Development Programs

Azenosertib (WEE1 Inhibitor)

Azenosertib is a potentially best-in-class and first-in-class oral, small molecule WEE1 inhibitor. The inhibition of WEE1, a DNA damage response kinase, drives cancer cells into mitosis without being able to repair damaged DNA, resulting in cell death and thereby preventing tumor growth and potentially causing tumor regression. Currently, there are no WEE1 inhibitors approved by the FDA. We have designed azenosertib to have advantages over other investigational therapies targeting WEE1, including superior selectivity and pharmacokinetic, or PK, properties. Azenosertib is currently being evaluated in the clinic for advanced solid tumors and hematological malignancies as a monotherapy, in combination with traditional chemotherapy and other DNA damaging agents, and in combination
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with molecularly targeted agents. On June 18, 2024, we disclosed that the FDA placed our ZN-c3-001, TETON (ZN-c3-004) and DENALI (ZN-c3-005) trials on partial clinical hold following two deaths in the DENALI trial due to presumed sepsis. We have been working closely with the FDA to resolve the partial clinical hold as quickly as possible. In the course of our dialogue with the FDA, the FDA also placed ZN-c3-002 on partial clinical hold. ZN-c3-002, which currently has four patients on active treatment, is under the same IND as ZN-c3-001, TETON and DENALI. Patients currently enrolled in the studies on partial clinical hold may continue to receive azenosertib, although no additional patients may be enrolled until the partial clinical hold is resolved. We previously disclosed that we are targeting the submission of our first NDA for azenosertib in a gynecologic malignancy in 2026—as disclosed on June 18, 2024, we plan to provide updates on the azenosertib clinical development timelines following resolution of the partial clinical hold.

The following clinical trials are part of the azenosertib clinical development program:

•Clinical Trial of Azenosertib in Platinum Sensitive Ovarian Cancer (PSOC). We previously disclosed plans to initiate a clinical trial evaluating azenosertib in PSOC patients in the first-line maintenance setting in 2025 as well as to disclose additional details about this trial in the second half of 2024—as disclosed on June 18, 2024, we plan to provide updates on the azenosertib clinical development timelines following resolution of the partial clinical hold.

•Monotherapy - Phase 2 Clinical Trial in Cyclin E1 Driven High-Grade Serous Ovarian Cancer, Fallopian Tube, or Primary Peritoneal Cancer (HGSOC) (DENALI - ZN-c3-005). We are evaluating azenosertib as a monotherapy in a Phase 2 clinical trial in patients with Cyclin E1 positive platinum resistant HGSOC. Our Cyclin E1 positive enrichment strategy is supported by preclinical data that showed that high Cyclin E1 protein expression sensitized cancer cells to the anti-tumor effects of azenosertib as well as preliminary retrospective clinical data that Cyclin E1 protein levels may be associated with clinical benefit from WEE1 inhibition. In addition, in April 2023, we announced preclinical data at the 2023 American Association for Cancer Research, or AACR, Annual Meeting that demonstrated that azenosertib drove cancer cell death in Cyclin E1-high tumor cells in vitro and substantially inhibited growth of Cyclin E1-high, patient derived, in vivo tumor models. On June 18, 2024, we disclosed that we had completed enrollment of Cohort 1b of this trial after enrolling over 100 patients and that we plan to disclose topline results from Cohort 1b of this trial in the second half of 2024.

•Monotherapy/Combination - Phase 1/2 Clinical Trial of Azenosertib as a Monotherapy and with PARP Inhibitor (PARPi) in Platinum Resistant Ovarian Cancer (PROC) (MAMMOTH - ZN-c3-006). We are evaluating azenosertib as a monotherapy and in combination with GSK plc’s, or GSK’s, PARP inhibitor, niraparib (ZEJULA®), in a Phase 1/2 clinical trial in PROC patients who have failed PARPi treatment as part of a clinical collaboration with GSK. This clinical study is supported by preclinical data that showed that combining azenosertib and niraparib resulted in synergistic cell killing in ovarian cancer in vivo models. As we reiterated on June 18, 2024, we plan to disclose topline data from this trial in the second half of 2024.

•Monotherapy - Phase 2 Clinical Trial in Recurrent or Persistent Uterine Serous Carcinoma (USC) (TETON - ZN-c3-004). Azenosertib is currently being evaluated as a monotherapy in a Phase 2 clinical trial in patients with USC. As of a September 14, 2022 data cutoff, a total of 43 patients were enrolled and dosed. Azenosertib was well tolerated. The most common treatment related adverse events, or TRAEs, were nausea (60.5% all grades/9.3% grade 3 or higher), fatigue (46.5% all grades/9.3% grade 3 or higher), diarrhea (37.2% all grades/7.0% grade 3 or higher) and vomiting (32.6% all grades/7.0% grade 3 or higher). The FDA granted Fast Track designation in November 2021 to azenosertib in patients with advanced or metastatic USC who have received at least one prior platinum-based chemotherapy regimen for management of advanced or metastatic disease. We believe that the study design in this patient population has the potential to support registration in the United States. We previously disclosed that we expect to disclose topline data from this trial in the second half of 2025—as disclosed on June 18, 2024, we plan to provide updates on certain of the azenosertib data timelines following resolution of the partial clinical hold.
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•Combination - Phase 1b Clinical Trial of Azenosertib and Chemotherapy in PROC (ZN-c3-002). Azenosertib is currently being evaluated in combination with each of paclitaxel, carboplatin, PLD, and gemcitabine in four separate cohorts in a Phase 1b clinical trial in patients with PROC. On May 25, 2023, we announced positive data from this Phase 1b clinical trial. Azenosertib was well tolerated in combination with multiple types of chemotherapy and demonstrated encouraging clinical activity, with noteworthy objective response rates, or ORRs, and median progression free survival, or mPFS, in all patients, but especially in those patients with Cyclin E1 positive tumors, a subgroup recognized to have a poor prognosis and to show relatively poor outcomes following treatment with chemotherapy. A total of 115 patients were enrolled in the study across all chemotherapy combination groups. At April 10, 2023, 94 were response evaluable. Across all dosing schedules, azenosertib plus paclitaxel demonstrated the highest ORR of 50.0% (mPFS of 7.4m; mDOR of 5.6m), followed by an ORR of 38.5% (mPFS of 8.3m; mDOR of 6.2m) for azenosertib plus gemcitabine. Azenosertib plus carboplatin demonstrated an ORR of 35.7% (mPFS of 10.4m; mDOR of 11.4m), and azenosertib plus PLD demonstrated an ORR of 19.4% (mPFS of 6.3m; mDOR of 8.3m). Of patients who had available tissue for immunohistochemistry, or IHC, 87% were Cyclin E1+ (H-score >50). Cyclin E1+ status was associated with a superior ORR and a longer mPFS across the response-evaluable patient population with IHC data (ORR of 40.0% vs 8.3%; mPFS of 9.86 vs 3.25 months; HR = 0.37; P = 0.0078), showcasing the potential synergy of WEE1 inhibition with chemotherapy in this patient population. Frequent Grade ≥3 TRAEs (%) across all azenosertib intermittent dosing groups were thrombocytopenia (27.5%), neutropenia (25.5%), anemia (15.7%), and fatigue (9.8%).

•Monotherapy - Phase 1b Dose Finding Clinical Trial in Solid Tumors (ZN-c3-001). We are currently evaluating azenosertib as a monotherapy in a Phase 1b dose finding clinical trial for the treatment of solid tumors. On June 6, 2023, we announced positive data from this clinical trial. As of April 24, 2023, a total of 127 heavily pretreated patients with advanced solid tumors were enrolled and received monotherapy azenosertib at doses ≥ 300 mg on either continuous daily dosing or intermittent weekly administration schedules. Across all tumor types, 74 patients received azenosertib on a continuous dosing schedule and 53 patients received azenosertib on an intermittent dosing schedule. When evaluating continuous versus intermittent at comparable clinically meaningful dose levels, the data were the following: intermittent dosing maintained safety and improved tolerability of azenosertib as compared to continuous dosing. Gastrointestinal, fatigue, and hematologic Grade 3 and 4 TRAEs were comparable or favorable versus continuous dosing. No discontinuations due to TRAEs were observed in the intermittent cohorts. Steady state exposure, as measured by AUC0-24, more than doubled at the intermittent dose of 400 mg, 5 days on, 2 days off, compared to AUC observed at 300 mg daily with continuous administration, and intermittent dosing achieved higher maximal concentration levels as compared to continuous administration. As of June 2, 2023, the confirmed ORR in the combined ovarian and USC subgroup of patients treated with intermittent dosing was 36.8% (7/19), versus 19.2% (5/26) in those who received a continuous dosing. In the response evaluable patients who received intermittent dosing azenosertib, the confirmed ORR was 50% in USC and 30.8% in ovarian cancer. 89% of ovarian cancer and USC patients who received an intermittent dosing schedule had target lesion reductions from their baseline scans. Patients in this subgroup who received an intermittent dosing schedule had a median follow up of 4.4 months, and 63% (12/19) patients remained on therapy as of June 2, 2023. On November 6, 2023, we announced updated data from this trial. Data from October 25, 2023 in the same population of patients (ovarian cancer and USC patients) that were response-evaluable on June 2, 2023, showed that there continued to be a 36.8% (7/19) ORR in these patients. As compared to the June 2, 2023 data, the median follow-up for patients in this subgroup increased to 9.2 months and the mPFS increased to 6.5 months. As of September 27, 2023, azenosertib continued to demonstrate a favorable safety and tolerability profile with additional safety-evaluable patients and longer follow-up. As we reiterated on June 18, 2024, we plan to disclose the final results from this trial in the second half of 2024.

•Combination - Phase 1 Clinical Trial of Azenosertib and Chemotherapy in Relapsed or Refractory Osteosarcoma (ZN-c3-003). We disclosed the final results from this trial in May 2024, which were subsequently presented in a poster at the 2024 American Society of Clinical Oncology Annual Meeting.
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Thirty-one patients were enrolled in the study, of which 31 were evaluable for safety, 29 were evaluable for dose-limiting toxicities and 28 were evaluable for efficacy. The median age was 27 (range 12-76) and 21 patients (68%) were ≤39 years old. Patients received a median of 3 (range 1-9) prior therapies, including 10 patients (32%) who had previous treatment with gemcitabine. The 18-week event-free survival rate, or EFS, which was defined as time from treatment initiation until disease progression or death due to any cause, was 39% (11/28) across all dose levels. The EFS observed in the study compares favorably to historical cohorts with a similar patient population where a 16-week EFS of approximately 12% has been reported. The maximum tolerated dose, or MTD, of azenosertib was determined to be 150 mg daily on a 5:2 schedule (5 days on, 2 days off) plus gemcitabine 800 mg/m2. At the MTD, the most frequent Grade ≥3 adverse events (≥20%) included thrombocytopenia and lymphopenia (33% each); there were no Grade 4 thrombocytopenia events or instances of febrile neutropenia at the MTD. Data support further investigation of azenosertib administered in combination with gemcitabine in patients with relapsed or refractory osteosarcoma in an upcoming investigator-initiated Phase 2 trial. As previously disclosed, we received orphan drug designation and rare pediatric disease designation from the FDA for azenosertib in osteosarcoma.

•Combination - Phase 1/2 Clinical Trial of Azenosertib with Encorafenib and Cetuximab (BEACON Regimen) in BRAF V600E Mutant Metastatic Colorectal Cancer (mCRC) (ZN-c3-016). We are collaborating with Pfizer Inc., or Pfizer, to evaluate azenosertib in combination with encorafenib and cetuximab, an FDA-approved standard of care known as the BEACON regimen, in patients with BRAF V600E mutant mCRC in a Phase 1/2 clinical trial. In preclinical studies, WEE1 inhibition has shown synergy with many targeted agents in mutationally driven cancers, and the addition of azenosertib to the BEACON regimen enhanced anti-tumor activity in a cell-line-derived xenograft model. We initiated enrollment in this clinical trial in the first quarter of 2023, and expect to disclose the initial data from this trial in the second half of 2024.

•Combination - Phase 1/2 Clinical Trial of Azenosertib and Chemotherapy in Pancreatic Cancer. We have agreed to support the Dana-Farber Cancer Institute, or Dana Farber, -sponsored Phase 1/2 clinical trial evaluating azenosertib and chemotherapy (gemcitabine) in pancreatic cancer patients.

•Combination – Phase 1/2 Clinical Trial of Azenosertib, Chemotherapy and Pembrolizumab, in Triple Negative Breast Cancer (TNBC). We have agreed to support the Dana Farber-sponsored Phase 1/2 clinical trial evaluating azenosertib, chemotherapy (carboplatin) and pembrolizumab, in patients with TNBC.

ZN-d5 (BCL-2 Inhibitor)

ZN-d5 is a potentially best-in-class, selective, oral small molecule inhibitor of BCL-2. As previously disclosed, ZN-d5 was being evaluated in combination with azenosertib in a Phase 1 dose escalation clinical trial in patients with relapsed or refractory acute myeloid leukemia, or R/R AML (ZN-d5-004C). On August 9, 2024, we announced that we are no longer developing the combination of ZN-d5 with azenosertib, and that we are discontinuing development of ZN-d5. The combination of ZN-d5 and azenosertib was studied in 27 patients with R/R AML. Thirteen patients were evaluable for efficacy, and the other 14 patients experienced progressive disease prior to efficacy evaluation or withdrew. The combination demonstrated clinical activity in patients who had been previously treated with venetoclax. Of the 6 patients who completed at least two cycles of therapy and underwent a cycle 3, day 1 bone marrow (BM), aspirate: 1 achieved a complete remission with incomplete hematologic recovery (CRi) and became transplant eligible, 2 patients had decreased BM blast counts, 2 had stable BM blasts, and 1 patient had increased BM blasts. The safety profile was manageable and in-line with other combinations in the R/R AML disease setting.

Liquidity Overview

Since our inception, our operations have been limited to organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product pipeline. We do not have any products approved for commercial sale and have not generated any revenues from product sales. We will not generate revenue from product sales unless and until we successfully complete
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clinical development, obtain regulatory approval for and commercialize one or more of our product candidates. We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy.

Since inception, we have incurred significant operating losses. Our net loss was $292.3 million for the year ended December 31, 2023. We had a net loss of $78.2 million and $175.8 million for the six months ended June 30, 2024 and June 30, 2023, respectively. We had an accumulated deficit of $966.8 million as of June 30, 2024. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We had cash, cash equivalents and marketable securities of $426.4 million as of June 30, 2024, which includes $27.8 million representing the June 30, 2024 fair value of Immunome common stock received by the Company as part of its upfront payment for the out-licensing of its ROR1 antibody-drug conjugate (ADC) product candidate and ADC platform in January 2024. We believe that our existing cash, cash equivalents and marketable securities as of June 30, 2024 will be sufficient to fund our operating expenses and capital expenditure requirements into mid-2026. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.
License Agreements and Strategic Collaborations
Recurium IP Holdings, LLC License Agreement
In December 2014, our wholly owned subsidiary, Zeno Pharmaceuticals, Inc., entered into a license agreement, or the Recurium Agreement, with Recurium IP Holdings, LLC, or Recurium IP, which was subsequently amended, under which Zeno Pharmaceuticals, Inc. was granted an exclusive worldwide license to certain intellectual property rights owned or controlled by Recurium IP to develop and commercialize pharmaceutical products for the treatment or prevention of disease, other than for providing pain relief. Following certain corporate restructuring disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, our wholly owned subsidiary, Zeno Management, Inc., or ZMI, became the Zentalis contracting party to the Recurium Agreement. The intellectual property rights exclusively licensed by ZMI under the Recurium Agreement include certain intellectual property, including intellectual property covering azenosertib. ZMI has the right to sublicense its rights under the Recurium Agreement, subject to certain conditions. ZMI is required to use commercially reasonable efforts to develop and commercialize at least one product that comprises or contains a compound modulating one of ten specific biological targets and to execute certain development activities.

Under the terms of the Recurium Agreement, ZMI is obligated to make development and regulatory milestone payments, pay royalties on net sales, and make certain sublicensing payments with respect to products that comprise or contain a compound modulating one of ten specific biological targets, including azenosertib. ZMI is obligated to make development and regulatory milestone payments for each such licensed product of up to $44.5 million. In addition, ZMI is obligated to make milestone payments of up to $150,000 for certain licensed products used in animals. ZMI is also obligated to pay royalties on sales of such licensed products at a mid- to high-single digit percentage. In addition, if ZMI chooses to sublicense or assign to any third parties its rights under certain patents exclusively in-licensed under the Recurium Agreement, ZMI must pay to Recurium IP 20% of certain sublicensing income received in connection with such transaction.

The Recurium Agreement will expire on the later of December 21, 2032 and, on a country-by-country basis, on the date of expiration of the last-to-expire royalty term for all licensed products in such country, unless earlier terminated by either party for cause or a bankruptcy event.

Pfizer Development Agreement
In April 2022, we entered into a development agreement with Pfizer to collaborate to advance the clinical development of azenosertib. We did not grant Pfizer any economic ownership or control of azenosertib or the rest of our pipeline. In October 2022, we announced our first clinical development collaboration with Pfizer to initiate a Phase 1/2 dose escalation study of azenosertib, in combination with encorafenib and cetuximab (an FDA-approved standard of care known as the BEACON regimen) in patients with BRAF V600E-mutant mCRC.
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GSK Clinical Trial Collaboration and Supply Agreement

In April 2021, we entered into a clinical trial collaboration and supply agreement with GSK under which we are evaluating the combination of azenosertib and niraparib, GSK’s poly (ADP-ribose) polymerase (PARP) inhibitor, in patients with PROC. Pursuant to this agreement, we are responsible for the conduct and cost of the relevant studies, under the supervision of a joint development committee made up of our representatives and representatives of GSK that meets quarterly. GSK is supplying niraparib for use in the collaboration, at no cost to us. We are required to provide to GSK clinical data and other reports upon completion of the study.

This agreement does not grant any right of first negotiation to participate in future clinical trials, and neither party granted the other any additional right or ability to evaluate their respective compounds in any other clinical studies, either as monotherapy or in combination with any other product or compound, in any therapeutic area.

The agreement with GSK will expire upon completion of all obligations of the parties thereunder or upon termination by either party. We and GSK each have the right to terminate the agreement for material breach by the other party. In addition, the agreement may be terminated by either party due to safety considerations or if either party decides to discontinue development of its own compound for medical, scientific, legal or other reasons or if a regulatory authority takes any action preventing that party from supplying its compound for the study or in the event the other party is subject to specified bankruptcy, insolvency or similar circumstances. GSK also has the right to terminate this agreement if it notifies us in writing that it reasonably and in good faith believes that niraparib is being used in an unsafe manner, and we fail to incorporate changes to address such issue, and the issue is unable to be resolved following elevation to appropriate parties.
Immunome License Agreement
In January 2024, we entered into an exclusive, worldwide license agreement with Immunome, under which Immunome licensed from us ZPC-21 (now known as IM-1021), a preclinical ROR1 ADC with best-in-class potential, and our proprietary ADC platform technology. Under the terms of the deal, we received an up-front payment of $35 million in cash and Immunome common stock (with the stock valued at the trailing 30-day volume-weighted average price). We are eligible to receive up to $275 million of milestone payments for ZPC-21 and other products that utilize the licensed platform technology in addition to mid-to-high single-digit royalties.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue, and we do not expect to generate any revenue in the foreseeable future from product sales. We have generated, and may in the future generate, revenue from payments received under our collaboration agreements, which includes payments of upfront fees, license fees, milestone-based payments and reimbursements for research and development efforts.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
•salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;
•expenses incurred under agreements with third parties, including contract research organizations, or CROs, and other third parties that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug material for use in our preclinical studies and clinical trials;
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•costs of outside consultants, including their fees, stock-based compensation and related travel expenses;
•the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;
•license payments made for intellectual property used in research and development activities; and
•allocated expenses for rent and maintenance of facilities and other operating costs.
We expense research and development costs as incurred. Reimbursed research and development costs under certain collaborative arrangements are recorded as a reduction to research and development expenses and are recognized in the period in which the related costs are incurred.
We track external development costs by product candidate or development program, but we do not allocate personnel costs, general license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates. These costs are included in unallocated research and development expenses in the table below.
The following table summarizes our research and development expenses by product candidate or development program:
 Three Months Ended June 30,Six Months Ended June 30,
 2024202320242023
Azenosertib$25,897 $13,883 $47,616 $26,787 
Unallocated research and development expenses and discontinued programs
 22,489  28,801 50,355 64,481 
Total research and development expenses$48,386 $42,684 $97,971$91,268 
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase substantially for the foreseeable future and will comprise a larger percentage of our total expenses as we complete our ongoing clinical trials, initiate new clinical trials, continue to discover and develop additional product candidates and prepare regulatory filings for any product candidates that successfully complete clinical development.
The successful development of our product candidates is highly uncertain. At this time, we cannot determine with certainty the duration and costs of our existing and future clinical trials of our product candidates or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our product candidates and any other product candidate we may develop in the future will depend on a variety of factors, including:
•per patient trial costs;
•the number of patients who enroll in each trial;
•the number of trials required for approval;
•the number of sites included in the trials;
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•the countries in which the trials are conducted;
•the length of time required to enroll eligible patients;
•the drop-out or discontinuation rates of patients;
•any delays in clinical trials, including as a result of clinical holds or the global macroeconomic environment;
•potential additional safety monitoring requested by regulatory agencies;
•the duration of patient participation in the trials and follow-up;
•the phase of development of the product candidate;
•the efficacy and safety profile of the product candidate.
•uncertainties in clinical trial design and patient enrollment rates;
•the actual probability of success for our product candidates, including the safety and efficacy, early clinical data, competition, manufacturing capability and commercial viability;
•significant and changing government regulation and regulatory guidance;
•the timing and receipt of any marketing approvals;
•the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
•our ability to attract and retain skilled personnel.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support research and development activities relating to our clinical stage programs, and any other product candidates we may develop. We also expect to continue to incur expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements; director and officer insurance costs; and investor and public relations costs.
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Interest Income
Interest income consists of interest earned on cash, cash equivalents and available-for-sale marketable securities.
Income Taxes
Since our inception, we and our corporate subsidiaries have generated cumulative federal, state and foreign net operating loss in certain jurisdictions for which we have not recorded any net tax benefit due to uncertainty around utilizing these tax attributes within their respective carryforward periods.
Results of Operations
Comparison of Three Months Ended June 30, 2024 to Three Months Ended June 30, 2023
The following table summarizes our results of operations for the periods indicated, together with the changes in those items in dollars:
 Three Months Ended June 30, Increase
(Decrease)
 
2024
 
2023
 (in thousands)
Operating Expenses
Research and development$48,386 $42,684 $5,702 
Zentera in-process research and development— 45,568 (45,568)
General and administrative 16,762 15,664 1,098 
Total operating expenses 65,148 103,916 (38,768)
Loss from operations
 (65,148)(103,916)38,768 
Other Income (Expense)
Investment and other income (expense), net
 (22,863)4,451 (27,314)
Net loss before income taxes
 (88,011)