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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 March 31, 2025
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)

Delaware | 82-3607803
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
10275 Science Center Dr., Suite 200 | 92121
San Diego, California | (Zip Code)
(Address of principal executive offices) |

(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 class | Trading 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 May 12, 2025, the registrant had 71,951,934 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

|  | Page
PART I. | FINANCIAL INFORMATION | 3
Item 1. | Financial Statements (Unaudited) | 4
| Condensed Consolidated Balance Sheets | 4
| Condensed Consolidated Statements of Operations | 5
| Condensed Consolidated Statements of Comprehensive (Loss) Income | 6
| Condensed Consolidated Statements of Cash Flows | 7
| Condensed Consolidated Statement of Stockholders’ Equity | 9
| Notes to Condensed Consolidated Financial Statements | 10
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 39
Item 4. | Controls and Procedures | 39
PART II. | OTHER INFORMATION | 40
Item 1. | Legal Proceedings | 40
Item 1A. | Risk Factors | 40
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 94
Item 3. | Defaults Upon Senior Securities | 94
Item 4. | Mine Safety Disclosures | 95
Item 5. | Other Information | 95
Item 6. | Exhibits | 95
| Signatures | 97

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,” “believe,” “estimate,” “predict,” “potential,” “design,” “support,” “advance,” “strive,” "opportunity," "upcoming," or “continue” 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 competitive position;
◦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;
◦our prioritization of azenosertib (ZN-c3) and the potential for azenosertib to be first-in-class and best-in-class;
◦the ability of our clinical trials to demonstrate safety and efficacy of azenosertib and other positive results;
◦the global macroeconomic environment and increased inflation and interest rates;
◦our plans for, including the timing and focus of, our ongoing and future clinical trials of azenosertib, including the reporting of data from those studies and trials and the timing thereof, including DENALI Part 2 and our planned Phase 3 confirmatory study of monotherapy azenosertib in Cyclin E1+ PROC patients and our plans to conduct it concurrently with DENALI Part 2b;
◦the design of our clinical trials, such as for DENALI Part 2, including our estimates of the number of patients that we will enroll in our clinical trials;
◦the potential benefits of the measures in the DENALI Part 2 protocol for enhanced patient monitoring, guidance and supportive care;
◦the beneficial characteristics, safety, efficacy and therapeutic effects of azenosertib;
◦our and our collaborators' strategy, plans and expectations with respect to the development, manufacturing, supply, approval and commercialization of azenosertib 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 purchasers of assets, 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 a companion diagnostic to identify patients with Cyclin E1+ PROC and other potential biomarkers to identify patients, and the costs thereof;
◦our plans relating to the further development of azenosertib, 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 azenosertib and any future product candidates, if approved;
◦our plans to evaluate additional strategic opportunities to maximize the value of our pipeline;
◦our plans to develop azenosertib in combination with other therapies, resources allowing;
◦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 azenosertib;
◦timing and likelihood of success of our development and commercialization efforts;
ii

◦timing of expected milestones, and the announcement thereof;
◦the broad franchise potential of azenosertib;
◦the estimated size of the market opportunity for azenosertib, including the market opportunity for azenosertib in Cyclin E1+ platinum-resistant ovarian cancer ("PROC"), and our underlying assumptions thereof, including our estimate of the limited overlap between FRα-high PROC patients and those that have Cyclin E1 overexpression, and our belief that there is additional market opportunity for azenosertib outside of ovarian cancer across other solid tumors;
◦our expectations regarding the approval and use of azenosertib;
◦the timing or likelihood of regulatory filings and approvals;
◦our ability to obtain and maintain regulatory approval of azenosertib and any future product candidates;
◦our regulatory strategy, including the potential for DENALI Part 2, if successful, to support an accelerated approval for azenosertib;
◦existing laws, regulations and regulatory developments, including those relating to the new U.S. presidential administration, 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 and lease commitments;
◦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 azenosertib and any future product candidates;
◦insurance coverage;
◦estimated periods of performance of key contracts; and
◦the potential need to hire 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.
INDUSTRY AND OTHER DATA
This Quarterly Report contains industry, market and competitive position data from our own internal estimates and research as well as industry and general publications and research surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. While we believe that
iii

each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the market definitions are appropriate, neither such research nor definitions have been verified by an independent source.
The industry in which we operate is subject to risks and uncertainties due to a variety of factors, including those described in Part II, Item 1A., “Risk Factors” in this Quarterly Report. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
iv

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. 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 azenosertib, which is currently our only product candidate in clinical development. If we are unable to complete development of, obtain approval for and commercialize azenosertib in a timely manner, our business will be harmed.
•The clinical trials of azenosertib or any future product candidates may not demonstrate safety and efficacy to the satisfaction of the U.S. Food and Drug Administration, or FDA, or ex-U.S. regulatory authorities or otherwise produce positive results.
•We expect to be required by the FDA and ex-U.S. regulatory authorities to obtain approval of a companion diagnostic in connection with approval of our lead indication for azenosertib, and additional biomarkers may be required for the development and commercialization of azenosertib outside of our lead indication and for future product candidates. If regulatory approval is not obtained or there are delays in obtaining regulatory approval of any such companion diagnostic, we will not be able to commercialize azenosertib and, potentially, future product candidates, and our ability to generate product revenue will be materially impaired.
•The regulatory approval processes of the FDA and ex-U.S. regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for azenosertib or any future 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 azenosertib or any future 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 azenosertib or any future 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.
•Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees.
•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.
v

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)

| March 31, |  | December 31,
| 2025 |  | 2024
ASSETS |  |  |
Current assets |  |  |
Cash and cash equivalents | $ | 41,929 |  |  | $ | 33,901 |
Marketable securities, available-for-sale | 278,373 |  |  | 318,009 |
Marketable equity securities | 12,151 |  |  | 19,174 |
Contracts receivable | — |  |  | 5,000 |
Prepaid expenses and other current assets | 10,429 |  |  | 9,982 |
Total current assets | 342,882 |  |  | 386,066 |
Property and equipment, net | 3,247 |  |  | 4,699 |
Operating lease right-of-use assets | 31,925 |  |  | 32,528 |
Prepaid expenses and other assets | 3,340 |  |  | 4,417 |
Restricted cash | 2,627 |  |  | 2,627 |
Total assets | $ | 384,021 |  |  | $ | 430,337 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Current liabilities |  |  |
Accounts payable | $ | 7,769 |  |  | $ | 7,438 |
Accrued expenses | 41,661 |  |  | 45,287 |
Total current liabilities | 49,430 |  |  | 52,725 |
Long-term lease liability | 38,651 |  |  | 39,577 |
Other long-term liabilities | 558 |  |  | 849 |
Total liabilities | 88,639 |  |  | 93,151 |
Commitments and contingencies |  |  |
EQUITY |  |  |
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2025 and December 31, 2024 | — |  |  | — |
Common stock, $0.001 par value; 250,000,000 shares authorized; 71,950,683 and 71,282,400 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively | 72 |  |  | 71 |
Additional paid-in capital | 1,397,626 |  |  | 1,390,952 |
Accumulated other comprehensive income | 358 |  |  | 558 |
Accumulated deficit | (1,102,674) |  |  | (1,054,395) |
Total stockholders’ equity | 295,382 |  |  | 337,186 |
Total liabilities and stockholders’ equity | $ | 384,021 |  |  | $ | 430,337 |

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 March 31,
|  |  |  |  | 2025 |  | 2024
License Revenue |  |  |  |  | $ | — |  |  | $ | 40,560 |
Operating Expenses |  |  |  |  |  |  |
Research and development |  |  |  |  | 27,247 |  |  | 49,585 |
General and administrative |  |  |  |  | 10,580 |  |  | 15,740 |
Restructuring |  |  |  |  | 7,796 |  |  | — |
Total operating expenses |  |  |  |  | 45,623 |  |  | 65,325 |
Loss from operations |  |  |  |  | (45,623) |  |  | (24,765) |
Other Income (Expense) |  |  |  |  |  |  |
Investment and other (expense) income, net |  |  |  |  | (2,656) |  |  | 34,948 |
Net income (loss) before income taxes |  |  |  |  | (48,279) |  |  | 10,183 |
Income tax expense |  |  |  |  | — |  |  | 143 |
Net (loss) income |  |  |  |  | (48,279) |  |  | 10,040 |
Net loss attributable to noncontrolling interests |  |  |  |  | — |  |  | (28) |
Net (loss) income attributable to Zentalis |  |  |  |  | $ | (48,279) |  |  | $ | 10,068 |
Earnings Per Share |  |  |  |  |  |  |
Basic |  |  |  |  | $ | (0.67) |  |  | $ | 0.14 |
Diluted |  |  |  |  | $ | (0.67) |  |  | $ | 0.14 |
Weighted average common shares outstanding |  |  |  |  |  |  |
Basic |  |  |  |  | 71,678 |  |  | 70,898 |
Diluted |  |  |  |  | 71,678 |  |  | 71,192 |

See notes to condensed consolidated financial statements.
5

Zentalis Pharmaceuticals, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
(In thousands)

|  | Three Months Ended March 31,
|  |  | 2025 | 2024
Net (loss) income |  |  | $ | (48,279) |  | $ | 10,040 |
Other comprehensive loss: |  |  |  |
Unrealized loss on marketable debt securities |  |  | (200) |  | (1,421) |
Total comprehensive (loss) income |  |  | (48,479) |  | 8,619 |
Comprehensive loss attributable to noncontrolling interests |  |  | — |  | (28) |
Comprehensive (loss) income attributable to Zentalis |  |  | $ | (48,479) |  | $ | 8,647 |

See notes to condensed consolidated financial statements.
6

Zentalis Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

| Three Months Ended March 31,
| 2025 |  | 2024
Operating Activities: |  |  |
Consolidated net (loss) income | $ | (48,279) |  |  | $ | 10,040 |
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
Depreciation and amortization | 262 |  |  | 324 |
Fixed asset impairment | 1,152 |  |  | — |
Share-based compensation | 6,486 |  |  | 12,833 |
Loss on disposal of equipment | — |  |  | (66) |
Non-cash impact of license revenue | — |  |  | (25,560) |
Non-cash recognized loss (gain) mark-to-market of equity securities | 7,023 |  |  | (31,169) |
Accretion of discounts on marketable securities, net | (1,034) |  |  | (2,764) |
Deconsolidation of variable interest entity | — |  |  | (79) |
Changes in operating assets and liabilities: |  |  |
Contracts receivable | 5,000 |  |  | — |
Prepaid expenses and other assets | 663 |  |  | (1,056) |
Accounts payable and accrued liabilities | (4,023) |  |  | (15,249) |
Operating lease right-of-use assets and liabilities, net | 114 |  |  | 772 |
Net cash used in operating activities | (32,636) |  |  | (51,974) |
Investing Activities: |  |  |
Purchases of marketable securities | (19,530) |  |  | (10,115) |
Proceeds from maturities of marketable securities | 60,000 |  |  | 71,700 |
Proceeds from sale of property and equipment | 5 |  |  | — |
Purchases of property and equipment | — |  |  | (40) |
Net cash provided by investing activities | 40,475 |  |  | 61,545 |
Financing Activities: |  |  |
Proceeds from issuance of common stock under equity incentive plans | 189 |  |  | 248 |
Net-settlement of restricted stock unit vesting | — |  |  | (241) |
Net cash provided by financing activities | 189 |  |  | 7 |
Net increase in cash, cash equivalents and restricted cash | 8,028 |  |  | 9,578 |
Cash, cash equivalents and restricted cash at beginning of period | 36,528 |  |  | 30,719 |
Cash, cash equivalents and restricted cash at end of period | $ | 44,556 |  |  | $ | 40,297 |

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:

| March 31,
| 2025 |  | 2024
Cash and cash equivalents | $ | 41,929 |  |  | $ | 37,616 |
Restricted cash | 2,627 |  |  | 2,681 |
Total cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows | $ | 44,556 |  |  | $ | 40,297 |

See notes to condensed consolidated financial statements.
8

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

| Three Months Ended March 31, 2025
| Common |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Income |  | Accumulated Deficit |  |  |  | Total Equity
| Shares |  | Amount |  |  |  |  |
Balance at December 31, 2024 | 71,282 |  |  | $ | 71 |  |  | $ | 1,390,952 |  |  | $ | 558 |  |  | $ | (1,054,395) |  |  |  |  | $ | 337,186 |
Share-based compensation expense | — |  |  | — |  |  | 6,486 |  |  | — |  |  | — |  |  |  |  | 6,486 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | (200) |  |  | — |  |  |  |  | (200) |
Issuance and withholding of common stock in connection with restricted stock unit vesting, net | 530 |  |  | 1 |  |  | (1) |  |  | — |  |  | — |  |  |  |  | — |
Shares issued under employee stock purchase plan | 139 |  |  | — |  |  | 189 |  |  | — |  |  | — |  |  |  |  | 189 |
Net loss attributable to Zentalis | — |  |  | — |  |  | — |  |  | — |  |  | (48,279) |  |  |  |  | (48,279) |
Balance at March 31, 2025 | 71,951 |  |  | $ | 72 |  |  | $ | 1,397,626 |  |  | $ | 358 |  |  | $ | (1,102,674) |  |  |  |  | $ | 295,382 |

| Three Months Ended March 31, 2024
| Common |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Income |  | Accumulated Deficit |  | Noncontrolling Interests |  | Total Equity
| Shares |  | Amount |  |  |  |  |
Balance at December 31, 2023 | 70,767 |  |  | $ | 70 |  |  | $ | 1,323,576 |  |  | $ | 2,194 |  |  | $ | (888,556) |  |  | $ | 107 |  |  | $ | 437,391 |
Share-based compensation expense | — |  |  | — |  |  | 12,833 |  |  | — |  |  | — |  |  | — |  |  | 12,833 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | (1,421) |  |  | — |  |  | — |  |  | (1,421) |
Issuance and withholding of common stock in connection with restricted stock unit vesting, net | 228 |  |  | — |  |  | (241) |  |  | — |  |  | — |  |  | — |  |  | (241) |
Deconsolidation of Kalyra | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (79) |  |  | (79) |
Shares issued under employee stock purchase plan | 18 |  |  | — |  |  | 248 |  |  | — |  |  | — |  |  | — |  |  | 248 |
Net loss attributable to non-controlling interest | — |  |  | — |  |  | — |  |  | — |  |  |  |  | (28) |  |  | (28) |
Net income attributable to Zentalis | — |  |  | — |  |  | — |  |  | — |  |  | 10,068 |  |  | — |  |  | 10,068 |
Balance at March 31, 2024 | 71,013 |  |  | $ | 70 |  |  | $ | 1,336,416 |  |  | $ | 773 |  |  | $ | (878,488) |  |  | $ | — |  |  | $ | 458,771 |

See notes to condensed consolidated financial statements.
9

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 developing azenosertib (ZN-c3), a potentially first-in-class and best-in-class WEE1 inhibitor for patients with Cyclin E1-positive platinum-resistant ovarian cancer ("Cyclin E1+ PROC"). 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 statements 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 March 31, 2025 are issued.
2. Interim Unaudited Financial Statements
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. 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 were 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, 2024, filed with the SEC on March 26, 2025. 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. All intercompany transactions and balances have been eliminated in consolidation.
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 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.
10

Significant Accounting Policies
During the three months ended March 31, 2025 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, 2024.
Restructuring Expense
The Company recognizes and measures a liability for one-time employee termination benefits for which no future service is required once the plan of termination meets all of the following criteria and has been communicated to employees: (i) management commits to a plan of termination; (ii) the plan identifies the number of employees to be terminated and their job classifications or functions, locations and the expected completion date; (iii) the plan establishes the terms of the benefit arrangement; and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. For one-time termination benefits for which future service is required, a liability is measured at the communication date based on its fair value as of the termination date and recognized ratably over the future service period. The Company recognizes and measures a liability for other related costs in the period in which the liability is incurred.
3. Significant Transactions
Immunome License Agreement
In January 2024, the Company and Immunome, Inc. (“Immunome”) entered into an exclusive, worldwide license agreement under which Immunome licensed from Zentalis ZPC-21 (now known as IM-1021), a preclinical ROR1 antibody-drug conjugate (“ADC”) and proprietary ADC technology platform (the “Immunome License Agreement”). Simultaneously, the Company and Immunome entered into a stock issuance agreement (together with the Immunome License Agreement, the “Immunome License Agreements”). The upfront consideration from Immunome amounted to $40.6 million, which consisted of $15.0 million in cash and approximately 2.3 million shares (quantified using a 30-day volume average price) of Immunome common stock valued at approximately $25.6 million on the date of acquisition and accounted for as marketable equity securities on the condensed consolidated balance sheet. Changes to the fair value of the Immunome stock are recorded as a component of investment and other income, net within the condensed consolidated statement of operations. The Company was eligible to receive up to $275.0 million in development, regulatory and sales milestones as well as tiered royalties on net sales of licensed products.
The Company determined that the Immunome License Agreements fell within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”) as Immunome has contracted to obtain goods and services that are an output of ordinary activities and is a customer. Furthermore, subsequent to the execution of the Immunome License Agreements, the Company was no longer an active participant in the research and was no longer exposed to the significant risks and rewards of the research. Management of the Company determined there was one combined performance obligation for the Immunome License Agreements and know-how given the deliverables are not distinct. The Company evaluated the performance obligation within the Immunome License Agreements and determined the combined performance obligation was satisfied at a point in time with Immunome as the Immunome License Agreements represented a right to use the functional intellectual property as it existed at the time of the Immunome License Agreements, the customer had significant risk and rewards of ownership of the asset and the customer had accepted the asset with the transfer of know-how within the quarter ended March 31, 2024. In addition, variable consideration consisting of milestone payments was evaluated based on the Company’s analysis that the possibility of achieving any of the milestone payments was remote, and therefore determined to be constrained and excluded from the transaction price.
11

Immunome Asset Sale
In October 2024, the Company and Immunome entered into an asset purchase agreement, pursuant to which Immunome purchased from the Company ZPC-21 (now known as IM-1021), a preclinical ROR1 ADC, and the Company’s proprietary ADC platform technology (the “Immunome Purchase Agreement”). The assets subject to the Immunome Asset Sale Agreement were previously licensed to Immunome under the Immunome License Agreement. Simultaneously, the Company and Immunome entered into a stock issuance agreement (together with the Immunome Purchase Agreement, the "Immunome Asset Purchase Agreements"). The upfront consideration from Immunome amounted to $30 million, which consisted of 1.8 million shares of Immunome common stock based on the trailing 30-day volume weighted average price of Immunome common stock (valued at approximately $21.9 million based on the closing price of Immunome's common stock on the date of acquisition), and $5.0 million of contingent consideration due upon the achievement of a developmental milestone. The developmental milestone was achieved in December 2024. Pursuant to the terms of the Immunome Stock Agreement, Zentalis is obligated to hold and not sell greater than 50% of the shares until the six-month anniversary of the closing date, subject to certain exceptions. The Immunome License Agreement terminated upon the parties’ entry into the Immunome Purchase Agreement.
The Company determined that the Immunome Asset Purchase Agreements fall within the scope of ASC 606, Revenue from Contracts with Customers, as Immunome has contracted to obtain goods and services that are an output of ordinary activities and is a customer. Furthermore, the Immunome Asset Purchase Agreements change existing enforceable rights and obligations of the Immunome License Agreements and is accounted for as a contract modification. Management of the Company determined there was one combined performance obligation for the Immunome Asset Purchase Agreements. The Company evaluated the performance obligation within the Immunome Asset Purchase Agreements and determined the performance obligation was satisfied at a point in time with Immunome as the Immunome Asset Purchase Agreements represented the transfer of ownership of functional intellectual property as it existed at the time of the Immunome Asset Purchase Agreements within the quarter ended December 31, 2024. In addition, variable consideration consisting of milestone payments was evaluated based on the Company’s analysis that the possibility of achieving the milestone payment was probable. During the twelve months ended December 31, 2024, the Company recognized revenue from milestone payments of $5.0 million and received payment during the three months ended March 31, 2025.
Pfizer
In April 2022, the Company and Pfizer entered into a securities purchase agreement (the “Pfizer Securities Purchase Agreement”) and the Pfizer Development Agreement relating to the Company’s product candidate, azenosertib (together with the Pfizer Securities Purchase Agreement, the “Pfizer Agreements”). As part of the Pfizer Securities Purchase Agreement, Pfizer agreed to purchase 953,834 shares of the Company’s common stock for $26.21 per share for total proceeds of $25 million.
As the Company and Pfizer are both active participants in various research activities and both parties are exposed to significant risks and rewards, the Pfizer Agreements are being accounted for under ASC 808, Collaborative Arrangements. The Company considered by analogy the ASC 606 criteria for combining contracts and determined that the Pfizer Agreements should be combined into a single contract because they were negotiated and executed in contemplation of one another. Furthermore, management concluded that no parts of the Pfizer Agreements are within the scope of ASC 606, Revenue from Contracts with Customers, as Pfizer was not deemed to be a customer of research and development services. The Company determined that the Pfizer Development Agreement contained two components: (i) the parties joint development activities for azenosertib and (ii) access to the information generated in the related development activities.
The Company accounted for the common stock issued to Pfizer based on the fair market value of the common stock on the date of issuance. The fair value of the common stock issued to Pfizer was $20.8 million, based on the closing price of the Company’s common stock on the date of issuance, resulting in a $4.2 million premium. The Company determined that the premium paid by Pfizer for the common stock should be attributed to the transaction price of the Pfizer Development Agreement and accounted for as a reduction of research and development expense
12

over the term of the anticipated research period of the project based on a percentage of total costs to be incurred. Research and development expense was reduced by $0.1 million and $0.4 million for the three months March 31, 2025 and 2024 to account for the premium paid by Pfizer on the Company’s common stock.
13

4. Segment Reporting and Disaggregation of Relevant Expense Captions
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The determination of a single business segment is consistent with the consolidated financial information periodically reviewed by the Chief Executive Officer as chief operating decision maker ("CODM") in assessing segment performance and deciding how to allocate resources.
The CODM uses net income or loss to monitor budgets, forecasts and expected cash flows in assessing segment performance and in deciding how to allocate resources. The measure of segment assets is reported on the consolidated balance sheets as total assets.
The following table presents information about reported significant segment expenses and net (loss) income (in thousands):

| Three months ended March 31,
| 2025 |  | 2024 |  |
Revenues | $ | — |  |  | $ | 40,560 |  |  |
Less: |  |  |  |  |
Research and development (1): |  |  |  |  |
Azenosertib external development costs | 9,606 |  |  | 21,719 |  |  |
Unallocated research and development expenses and discontinued programs | 17,641 |  |  | 27,866 |  |  |
Total research and development | 27,247 |  |  | 49,585 |  |  |
General and administrative | 10,580 |  |  | 15,740 |  |  |
Other (2) | (10,452) |  |  | 34,805 |  |  |
Net (loss) income | $ | (48,279) |  |  | $ | 10,040 |  |  |
Adjustments for cash used in operations: |  |  |  |  |
Non-cash expenses | 13,889 |  |  | (46,481) |  |  |
Changes in working capital | 1,754 |  |  | (15,533) |  |  |
Cash used in operations: | $ | (32,636) |  |  | $ | (51,974) |  |  |

(1) The Company tracks external development costs by product candidate or development program, but does 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 and discontinued programs.
(2) Other consists of investment and other (expense) income, restructuring charges and income tax expense.
14

5. Fair Value Measurement
Available-for-sale marketable debt securities consisted of the following (in thousands):

| March 31, 2025
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Corporate debt securities | 193,656 |  |  | 408 |  |  | (54) |  |  | 194,010 |
US treasury securities | 84,359 |  |  | 84 |  |  | (80) |  |  | 84,363 |
| $ | 278,015 |  |  | $ | 492 |  |  | $ | (134) |  |  | $ | 278,373 |

| December 31, 2024
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Corporate debt securities | 233,291 |  |  | 731 |  |  | (81) |  |  | 233,941 |
US treasury securities | 84,160 |  |  | 43 |  |  | (135) |  |  | 84,068 |
| $ | 317,451 |  |  | $ | 774 |  |  | $ | (216) |  |  | $ | 318,009 |

As of March 31, 2025, five of our available-for-sale debt securities with a fair market value of $49.6 million were in a gross unrealized loss position of $134 thousand. Five have been in a gross unrealized loss position of $134 thousand for less than one year and none have been in a gross unrealized loss position 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 March 31, 2025, 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.
15

Contractual maturities of available-for-sale debt securities are as follows (in thousands):

| March 31, 2025 |  | December 31, 2024
| Estimated Fair Value
Within one year | $ | 248,837 |  |  | $ | 249,308 |
After one but within five years | 29,536 |  |  | 68,701 |
| $ | 278,373 |  |  | $ | 318,009 |

Equity investment gains (losses) comprised the following (in thousands):

| Three Months Ended March 31,
| 2025 |  | 2024
Change in unrealized investment gains (losses) during the year on securities held at the end of the period | $ | (7,023) |  |  | $ | 31,169 |
Investment gains (losses) during the period on securities sold | — |  |  | — |
Net gains (losses) recognized on equity securities | $ | (7,023) |  |  | $ | 31,169 |

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. The Company determines the fair value of financial assets and liabilities using three levels of inputs as follows:
Level 1—Inputs which include quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs (other than quoted market prices included in Level 1) that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.
Level 3—Unobservable inputs for assets or liabilities and include little or no market activity.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company had $0.5 million in contingent consideration liabilities as of March 31, 2025 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.
16

The following table summarizes the financial assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

| March 31, 2025
| Level 1 |  | Level 2 |  | Level 3 |  | Total estimated fair value
Financial assets: |  |  |  |  |  |  |
Cash equivalents: |  |  |  |  |  |  |
Money market funds | $ | 9,131 |  |  | $ | — |  |  | $ | — |  |  | $ | 9,131 |
Total cash equivalents: | 9,131 |  |  | — |  |  | — |  |  | 9,131 |
Available-for-sale marketable securities: |  |  |  |  |  |  |
Corporate debt securities | — |  |  | 194,010 |  |  | — |  |  | 194,010 |
US treasury securities | — |  |  | 84,363 |  |  | — |  |  | 84,363 |
Total available-for-sale marketable securities: | — |  |  | 278,373 |  |  | — |  |  | 278,373 |
Immunome marketable equity securities | $ | 12,151 |  |  | $ | — |  |  | $ | — |  |  | $ | 12,151 |
Total assets measured at fair value | $ | 21,282 |  |  | $ | 278,373 |  |  | $ | — |  |  | $ | 299,655 |
Financial liabilities: |  |  |  |  |  |  |
Contingent consideration | — |  |  | — |  |  | 500 |  |  | 500 |
Total financial liabilities | $ | — |  |  | $ | — |  |  | $ | 500 |  |  | $ | 500 |

|  | December 31, 2024
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total estimated fair value
Cash equivalents: |  |  |  |  |  |  |  |
Money market funds |  | $ | 13,723 |  |  | $ | — |  |  | $ | — |  |  | $ | 13,723 |
Total cash equivalents: |  | 13,723 |  |  | — |  |  | — |  |  | 13,723 |
Available-for-sale marketable securities: |  |  |  |  |  |  |  |
Corporate debt securities |  | — |  |  | 233,941 |  |  | — |  |  | 233,941 |
US treasury securities |  | — |  |  | 84,068 |  |  | — |  |  | 84,068 |
Total available-for-sale marketable securities: |  | — |  |  | 318,009 |  |  | — |  |  | 318,009 |
Immunome marketable equity securities |  | 19,174 |  |  | — |  |  | — |  |  | 19,174 |
Total assets measured at fair value |  | $ | 32,897 |  |  | $ | 318,009 |  |  | $ | — |  |  | $ | 350,906 |
Financial liabilities: |  |  |  |  |  |  |  |
Contingent consideration |  | — |  |  | — |  |  | 500 |  |  | 500 |
Total financial liabilities |  | $ | — |  |  | $ | — |  |  | $ | 500 |  |  | $ | 500 |

17

The following significant unobservable inputs were used in the valuation of the contingent consideration payable to Zentera pursuant to the Termination Agreement at March 31, 2025:

Contingent Consideration Liability | Fair Value as of March 31, 2025 | Valuation Technique | Unobservable Input | Range
| (in thousands) |  |  |
Milestone payment | $ | 500 |  | Discounted cash flow | Likelihood of occurrence | 1.0% - 2.4%
|  |  | Discount rate | 40%
|  |  | Expected term | Perpetuity

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, 2024 | $ | 500 |
Changes in the fair value of contingent consideration | — |
Contingent consideration at March 31, 2025 | $ | 500 |

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2025. We had one instrument that was classified within Level 3 as of March 31, 2025. As of March 31, 2025 and December 31, 2024, no material fair value adjustments were required for non-financial assets and liabilities.
6. Prepaid Expenses and Other Assets
Prepaid expenses and other assets consisted of the following (in thousands):

| March 31, |  | December 31,
| 2025 |  | 2024
Prepaid insurance | $ | 172 |  |  | $ | 249 |
Prepaid software licenses and maintenance | 471 |  |  | 509 |
Foreign R&D credit refund | 193 |  |  | — |
Prepaid research and development expenses | 8,081 |  |  | 8,788 |
Interest receivable | 2,738 |  |  | 2,943 |
Deferred tax asset | 103 |  |  | 101 |
Sublease assets | 722 |  |  | 626 |
Other prepaid expenses | 1,289 |  |  | 1,183 |
Total prepaid expenses and other assets | 13,769 |  |  | 14,399 |
Less long-term portion | 3,340 |  |  | 4,417 |
Total prepaid expenses and other assets, current | $ | 10,429 |  |  | $ | 9,982 |

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7. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):

| March 31, |  | December 31,
| 2025 |  | 2024
Lab equipment | $ | — |  |  | $ | 3,382 |
Leasehold improvements | 4,168 |  |  | 4,168 |
Office equipment and furniture | 1,277 |  |  | 1,280 |
Computer equipment | 143 |  |  | 143 |
Subtotal | 5,588 |  |  | 8,973 |
Accumulated depreciation and amortization | (2,341) |  |  | (4,274) |
Property and equipment, net | $ | 3,247 |  |  | $ | 4,699 |

Depreciation and amortization expense for the three months ended March 31, 2025 and 2024 was approximately $262 thousand and $324 thousand, respectively.
During the three months ended March 31, 2025, management determined that changes in circumstances indicated the carrying value of certain research and development equipment may not be recoverable and recorded an impairment charge of $1.2 million, which is reported in the Research and development expense line item of the condensed consolidated statement of operations.
8. Accrued Expenses
Accrued expenses consist of the following (in thousands):

| March 31, |  | December 31,
| 2025 |  | 2024
Accrued research and development expenses | $ | 25,621 |  |  | $ | 28,715 |
Accrued employee expenses | 7,049 |  |  | 12,799 |
Accrued restructuring | 4,411 |  |  | — |
Accrued general and administrative expenses | 396 |  |  | 642 |
Lease liability | 3,509 |  |  | 3,072 |
Contingent consideration | 500 |  |  | 500 |
Accrued legal expenses | 733 |  |  | 408 |
Total accrued expenses | 42,219 |  |  | 46,136 |
Less long-term portion | 558 |  |  | 849 |
Total accrued expenses, current | $ | 41,661 |  |  | $ | 45,287 |

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9. Stockholders’ Equity
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.
As of March 31, 2025, 14,653,443 shares were subject to outstanding awards under the 2020 Plan and 2,699,732 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. As of March 31, 2025, the Board of Directors has reserved 8,775,000 shares of the Company’s common stock for issuance pursuant to awards granted under the 2022 Inducement Plan.
As of March 31, 2025, 6,676,301 shares were subject to outstanding awards under the 2022 Inducement Plan and 1,901,699 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 March 31, |  |
| 2025 |  | 2024 |  |  |  |
Research and development expense | $ | 3,381 |  |  | $ | 4,740 |  |  |  |  |
General and administrative expense | 3,105 |  |  | 8,093 |  |  |  |  |
Total share-based compensation expense | $ | 6,486 |  |  | $ | 12,833 |  |  |  |  |

Share-based compensation expense by type of share-based award (in thousands):

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
Stock Options | $ | 4,745 |  |  | $ | 9,874 |  |  |  |  |
Employee Stock Purchase Plan | 62 |  |  | 53 |  |  |  |  |
RSAs and RSUs | 1,679 |  |  | 2,906 |  |  |  |  |
| $ | 6,486 |  |  | $ | 12,833 |  |  |  |  |

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,
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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 three months ended March 31, 2025 and March 31, 2024 was determined with the following assumptions:

| March 31, 2025 |  | March 31, 2024
Expected volatility | 55.9% - 66.8% |  | 75.3% - 78.2%
Average expected term (in years) | 5.9 - 6.1 |  | 6.0 - 6.1
Risk-free interest rate | 4.0% - 4.4% |  | 3.8% - 4.1%
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 March 31, 2025 was 1,726,004. Under the terms of the ESPP, the Company’s employees may elect to have up to 20% of their compensation, up to a maximum of $21,250 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 March 31, 2025
ESPP |  |  |  |  |
Volatility |  |  | 64.9 | % |  |
Expected term (years) |  |  | 0.5 |  |
Risk free rate |  |  | 4.4 | % |  |
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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| March 31, 2025
| Unrecognized Expense |  | Remaining Weighted-Average Recognition Period (years)
Stock options | $ | 40,890 |  |  | 2.61
RSUs | 15,645 |  |  | 2.16

During the three months ended March 31, 2025, we issued zero shares of common stock in connection with the exercises of stock options. Outstanding stock options and unvested RSUs totaling approximately 14.5 million shares and 6.9 million shares of our common stock, respectively, were outstanding as of March 31, 2025.
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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.
Leases
Our commitments include payments related to operating leases. Approximate annual future minimum operating lease payments as of March 31, 2025 are as follows (in thousands):

Year |  | Operating Leases
2025 (remaining) |  | $ | 5,352 |
2026 |  | 7,278 |
2027 |  | 7,451 |
2028 |  | 7,760 |
2029 |  | 7,930 |
Thereafter |  | 23,088 |
Total minimum lease payments: |  | 58,859 |
Less: imputed interest |  | (16,699) |
Total operating lease liabilities |  | 42,160 |
Less: current portion |  | (3,509) |
Lease liability, net of current portion |  | $ | 38,651 |

The weighted-average remaining lease term of our operating leases is approximately 7.5 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 three months ended March 31, 2025, we recorded lease income of $0.4 million relating to our New York sublease.
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11. Net Income (Loss) Per Common Share
Basic and diluted net (loss) income per common share were calculated as follows (in thousands except per share amounts):

|  |  |  |  |  | Three Months Ended March 31,
|  |  |  |  |  |  |  |  |  | 2025 |  | 2024
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net (loss) income attributable to Zentalis |  |  |  |  |  |  |  |  |  | $ | (48,279) |  |  | $ | 10,068 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted average number of common shares outstanding for basic |  |  |  |  |  |  |  |  |  | 71,678 |  |  | 70,898 |
Dilutive potential common stock outstanding |  |  |  |  |  |  |  |  |  |  |  |
Stock options |  |  |  |  |  |  |  |  |  | — |  |  | — |
Restricted Stock Units |  |  |  |  |  |  |  |  |  | — |  |  | 294 |
Weighted average common shares outstanding for diluted earnings per share |  |  |  |  |  |  |  |  |  | 71,678 |  |  | 71,192 |
Earnings per share |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |  |  |  | $ | (0.67) |  |  | $ | 0.14 |
Diluted |  |  |  |  |  |  |  |  |  | $ | (0.67) |  |  | $ | 0.14 |

Our potential and dilutive securities, which include outstanding stock options and unvested RSUs have been excluded from the computation of diluted net loss per common share as the effect would be anti-dilutive for the three months ended March 31, 2025.
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).

| March 31, |
| 2025 |  | 2024 |
Outstanding stock options | 11,214 |  |  | 12,233 |  |
Unvested RSUs | 1,953 |  |  | 665 |  |
| 13,167 |  |  | 12,898 |  |

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12. Restructuring
On January 28, 2025, the Company announced a corporate restructuring, (the “Restructuring”) that reduced its work force by approximately 40%. The Company has substantially completed all of the activities included in the restructuring plan and all of the costs associated with the restructuring were incurred during the quarter ended March 31, 2025.
In connection with the Restructuring, the Company recorded restructuring charges of $7.8 million which are reported as a separate line item in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2025. The following table summarizes the components of the restructuring charges (in thousands):

| Three Months Ended March 31, 2025
| Accruals |  | Non-cash items |  | Total
Employee separation costs | $ | 6,947 |  |  | $ | 806 |  |  | $ | 7,753 |
Other restructuring charges | 43 |  |  | — |  |  | 43 |
| $ | 6,990 |  |  | $ | 806 |  |  | $ | 7,796 |

Employee separation costs consist primarily of salaries and benefits earned during the minimum notification period proscribed by law and severance costs associated with the reduction in the Company’s workforce. Other restructuring charges consist of incremental direct costs associated with the Restructuring.
The following table sets forth activity in the restructuring liability (in thousands):

| Employee separation costs |  | Other restructuring charges |  | Total
Balance at December 31, 2024 | $ | — |  |  | $ | — |  |  | $ | — |
Accruals | 6,947 |  |  | 43 |  |  | 6,990 |
Payments | (2,540) |  |  | (39) |  |  | (2,579) |
Balance at March 31, 2025 | $ | 4,407 |  |  | $ | 4 |  |  | $ | 4,411 |

The Company records restructuring activities in accordance with ASC 420, Exit or Disposal Cost Obligations.
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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, 2024. 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 based upon current plans, expectations and beliefs that involve significant risks and uncertainties. As a result of many important factors, including those set forth under “Risk Factors” in 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 developing azenosertib (ZN-c3), a potentially first-in-class and best-in-class WEE1 inhibitor, for patients with ovarian cancer and other tumor types. In clinical trials, azenosertib has been well tolerated and has demonstrated anti-tumor activity as a single agent across multiple tumor types. We are currently focused on advancing the clinical development of azenosertib in Cyclin E1+ platinum-resistant ovarian cancer, or PROC. We believe that our DENALI (ZN-c3-005) Part 2 clinical trial of azenosertib in patients with Cyclin E1+ PROC, if successful, has the potential to support an accelerated approval, subject to U.S. Food and Drug Administration, or FDA, review. Azenosertib also has broad franchise potential beyond Cyclin E1+ PROC. We exclusively in-license or solely own worldwide development and commercialization rights to azenosertib.
Azenosertib (WEE1 Inhibitor)
Mechanism of Action
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. We have designed azenosertib to have advantages over other investigational therapies targeting WEE1, including superior selectivity and pharmacokinetic, or PK, properties.
Cyclin E1 Expression as a Sensitive and Specific Predictive Biomarker
Cells with Cyclin E1 activation are exquisitely sensitive to WEE1 inhibition via azenosertib because Cyclin E1 activation further accelerates cancer cells into the DNA replication phase without adequate DNA repair. As a result, we have used retrospective analyses to establish Cyclin E1 as a sensitive and specific predictive biomarker that can be used to identify patients who might benefit from azenosertib. In addition, based on published retrospective analyses, Cyclin E1 alteration is a biomarker of poor prognosis and low benefit from standard-of-care single-agent chemotherapy in PROC patients.
We are working with a diagnostic partner to develop a companion diagnostic test that will identify patients with PROC that overexpress the Cyclin E1 protein using our proprietary immunohistochemistry, or IHC, cutoff. A prototype of this test is ready for use in DENALI Part 2.
Market Opportunity
In 2022, the global ovarian cancer market was approximately $3 billion, with significant growth expected over the next several years. PROC is a subset of the ovarian cancer market. Based on our analysis utilizing our IHC cutoff, we estimate that approximately 50% of PROC patients overexpress Cyclin E1 protein, which account for approximately 21,500 patients on an annual basis in the United States, EU4 (France, Germany, Italy, Spain) and the United Kingdom, based on 2024 estimates. As a result, we believe there is a large market opportunity for
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azenosertib in Cyclin E1+ PROC patients. Moreover, the successful launch of mirvetuximab in PROC patients with high folate receptor alpha, or FRα-high, expression underscores the demand for biomarker-directed therapies for PROC patients. The limited overlap between FRα-high PROC patients and those that have Cyclin E1 overexpression is estimated to be less than 20%, which highlights the significant unmet need in patients with Cyclin E1+ PROC.
We believe there is additional market opportunity for azenosertib outside of ovarian cancer across other solid tumor types, including uterine serous carcinoma, or USC, triple negative breast cancer, HER2+ solid tumors, and osteosarcoma. Some of these tumor types are being studied in a Company sponsored trial (TETON (ZN-c3-004) in USC) or investigator initiated clinical trials.
Clinical Development Program
The following ongoing and planned studies constitute the current clinical development program for azenosertib:
•Monotherapy – Phase 2 Clinical Trial in PROC (DENALI - ZN-c3-005).
▪DENALI Part 1b is a single-arm study that evaluated azenosertib monotherapy at our primary dose-of-interest, 400 mg QD 5:2 (intermittent daily dosing with a five days on, two days off dosing schedule), in 102 patients with PROC. Tissue collection for biomarker assessment was mandated in the study and upon a retrospective analysis, approximately 50% of the patients were Cyclin E1+ per our proprietary IHC cutoff. In January and March of 2025, we announced clinical data from this study, which is described in the next section below titled “Clinical Data – DENALI Part 1b.”
▪DENALI Part 2 is designed to enroll approximately 100 patients with Cyclin E1+ PROC at the selected dose who have received one to three prior lines of therapy, or for patients whose tumors are also FRα-high and who have received mirvetuximab soravtansine, one to four prior lines of therapy. We have aligned with the FDA on the design of our DENALI Part 2 study in patients with Cyclin E1+ PROC, which allows for seamless enrollment across Parts 2a and 2b. DENALI Part 2a is designed to confirm 400 mg QD 5:2 as the primary dose-of-interest by enrolling approximately 30 patients at each of two dose levels, 400 mg QD 5:2 and 300 mg QD 5:2. DENALI Part 2b is designed to enroll approximately 70 patients at a single dose, the selection of which will be informed by the Part 2a results subject to FDA feedback. In April 2025, we announced that the first patient was dosed in DENALI Part 2a. We anticipate disclosing topline data from DENALI Part 2 by year end 2026. DENALI Part 2, if successful, has the potential to support an accelerated approval, subject to FDA review. The FDA has granted Fast Track Designation to azenosertib for the treatment of patients with PROC who are positive via Cyclin E1 IHC for protein levels.
•Monotherapy – Phase 3 Clinical Trial in Cyclin E1+ PROC. We plan to conduct a randomized Phase 3 clinical trial of azenosertib versus standard-of-care chemotherapy for the treatment of patients with Cyclin E1+ PROC designed to support a full approval of azenosertib in this setting, which we plan to conduct concurrently with DENALI Part 2b, subject to FDA feedback.
•Monotherapy – Phase 2 Clinical Trial in USC (TETON - ZN-c3-004). Azenosertib is currently being evaluated as a monotherapy in a Phase 2 clinical trial in patients with USC. The FDA granted Fast Track Designation 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 plan to disclose data from this trial in the first half of 2026.
•Combination – Phase 1b Clinical Trial of Azenosertib and Chemotherapy or Bevacizumab in Ovarian Cancer (ZN-c3-002). We are currently enrolling patients in an arm of our ZN-c3-002 Phase 1b clinical trial that is evaluating azenosertib in combination with bevacizumab in platinum sensitive ovarian cancer.
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•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). ZN-c3-016 is an ongoing Phase 1/2 study that is evaluating azenosertib in combination with encorafenib and cetuximab in patients with metastatic BRAF V600E mCRC in collaboration with Pfizer. In January 2025, we announced clinical data from this trial. While the results from this trial in BRAF inhibitor naïve patients were encouraging, we decided not to advance into the dose expansion phase of the study due to resource prioritization and an evolving treatment landscape.
The following chart is a graphical representation of our current clinical development program for azenosertib:
Clinical Data – DENALI Part 1b
In January 2025, we announced data from DENALI Part 1b (n=102). As of the December 2, 2024 data cutoff, in patients with Cyclin E1+ PROC tumors who were response-evaluable (patients who had at least one scan after receiving azenosertib), an objective response rate, or ORR, of 34.9% (15/43; 95% confidence interval, or CI: 21.0 - 50.9) was observed. In the intent-to-treat patients with Cyclin E1+ PROC (patients who received at least one dose of azenosertib), the ORR was 31.3% (15/48; 95% CI: 18.7 - 46.3). As of the December 2, 2024 data cutoff, the median duration of response, or mDOR, for the intent-to-treat population was still maturing and was approximately 5.5 months (95% CI: 2.7 - not estimable).
As of the December 2, 2024 data cutoff, azenosertib was observed to have a safety and tolerability profile that is favorable compared to published data from standard-of-care single-agent chemotherapy. Treatment-related serious adverse events occurred in 22 patients (21.6%).
The most common treatment-related adverse events of special interest or clinical significance for azenosertib and this class of molecules, were nausea (65.7% all grades; 3.9% Grade 3+), fatigue (59.8% all grades, 15.7% Grade 3+), diarrhea (50.0% all grades; 6.9% Grade 3+), thrombocytopenia (34.3% all grades; 11.8% Grade 3+), and anemia (30.4% all grades, 10.8% Grade 3+). In addition, Grade 3+ sepsis occurred in 3 patients (2.9%), Grade 3+ febrile neutropenia occurred in 3 patients (2.9%), and Grade 3+ pancytopenia occurred in 1 patient (1.0%). Treatment-related adverse events led to dose reductions in 43 patients (42.2%), dose interruptions in 60 patients (58.8%) and discontinuations in 22 patients (21.6%). There were two previously reported treatment-related Grade 5 events in the study (2.0%). The DENALI Part 2 protocol contains measures for enhanced patient monitoring, guidance and supportive care, which could potentially improve discontinuation rates.
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In March 2025 at the Society of Gynecologic Oncology 2025 Annual Meeting on Women’s Cancer, or SGO, we disclosed updated data from DENALI Part 1b reflecting a January 13, 2025 data cutoff. As of the January 13, 2025 data cutoff, the ORR in patients with Cyclin E1+ PROC tumors who were response-evaluable remained at 34.9% (15/43; 95% CI: 21.0 - 50.9). The safety and tolerability profile presented at SGO reflected treatment-related adverse events occurring in 10% or greater of patients and was consistent with the safety and tolerability profile reflected in the December 2, 2024 data cutoff, with no new safety findings. As previously disclosed in January 2025, the mDOR for the intent-to-treat population in DENALI Part 1b was still maturing. As of the January 13, 2025 data cutoff, the ongoing mDOR had increased to approximately 6.3 months (95% CI: 2.7 - not estimable) and continues to mature as patients remained on study as of the data cutoff.
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 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 losses were $165.9 million for the year ended December 31, 2024. We had net losses of $48.3 million and net income of $10.0 million for the three months ended March 31, 2025 and March 31, 2024, respectively. We had an accumulated deficit of $1.1 billion as of March 31, 2025. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We had cash, cash equivalents and marketable securities of $332.5 million as of March 31, 2025. We believe that our existing cash, cash equivalents and marketable securities as of March 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into late 2027. 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.
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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 historical corporate restructuring as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, 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 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. In January 2025, we announced that we would not advance to the dose expansion phase of the study due to resource prioritization and an evolving treatment landscape.
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 have evaluated the combination of azenosertib and niraparib, GSK’s poly (ADP-ribose) polymerase (PARP) inhibitor, in patients with PROC. In January 2025, we announced that the trial was fully enrolled and that we were not proceeding further with the development of the combination of azenosertib with niraparib as efficacious exposures of azenosertib were not reached. Pursuant to this agreement, we were responsible for the conduct and cost of the study, under the supervision of a joint development committee made up of our representatives and representatives of GSK. GSK supplied 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.
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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. In addition, there are standard early termination provisions under this agreement.
Immunome Agreements
In January 2024, we entered into an exclusive, worldwide license agreement with Immunome, or the Immunome License Agreement, 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, or the ADC Assets. 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). In October 2024, we entered into an asset purchase agreement with Immunome, pursuant to which Immunome purchased the ADC Assets, or the Immunome Purchase Agreement. We received $25 million worth of Immunome common stock, with the shares valued at the trailing 30-day volume-weighted average price of Immunome's common stock. On the date of execution of the transaction, the Immunome stock was valued at $21.9 million based on the closing price of Immunome's common stock on that date. In the first quarter of 2025, we also received $5.0 million of contingent consideration following the achievement of a developmental milestone in December 2024. The Immunome License Agreement terminated upon the parties’ entry into the Immunome Purchase Agreement..
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 licensing, collaboration and asset sale agreements, which included 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 non-cash 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;
•costs of outside consultants, including their fees, non-cash 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.
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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 and discontinued programs in the table below.
The following table summarizes our research and development expenses by product candidate or development program:

| Three Months Ended March 31, |  |
| 2025 | 2024 |  |  |
Azenosertib | $ | 9,606 |  | $ | 21,719 |  |  |  |  |  |
Unallocated research and development expenses and discontinued programs |  | 17,641 |  |  | 27,866 |  |  |  |  |  |
Total research and development expenses | $ | 27,247 |  | $ | 49,585 |  |  |  |  |  |

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. Following the strategic restructuring announced in January 2025 for which we incurred certain associated non-recurring expenses in the first quarter of 2025, we expect an initial decrease in research and development expenses; however, if our azenosertib development program continues to advance successfully, we expect our research and development expenses to increase as we initiate and execute our Phase 3 confirmatory study and prepare for commercialization.
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 azenosertib 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 azenosertib 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;
•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;
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•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 non-cash 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.
Following the strategic restructuring announced in January 2025 for which we incurred certain associated non-recurring expenses in the first quarter of 2025, we expect an initial decrease in general and administrative expenses; however, if our azenosertib development program continues to advance successfully, we expect our general and administrative expenses to increase as we initiate and execute our Phase 3 confirmatory study and prepare for commercialization. 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.
Restructuring Expenses
Restructuring expenses consist of involuntary employee termination benefits pursuant to a one-time benefit arrangement.
Interest Income
Interest income consists of interest earned on cash, cash equivalents and available-for-sale marketable securities.
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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 March 31, 2025 to Three Months Ended March 31, 2024
The following table summarizes our results of operations for the periods indicated, together with the changes in those items in dollars:

| Three Months Ended March 31, |  | Increase (Decrease)
| 2025 |  | 2024
| (in thousands)
License Revenue | $ | — |  |  | $ | 40,560 |  |  | $ | (40,560) |
Operating Expenses |  |  |  |  |  |  |  |
Research and development | $ | 27,247 |  |  | $ | 49,585 |  |  | $ | (22,338) |
General and administrative |  | 10,580 |  |  |  | 15,740 |  |  |  | (5,160) |
Restructuring |  | 7,796 |  |  |  | — |  |  |  | 7,796 |
Total operating expenses |  | 45,623 |  |  |  | 65,325 |  |  |  | (19,702) |
Loss from operations |  | (45,623) |  |  |  | (24,765) |  |  |  | (20,858) |
Other Income (Expense) |  |  |  |  |  |  |  |
Investment and other (expense) income, net |  | (2,656) |  |  |  | 34,948 |  |  |  | (37,604) |
Net loss before income taxes |  | (48,279) |  |  |  | 10,183 |  |  |  | (58,462) |
Income tax expense (benefit) |  | — |  |  |  | 143 |  |  |  | (143) |
Net loss |  | (48,279) |  |  |  | 10,040 |  |  |  | (58,319) |
Net loss attributable to noncontrolling interests |  | — |  |  |  | (28) |  |  |  | 28 |
Net loss attributable to Zentalis | $ | (48,279) |  |  | $ | 10,068 |  |  | $ | (58,347) |

License Revenue
License revenue for the three months ended March 31, 2025 , was zero compared to $40.6 million for the three months ended March 31, 2024. The decrease relates to the Immunome License Agreement and related share issuance agreement with Immunome entered during the three months ended March 31, 2024.
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Research and Development Expenses
Research and development expenses for the three months ended March 31, 2025 were $27.2 million, compared to $49.6 million for the three months ended March 31, 2024. The decrease of $22.4 million was primarily due to decreases of $10.7 million for clinical expenses, $4.8 million for drug manufacturing, $3.5 million for lab services and $5.1 million related to consulting and personnel expenses, including non-cash stock-based compensation. These decreases were partially offset by the one-time impairment charge of $1.2 million related to the disposal of research and development equipment and an increase of $0.5 million for allocated overhead.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2025 were $10.6 million, compared to $15.7 million during the three months ended March 31, 2024. This decrease of $5.1 million was attributable to non-cash stock-based compensation.
Restructuring Expenses
On January 22, 2025, our Board of Directors approved a strategic restructuring of the Company to support execution of late-stage development for azenosertib, and extend its cash runway beyond a potentially registration-enabling azenosertib data readout from the Company’s DENALI Part 2 study, anticipated by the end of 2026. In connection with this strategic restructuring, the Company reduced its workforce by approximately 40%.
Restructuring expenses for the three months ended March 31, 2025 were $7.8 million, compared to zero during the three months ended March 31, 2024.
Investment and Other Income (Expense), Net
Investment and other income (expense), net was $(2.7) million for the three months ended March 31, 2025, compared to $34.9 million for the three months ended March 31, 2024. The decrease of $37.6 million was primarily driven by decreases in the fair value of Immunome stock of $38.3 million and a decrease of $2.2 million in returns on invested cash and marketable debt securities. The decreases were partially offset by a reduction of one-time miscellaneous expenses incurred in 2024.
Liquidity and Capital Resources
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 and we have incurred significant operating losses. Following the strategic restructuring announced in January 2025 for which we incurred certain associated non-recurring expenses in the first quarter of 2025, we expect an initial decrease in expenses; however, if our azenosertib development program continues to advance successfully, we expect our expenses to increase as we initiate and execute our Phase 3 confirmatory study and prepare for commercialization.
As a result, we will need to raise substantial additional capital to support our continuing operations and pursue our strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all, particularly in light of the global macroeconomic environment and fluctuating inflation and interest rates. If we are unable to secure adequate additional funding as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.
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Because of the numerous risks and uncertainties associated with developing and commercializing therapeutics, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We do not currently have any approved products and have never generated any revenue from product sales. To date, we have financed our operations primarily through the sale of equity securities. From inception through March 31, 2025, we raised a total of $1.2 billion in gross proceeds from the sale of shares of our common stock and convertible preferred units. As of March 31, 2025, we had $41.9 million in cash and cash equivalents, $278.4 million in marketable debt securities, $12.2 in marketable equity securities, and an accumulated deficit of $1.1 billion. We maintain the majority of our cash and cash equivalents in accounts with major financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position. We had no indebtedness as of March 31, 2025.
ATM Program
In May 2021, we entered into a sales agreement, or the Sales Agreement, with Leerink Partners LLC, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $75.0 million in “at-the-market” offerings, or the ATM, under our Registration Statement on Form S-3 (File No. 333-286122) filed with the U.S. Securities and Exchange Commission, or the SEC, on March 26, 2025. Sales of common stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act of 1933, as amended, or the Securities Act, including sales made directly through The Nasdaq Global Market or any other existing trading market for our common stock. During the quarter ended March 31, 2025, we did not sell any shares of common stock under the Sales Agreement. As of March 31, 2025, there was $75.0 million of our common stock remaining available for sale under our ATM.
Cash Flows
The following table summarizes our sources and uses of cash for the period presented:

| Three Months Ended March 31,
| 2025 |  | 2024
| (in thousands)
Net cash used in operating activities | $ | (32,636) |  |  | $ | (51,974) |
Net cash provided by investing activities |  | 40,475 |  |  |  | 61,545 |
Net cash provided by financing activities |  | 189 |  |  |  | 7 |
Net increase in cash and cash equivalents | $ | 8,028 |  |  | $ | 9,578 |

Operating Activities
Net cash used in operating activities for the three months ended March 31, 2025 was $32.6 million, consisting primarily of our net loss of $48.3 million as we incurred expenses associated with research and development activities for our product candidates and incurred general and administrative expenses, as well as changes in operating assets and liabilities of $1.8 million and by non-cash adjustments of $13.9 million.
Net cash used in operating activities for the three months ended March 31, 2024 was $52.0 million, consisting primarily of our net income of $10.0 million offset by expenses associated with research and development activities
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for our product candidates and incurred general and administrative expenses, as well as changes in operating assets and liabilities of $15.5 million, partially offset by non-cash adjustments of $46.4 million.
Investing Activities
Net cash provided by investing activities for the three months ended March 31, 2025 of $40.5 million was attributable to proceeds of maturities of marketable securities of $60.0 million, offset by net investment of excess cash of $19.5 million.
Net cash provided by investing activities for the three months ended March 31, 2024 of $61.5 million was attributable to proceeds of maturities of marketable securities of $71.7 million, offset by net investment of excess cash of $10.1 million and purchases of property and equipment of $40 thousand.
Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2025 of $189.0 thousand was provided from the issuance of common stock under equity incentive plans.
Net cash provided by financing activities for the three months ended March 31, 2024 of $7 thousand consists of $248 thousand provided from the issuance of common stock under equity incentive plans offset by cash used in the net-settlement of restricted stock unit vesting.
Funding Requirements
Following the strategic restructuring announced in January 2025 for which we incurred certain associated non-recurring expenses in the first quarter of 2025, we expect an initial decrease in expenses; however, if our azenosertib development program continues to advance successfully, we expect our expenses to increase as we initiate and execute our Phase 3 confirmatory study and prepare for commercialization. Our future capital requirements will depend on many factors, including:
•the clinical development of azenosertib for the treatment of oncology indications;
•the preclinical and clinical development of other programs, resources allowing;
•the development of a companion diagnostic with a partner in conjunction with our clinical development of azenosertib as a monotherapy for the treatment of Cyclin E1+ PROC, if applicable, diagnostics tools for additional biomarkers for azenosertib and any future product candidates;
•the costs of in-licensing or acquiring the rights to other products, product candidates or technologies;
•the legal costs related to maintaining, expanding and protecting our intellectual property portfolio;
•hiring additional personnel, if needed;
•the costs to seek regulatory approval for azenosertib for the treatment of Cyclin E1+ PROC and support our diagnostic partner's seeking regulatory approval of a companion diagnostic to identify patients with Cyclin E1+ PROC, and resources allowing, seek regulatory approval of azenosertib for additional oncology indications, assuming supportive clinical data; and
•the costs to seek regulatory approval for any future product candidates and, if needed, diagnostics tools for biomarkers associated with such product candidates, that successfully complete clinical development, resources allowing.
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As of March 31, 2025, we have $3.5 million and $38.7 million in current and long-term lease liabilities, respectively. We believe that our existing cash, cash equivalents and marketable securities as of March 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into late 2027. 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.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drugs, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:
•the progress, costs and results of our clinical trials for azenosertib for patients with Cyclin E1+ PROC and, resources allowing, any additional indications, and any future product candidates;
•the progress, costs and results to develop a companion diagnostic to identify patients with Cyclin E1+ PROC;
•the progress, costs and results of additional research and preclinical studies in other research programs we initiate in the future and, if needed, of diagnostics tools for additional biomarkers for azenosertib and any future product candidates;
•the costs and timing of process development and manufacturing scale-up activities associated with azenosertib and, resources allowing, our product candidates and other programs as we advance them through preclinical and clinical development;
•our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;
•the extent to which we in-license or acquire rights to other products, product candidates or technologies;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims; and
•our ability to attract and retain skilled personnel.
Further, our operating results may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions.
We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or
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future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Critical Accounting Estimates
There have been no significant changes to our critical accounting estimates from our disclosure reported in “Critical Accounting Estimates” in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.
Item 4. Controls and Procedures.
Inherent Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not subject to any material legal proceedings.
Item 1A. Risk Factors.
You should carefully consider the risks and uncertainties described below and the other information in this Quarterly Report on Form 10-Q, including our interim unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. Our business, financial condition, results of operations or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain important factors, including those set forth below.
Risks Related to Our Financial Position and Need for Additional Capital
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 are a clinical-stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. We have no products approved for commercial sale and have not generated any revenue from product sales. To date, we have devoted substantially all of our resources and efforts to organizing and staffing our company, business planning, executing partnerships, raising capital, discovering, identifying and developing potential product candidates, securing related intellectual property rights, and conducting preclinical studies and clinical trials of our product candidates, including the ongoing clinical trials of azenosertib. We have not yet demonstrated our ability to obtain marketing approvals, supply a product at commercial scale or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. As a result, it may be more difficult for you to accurately predict our future success or viability than it could be if we had a longer operating history.
In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by clinical stage biopharmaceutical companies in rapidly evolving fields. We also may need to transition from a company with a research and development focus to a company capable of supporting commercial activities. If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer.
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We have incurred significant net losses since inception and we expect to continue to incur significant net losses for the foreseeable future.
We have incurred net losses in almost every reporting period since our inception, we have not generated any revenue from product sales to date, and we have financed our operations principally through private financings, our initial public offering, or IPO, and follow-on public offerings of our common stock. We incurred a net loss of $165.9 million for the year ended December 31, 2024. We had a net loss of $48.3 million and a net income of $10.0 million for the three months ended March 31, 2025 and March 31, 2024, respectively. As of March 31, 2025, we had an accumulated deficit of $1.1 billion. Our losses have resulted principally from expenses incurred in research and development of our product candidates and from management and administrative costs and other expenses that we have incurred while building our business infrastructure. We expect that it will be several years, if ever, before we have a commercialized product and generate revenue from product sales. Even if we succeed in receiving marketing approval for and commercializing one or more of our product candidates, we expect that we will continue to incur substantial research and development and other expenses as we discover, develop and market additional potential products.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we continue our research and development efforts and seek to obtain regulatory approval and commercialization of our product candidates. The net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our working capital and our ability to achieve and maintain profitability.
Our ability to generate product revenue and achieve profitability depends significantly on our ability to achieve a number of objectives.
Our business depends entirely on the successful discovery, development and commercialization of azenosertib and any future product candidates. We currently generate no revenues from sales of any products. We have no products approved for commercial sale and do not anticipate generating any revenue from product sales for the next several years, if ever. Our ability to generate product revenue and achieve profitability depends significantly on our ability, or any future collaborator’s ability, to achieve a number of objectives, including:
•successful and timely completion of the clinical development of azenosertib as a monotherapy for the treatment of Cyclin E1+ PROC, successful and timely completion of the development of a companion diagnostic with a diagnostic partner to identify patients with Cyclin E1+ PROC, and meeting the associated costs thereof, including any unforeseen costs we have incurred and may continue to incur as a result of delays including due to public health emergencies, U.S. and global economic issues, such as rising inflation and interest rates, or ongoing military conflicts, among other causes;
•successful and timely completion of the clinical development of azenosertib for additional oncology indications and of any future product candidates, resources allowing;
•if applicable, the availability or successful development of diagnostic tools for biomarkers for any future product candidates or for additional biomarkers for azenosertib;
•establishing and maintaining relationships with CROs and clinical sites for the clinical development, both in the United States and internationally, of azenosertib and any future product candidates, resources allowing;
•timely receipt of marketing approvals from applicable regulatory authorities for azenosertib for the treatment of Cyclin E1+ PROC and, resources allowing, additional oncology indications for azenosertib and any future product candidates, in each case for which we successfully complete clinical development;
•timely receipt by our diagnostic partner of a marketing approval for a companion diagnostic to identify patients with Cyclin E1+ PROC and, if applicable, marketing approval of diagnostic tools for biomarkers for any future product candidates and any additional biomarkers for azenosertib;
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•maintaining marketing approvals, including our diagnostic partner's maintaining its marketing approval of a companion diagnostic to identify patients with Cyclin E1+ PROC, and making any required post-marketing approval commitments to applicable regulatory authorities;
•developing an efficient and scalable manufacturing process for our product candidates, including obtaining finished products that are appropriately packaged for sale;
•establishing and maintaining commercially viable supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and meet the market demand for product candidates that we develop, if approved;
•successful commercial launch following any marketing approval, including the development of a commercial infrastructure, whether in-house or with one or more collaborators;
•a continued acceptable safety profile following any marketing approval of our product candidates;
•commercial acceptance of our product candidates by patients, the medical community and third-party payors;
•identifying, assessing and developing new product candidates;
•obtaining, maintaining and expanding our intellectual property rights, including patents, trade secrets and know how, and regulatory exclusivity, both in the United States and internationally;
•protecting our rights in our intellectual property portfolio;
•defending against third-party interference or infringement claims, if any;
•negotiating favorable terms in any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
•obtaining adequate pricing, coverage and reimbursement by hospitals, government and third-party payors for product candidates that we develop;
•addressing any competing therapies and technological and market developments; and
•attracting, hiring and retaining qualified personnel, especially in the current labor market.
We may never be successful in achieving our objectives and, even if we do, may never generate revenue that is significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to maintain or further our research and development efforts, raise additional necessary capital, grow our business and continue our operations. Additionally, our current prioritization of a single product candidate means that our financial prospects are closely tied to the success of azenosertib. Any setbacks in its development or commercialization could have a material adverse effect on our financial condition and ability to continue operations.
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.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash since inception. Following our strategic restructuring announced in January 2025 for which we incurred the associated non-recurring expenses in the first quarter of 2025, we expect an initial decrease in expenses; however, if our azenosertib development program continues to advance successfully, we expect our expenses to increase as we initiate and execute our Phase 3 confirmatory study and prepare for commercialization. Even if azenosertib or any future product candidate that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond our expectations if we are required by the FDA, the European Medicines Agency, or the EMA, or other regulatory agencies to perform clinical trials or preclinical studies in addition to those that we currently anticipate. We are incurring costs related to collaborating with a diagnostic company for the development, manufacturing and supply of a companion diagnostic to identify patients with Cyclin E1+ PROC, and we may in the future incur costs relating to additional diagnostic tools for biomarkers associated with azenosertib and any future product candidates. Other unanticipated costs may also arise. In addition, if we obtain marketing approval for any of our product candidates, including azenosertib, we expect to incur significant commercialization expenses related to
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drug sales, marketing, manufacturing and distribution. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of any product candidate we develop. We have also incurred, and expect to continue to incur, costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in order to maintain our continuing operations.
As of March 31, 2025, we had cash and cash equivalents and marketable securities of $332.5 million. Based on current business plans, we believe that our existing cash, cash equivalents and marketable securities as of March 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into late 2027, but will not be sufficient to fund all of the activities that are necessary to complete the development of azenosertib and any future product candidates. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.
We will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources, which may dilute our stockholders or restrict our operating activities. We do not have any committed external source of funds. Adequate additional financing may not be available to us on acceptable terms, or at all. Market volatility resulting from public health emergencies, U.S. and global economic issues, global supply chain disruptions, international political instability, rising inflation and interest rates or other factors could also adversely impact our ability to access capital as and when needed. Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our clinical trials or future commercialization efforts.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
We are substantially dependent on the success of azenosertib, which is currently our only product candidate in clinical development. If we are unable to complete development of, obtain approval for and commercialize azenosertib in a timely manner, our business will be harmed.
Our future success is dependent on our ability to timely complete clinical trials, obtain marketing approval for and successfully commercialize our only product candidate in clinical development, azenosertib. We are investing significant efforts and financial resources in the research and development of azenosertib, which will require additional clinical development, additional clinical, preclinical and manufacturing activities, marketing approval from government regulators, substantial investment and significant marketing efforts before we can generate any revenues from product sales. We are not permitted to market or promote any product candidate before we receive marketing approval from the FDA and/or ex-U.S. regulatory authorities, and we may never receive such marketing approvals.
The success of azenosertib will depend on several factors, including the following:
•the successful and timely completion of our ongoing and planned clinical trials;
•maintaining and establishing relationships with CROs and clinical sites for the clinical development of azenosertib both in the United States and internationally;
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•the frequency and severity of adverse events, or AEs, observed in clinical trials;
•efficacy, safety and tolerability profiles that are satisfactory to the FDA and/or any ex-U.S. regulatory authority for marketing approval;
•the timely receipt of marketing approvals from applicable regulatory authorities;
•the extent of any required post-marketing approval commitments to applicable regulatory authorities;
•the successful development, in collaboration with our diagnostic partner, of a companion diagnostic for our lead indication for azenosertib and the availability or successful development of diagnostic tools for any additional biomarkers for azenosertib;
•the maintenance of existing or the establishment of new supply arrangements with third-party drug substance and drug product suppliers and manufacturers for clinical development of azenosertib
•the maintenance of existing, or the establishment of new, scaled production arrangements with third-party manufacturers to obtain finished products that are appropriate for commercial sale of azenosertib, if approved, including for supplies of drugs that we are testing in combination with azenosertib;
•obtaining and maintaining our intellectual property rights, including patents, trade secrets and know how, and regulatory exclusivity, both in the United States and internationally;
•the protection of our rights in our intellectual property portfolio;
•the successful launch of commercial sales following any marketing approval;
•a continued acceptable safety profile following any marketing approval;
•commercial acceptance by patients, the medical community and third-party payors; and
•our ability to compete with other therapies.
We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any future collaborator. If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize azenosertib or any future product candidates, which would materially harm our business. If we do not receive marketing approvals for azenosertib, or any future product candidates, we may not be able to continue our operations.
We have and in the future may enter into collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any of these collaborations is not successful, we may not be able to capitalize on the market potential of those product candidates.
We have and in the future may seek third-party collaborators for the research, development and commercialization of one or more of our product candidates. For example, we are collaborating with Pfizer, GSK and Dana Farber on the development of azenosertib. Our likely collaborators in any future collaboration arrangements we may enter into include large and mid-size pharmaceutical companies and biotechnology companies. If we were to enter into any collaboration arrangements with third parties, those agreements may limit our control over the amount and timing of resources that our collaborators dedicate to the development and commercialization of any product candidates we may seek to develop with them. We cannot predict the success of any collaboration in which we have entered or may enter. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates and any future research programs or product candidates we may develop pose risks to us, including the following:
•Collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations.
•Collaborators may not pursue development and commercialization of any product candidates we may develop or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator's strategic focus or market
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considerations, including as a result of a sale or disposition of a business unit or development function, or available funding or external factors such as an acquisition or business combination that diverts resources or creates competing priorities. If this were to happen, we may need additional capital to pursue further development or commercialization of the applicable product candidates.
•Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, use our product candidates in clinical trials in an unsafe manner, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing.
•Collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours.
•Subject to certain diligence obligations, collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products.
•Collaborators may not properly obtain, maintain, enforce or defend our intellectual property or proprietary rights or may use proprietary information in a way that could jeopardize or invalidate our proprietary information or expose us to potential litigation.
•Collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in cases where that applies, we would not have the exclusive right to commercialize the collaboration intellectual property.
•Disputes may arise between our collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources.
•We may lose certain rights under circumstances identified in our collaborations, including if we undergo a change of control.
•Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.
•Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program under such collaboration could be delayed, diminished or terminated.
•Collaborators may be unable to maintain compliance with applicable laws, regulations and guidance, including good practice quality guidelines and regulations, including GLP, GCP, and cGMP, or similar ex-U.S. requirements or to secure approval for clinical development plans from the FDA or ex-U.S. regulatory authorities.
•We may require certain regulatory, clinical, manufacturing, financial and other information from our collaborators, which, if not provided in a timely manner or at all, could affect our ability to meet our business objectives and/or comply with applicable laws, regulations and guidance.
If we do not receive the funding or other resources we expect under these agreements, our development of product candidates could be delayed and we may need additional resources to develop our product candidates. In addition, if one of our collaborators terminates its agreement with us, we may find it more difficult to find a suitable replacement collaborator or attract new collaborators and our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected. All of the risks relating to product development, marketing approval and commercialization described in this report apply to the activities of our collaborators.
We may in the future decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of any product candidates we may develop. These and other similar relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In
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addition, we could face significant competition in seeking appropriate collaborators and the negotiation process is time-consuming and complex. Our ability to reach a definitive collaboration agreement will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of several factors. If we license rights to any product candidates we or our collaborators may develop, we may not be able to realize the benefit of those transactions if we are unable to successfully integrate them with our existing operations and company culture.
Our long-term prospects depend in part upon discovering, developing and commercializing additional product candidates, which may fail in development or suffer delays that adversely affect their commercial viability.
Our future operating results are dependent on our ability to successfully discover, develop, obtain regulatory approval for and commercialize product candidates beyond azenosertib. A product candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for product candidates is high due to risks relating to safety, efficacy, clinical execution, changing standards of medical care and other unpredictable variables. The results from preclinical testing or early clinical trials of a product candidate may not be predictive of the results that will be obtained in later stage clinical trials of the product candidate.
The success of other product candidates we may develop will depend on many factors, including the following:
•generating sufficient data to support the initiation or continuation of clinical trials;
•obtaining regulatory permission to initiate clinical trials;
•contracting with the necessary parties to conduct clinical trials;
•successful enrollment of patients in, and the completion of, clinical trials on a timely basis;
•the timely manufacture of sufficient quantities of the product candidate for use in clinical trials; and
•AEs in the clinical trials.
Even if we successfully advance any other product candidates into clinical development, their success will be subject to all of the clinical, regulatory and commercial risks described elsewhere in this “Risk Factors” section. Accordingly, we cannot assure you that we will ever be able to discover, develop, obtain regulatory approval of, commercialize or generate significant revenue from our other product candidates.
The regulatory approval processes of the FDA and ex-U.S. regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for azenosertib or any future product candidates, we will be unable to generate product revenue and our business will be substantially harmed.
We are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Ex-U.S. regulatory authorities impose similar requirements. The time required to obtain approval by the FDA and ex-U.S. regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other data. Even if we eventually complete clinical testing and receive approval of any regulatory filing for our product candidates, the FDA and ex-U.S. regulatory authorities may approve our product candidates for a more limited indication or a narrower patient population than we originally requested. We have not submitted for, or obtained, regulatory approval for any product candidate, and it is possible that neither azenosertib nor any product candidates we may seek to develop in the future will ever obtain regulatory approval.
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Applications for our product candidates could fail to receive regulatory approval for many reasons, including the following:
•the FDA or ex-U.S. regulatory authorities may disagree with the design, implementation or results of our clinical trials;
•the FDA or ex-U.S. regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use;
•the population studied in the clinical trial may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval;
•the FDA or ex-U.S. regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
•the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or BLA or other submission or to obtain regulatory approval in the United States or elsewhere;
•we may be unable to demonstrate to the FDA or ex-U.S. regulatory authorities that a product candidate’s risk-benefit ratio for its proposed indication is acceptable;
•the FDA or ex-U.S. regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;
•if the FDA or ex-U.S. regulatory authority requires approval or clearance of a companion diagnostic for a particular product candidate, which we expect to be the case for monotherapy azenosertib for the treatment of patients with Cyclin E1+ PROC, and the FDA or comparable regulatory authority does not provide such approval or clearance, then the product candidate may not be approved for marketing; and/or
•the approval policies or regulations of the FDA or ex-U.S. regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
In addition, the policies and practices of the FDA and ex-U.S. regulatory authorities with respect to clinical trials may change and additional government regulations may be enacted. For example, in recent years the FDA has issued guidance and launched programs aiming to reform and modernize the dose optimization procedures used by clinical trial sponsors during the development of oncology drugs. Since these guidelines are new and can potentially evolve during the conduct of our clinical trials, changes in the FDA’s thinking with respect to dose selection and optimization could require us to change the design of our planned or ongoing clinical trials or otherwise conduct additional preclinical, clinical or manufacturing studies beyond those we currently anticipate, which could increase our costs and/or delay the development of our product candidates.
In addition, the regulatory landscape related to clinical trials in the EU has evolved in the last few years. The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. While the EU Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR three-year transition period ended on January 31, 2025, and all clinical trials (including related applications) are now fully subject to the provisions of the CTR. Compliance with the CTR requirements by us, our collaborators and third-party service providers, such as CROs, may impact our development plans.
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This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations and prospects.
In addition, even if we obtain approval of our product candidates, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may impose significant limitations in the form of narrow indications, warnings and precautions, or a REMS, or similar risk management measures. Regulatory authorities may not approve the price we intend to charge for products we may develop, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could seriously harm our business.
The clinical trials of azenosertib or any future product candidates may not demonstrate safety and efficacy to the satisfaction of the FDA or ex-U.S. regulatory authorities or otherwise produce positive results.
Before obtaining marketing approval from the FDA or ex-U.S. regulatory authorities for the sale of our product candidates, we must complete preclinical development and extensive clinical trials to demonstrate the safety and efficacy of our product candidates. Clinical testing is expensive, difficult to design and implement, can take many years to complete and its ultimate outcome is uncertain. A failure of one or more clinical trials can occur at any stage of the process. The outcome of preclinical studies and early-stage clinical trials may not be predictive of the success of later clinical trials, including that potential biomarkers, even if validated preclinically or in early-stage clinical trials, may not be functionally validated in later clinical trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs. We cannot guarantee that the FDA or ex-U.S. regulatory authorities will interpret trial results as we do, and more trials could be required before we are able to submit applications seeking approval of our product candidates, which may require us to expend significant resources that may not be available to us and/or cause delays in our planned timelines. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.
In addition, we may rely in part on preclinical, clinical and quality data generated by CROs, our collaborators and other third parties for regulatory submissions for our product candidates. While we have or will have agreements governing our relationships with these third parties, we have limited influence over their actual performance. If these third parties do not make data available to us, or, if applicable, make regulatory submissions in a timely manner, in each case pursuant to our agreements with them, our development programs may be significantly delayed, and we may need to conduct additional studies or collect additional data independently. In either case, our development costs would increase.
We do not know whether our future clinical trials will begin on time or enroll patients on time, or whether our ongoing and/or future clinical trials will be completed on schedule or at all. Clinical trials can be delayed for a variety of reasons, including delays related to:
•the FDA or ex-U.S. regulatory authorities disagreeing as to the design or implementation of our clinical studies;
•obtaining regulatory authorizations to commence a trial or reaching a consensus with regulatory authorities on trial design;
•any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
•obtaining approval from one or more IRBs or ethics committees;
•IRBs or ethics committees refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;
•changes to the clinical trial protocol;
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•clinical sites deviating from the trial protocol or dropping out of a trial;
•manufacturing sufficient quantities of product candidate or obtaining sufficient quantities of combination therapies for use in clinical trials;
•subjects failing to enroll or remain in our trial at the rate we expect, or failing to return for post-treatment follow-up;
•subjects choosing an alternative treatment for the indication for which a product candidate is being developed, or participating in competing clinical trials;
•lack of adequate funding to continue the clinical trial;
•subjects experiencing severe or unexpected drug-related AEs;
•occurrence of serious AEs in trials of the same class of agents conducted by other companies;
•selection of clinical end points that require prolonged periods of clinical observation or analysis of the resulting data;
•a facility manufacturing our product candidates or any of their components being ordered by the FDA or ex-U.S. regulatory authorities to temporarily or permanently shut down due to violations of cGMP regulations or similar ex-U.S. requirements or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process;
•any changes to our manufacturing process that may be necessary or desired;
•the imposition of a clinical hold by the FDA, such as the azenosertib partial clinical hold we announced in June 2024 that was lifted in September 2024 without any changes required by FDA to the azenosertib clinical development plan;
•third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, GCP, or other regulatory requirements;
•third-party contractors not performing data collection or analysis in a timely or accurate manner;
•third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; and/or
•if we are collaborating with a third party on a clinical trial, our collaborator may not devote sufficient resources to or prioritize our clinical trial.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial; or by the FDA or ex-U.S. regulatory authorities. Such a suspension or termination may be due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or ex-U.S. regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects resulting in the imposition of a clinical hold, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments will require us to resubmit our clinical trial protocols to IRBs or ethics committees for reexamination, which may impact the costs, timing or successful completion of a clinical trial.
Further, conducting clinical trials in ex-U.S. countries, as we do for azenosertib, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in ex-U.S. countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with ex-U.S. regulatory schemes, as well as political and economic risks relevant to such ex-U.S. countries.
Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or ex-U.S. regulatory authorities. The FDA or ex-U.S. regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or ex-U.S. regulatory authority may
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therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or ex-U.S. regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.
If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.
In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Any delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.
We expect to be required by the FDA and ex-U.S. regulatory authorities to obtain approval of a companion diagnostic in connection with approval of our lead indication for azenosertib, and additional biomarkers may be required for the development and commercialization of azenosertib outside of our lead indication and for future product candidates. If regulatory approval is not obtained or there are delays in obtaining regulatory approval of any such companion diagnostic, we will not be able to commercialize azenosertib and, potentially, future product candidates, and our ability to generate product revenue will be materially impaired.
We are working with a diagnostic partner to develop a companion diagnostic to identify patients with Cyclin E1+ PROC in connection with our clinical development of monotherapy azenosertib for the treatment of patients with Cyclin E1+ PROC, and we expect the FDA and ex-U.S. regulatory authorities to require approval of this companion diagnostic in connection with approval of monotherapy azenosertib for this indication. In addition, in the future, we may develop diagnostic tools for additional biomarkers for azenosertib and future product candidates for which the FDA and ex-U.S. regulatory authorities may require us or a third party collaborator to obtain marketing approval.
According to FDA guidance, if the FDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product or indication, the FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic is not also approved or cleared for that indication. Many ex-U.S. regulatory authorities have similar requirements as the FDA for companion diagnostics. If there is not a satisfactory companion diagnostic commercially available for a particular biomarker, which is the case for Cyclin E1+ PROC, we would be required to develop or obtain such diagnostic, which would be subject to regulatory approval requirements. The approval or clearance of a companion diagnostic as part of the therapeutic product’s further labeling limits the use of the therapeutic product to only those patients who express the specific characteristic that the companion diagnostic was developed to detect. Depending on the data from our clinical trials, we may decide to collaborate with diagnostic companies during our clinical trial enrollment process to help identify patients with characteristics that we believe will be most likely to respond to our product candidates, which we have done for our development of monotherapy azenosertib for the treatment of Cyclin E1+ PROC. The process of obtaining or creating a companion diagnostic is time consuming and costly and may not result in any future income. This could require us to raise additional funds, which could dilute our current investors or impact our ability to continue our operations in the future.
In addition, we may have difficulty in establishing or maintaining development relationship with diagnostic partners, and we will face competition from other companies in establishing and maintaining these partnerships. We face similar risks with our relationships with diagnostic partners as we face with other collaborations - see "We have and in the future may enter into collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any of these collaborations is not
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successful, we may not be able to capitalize on the market potential of those product candidates." above for more information.
There are also several risks associated with biomarker identification and validation. We, in collaboration with any diagnostic partners, may not be able to identify predictive biomarkers for one or more of our programs. We may not be able to validate potential biomarkers (e.g., certain genomic mutations) or their functional relevance preclinically in relevant in vitro or in vivo models. Data analytics and information from databases that we rely on for identifying or validating some of our biomarker-target relationships may not accurately reflect potential patient populations or may be based on incorrect methodology. Potential biomarkers, even if validated preclinically, may not be functionally effective or validated in human clinical trials.
There are also risks associated with diagnostics that are commercially available, including that we may not have access to reliable supply for such diagnostics, and that such diagnostics may not be reimbursed without obtaining regulatory approval.
If we, in collaboration with our diagnostic partner, are unable to successfully develop a Cyclin E1+ PROC companion diagnostic for azenosertib, or experience delays in doing so, including delays in obtaining regulatory approvals, the development of monotherapy azenosertib for patients with Cyclin E1+ PROC will be adversely affected, which will have a material adverse effect on our business. In addition, if additional indications of azenosertib or any future product candidates require a companion diagnostic or other diagnostic tool and we, in collaboration with diagnostic partners, are unable to successfully develop such tools, or such tools are not available commercially, or we experience delays in doing so, then the development of such product candidates will be adversely affected, which could have a material adverse effect on our business.
We or our collaborators may also experience delays in developing a sustainable, reproducible and scalable manufacturing process for a companion diagnostic, such as the one our diagnostic partner is developing for identifying patients with Cyclin E1+ PROC, or in transferring that process to commercial partners, if applicable, or negotiating insurance reimbursement plans, all of which may prevent us from completing our clinical trials or commercializing azenosertib and any future product candidates, if approved, on a timely or profitable basis, if at all.
Interim, initial, “topline,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
We may publicly disclose initial, preliminary or topline data from our preclinical studies and clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the initial, topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Certain of these data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, initial, topline and preliminary data should be viewed with caution until the final data are available. For example, in January 2025, we announced monotherapy azenosertib clinical data in patients with Cyclin E1+ PROC, who were identified using a proprietary immunohistochemistry cutoff defined by retrospective tissue analysis utilizing a Cyclin E1 biomarker assay. In our DENALI Part 2 clinical trial, we are identifying patients using our proprietary immunohistochemistry cutoff with a prospective tissue analysis utilizing the Cyclin E1 biomarker assay. If we have not identified the optimal immunohistochemistry cutoff, or if our Cyclin E1 biomarker assay does not function as it functioned previously, or if the historical correlation between retrospective tissue analysis and response rates is not replicated with prospective tissue analysis, then the clinical data we announced in January 2025 may be materially different in DENALI Part 2 and in future studies.
From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may
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materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. Adverse differences between interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.
If the initial, interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
Even if approved, azenosertib and any future product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
Even if azenosertib and any future product candidates receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, healthcare payors and others in the medical community. The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including:
•the efficacy and safety profile as demonstrated in clinical trials compared to alternative treatments;
•the timing of market introduction of the product candidate as well as competitive products;
•the clinical indications for which the product candidate is approved;
•if applicable (which we expect to be the case for monotherapy azenosertib in Cyclin E1+ PROC), the availability and/or reimbursement of diagnostic tools such as companion diagnostics for biomarkers associated with our product candidates or any other future product candidates;
•restrictions on the use of our product candidates, such as boxed warnings or contraindications in labeling, or a REMS, or similar risk management measures, if any, which may not be required of alternative treatments and competitor products;
•the potential and perceived advantages of the product candidate over alternative treatments;
•the cost of treatment in relation to alternative treatments;
•the availability of coverage and adequate reimbursement, as well as pricing, by third-party payors, including government authorities;
•for combination therapies, the availability of the combination product;
•relative convenience and ease of administration;
•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
•the effectiveness of sales and marketing efforts;
•unfavorable publicity relating to our products or product candidates or similar approved products or product candidates in development by third parties; and
•the approval of other new therapies for the same indications.
If azenosertib or any future product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate or derive sufficient revenue from that product candidate and our financial results could be negatively impacted.
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If we experience delays or difficulties in the enrollment and/or continuing participation of patients in clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Patient enrollment is a significant factor in the timing of clinical trials, and the timing of our clinical trials depends, in part, on the speed at which we can recruit patients to participate in our trials, as well as completion of required follow-up periods. We may not be able to initiate or continue clinical trials for azenosertib and any future product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials to each such trial’s conclusion as required by the FDA or ex-U.S. regulatory authorities. Additionally, certain clinical trials for future product candidates may be focused on indications with relatively small patient populations, which may further limit enrollment of eligible patients or may result in slower enrollment than we anticipate. The eligibility criteria of our clinical trials, once established, may further limit the pool of available trial participants.
Patient enrollment may also be affected if our competitors have ongoing clinical trials for product candidates that are under development for the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment for any of our clinical trials may be affected by other factors, including:
•size and nature of the patient population;
•severity of the disease under investigation;
•availability and efficacy of approved drugs for the disease under investigation;
•patient eligibility criteria for the trial in question as defined in the protocol;
•perceived risks and benefits of the product candidate under study;
•clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating;
•efforts to facilitate timely enrollment in clinical trials;
•patient referral practices of physicians;
•the ability to monitor patients adequately during and after treatment;
•proximity and availability of clinical trial sites for prospective patients;
•continued enrollment of prospective patients by clinical trial sites;
•the risk that patients enrolled in clinical trials will drop out of the trials before completion or, because they may be late-stage cancer patients, will not survive the full terms of the clinical trials, and
•Geopolitical changes may impact the ability to enroll in countries selected for clinical trials.
Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates and jeopardize our ability to obtain marketing approval for the sale of our product candidates. Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining such patients on trial.
A fast track designation from the FDA may not lead to a faster development or regulatory review or approval process, and does not increase the likelihood that our product candidates will receive regulatory approval.
The FDA has granted fast track designation for azenosertib in (i) patients with advanced or metastatic USC who have received at least one prior platinum-based chemotherapy regimen for management of advanced or metastatic disease, and (ii) for the treatment of patients with platinum-resistant epithelial ovarian, fallopian tube, or primary peritoneal cancer who are positive via Cyclin E1 immunohistochemistry for protein levels, and we intend to seek such designation for some or all of our future product candidates when applicable. The fast track program is intended to expedite or facilitate the process for reviewing new product candidates that meet certain criteria. Specifically, drugs and biologic are eligible for fast track designation if they are intended, alone or in combination with one or more drugs or biologics, to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product candidate and the specific indication for which it is being studied. The sponsor of a fast
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track product candidate has opportunities for more frequent interactions with the applicable FDA review team during product development and, once an NDA or BLA is submitted, the application may be eligible for priority review. An NDA or BLA submitted for a fast track product candidate may also be eligible for rolling review, where the FDA may consider for review sections of the NDA or BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA or BLA, the FDA agrees to accept sections of the NDA or BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the application.
The FDA has broad discretion whether or not to grant this designation. Even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even where we do receive fast track designation for any of our product candidates, such product candidates may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may also withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program. Furthermore, such a designation does not increase the likelihood that azenosertib or any other product candidate that may be granted fast track designation will receive regulatory approval in the United States. Many product candidates that have received fast track designation have ultimately failed to obtain approval.
We are developing azenosertib in combination with other therapies, which exposes us to additional risks.
We are developing azenosertib in combination with one or more other approved therapies to treat cancer and may in the future develop azenosertib or additional product candidates in combination with other approved or unapproved therapies. If we were to experience an unexpected loss of supply of any of those approved or unapproved therapies, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials. Even if any product candidate we develop were to receive marketing approval or be commercialized for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA or ex-U.S. regulatory authorities could revoke approval of the therapy used in combination with our product or that safety, efficacy, manufacturing or supply issues could arise with any of those existing therapies. If the therapies we use in combination with our product candidates are replaced as the standard of care for the indications we choose for any of our product candidates, the FDA or ex-U.S. regulatory authorities may require us to conduct additional clinical trials. The occurrence of any of these risks could result in our own products, if approved, being removed from the market or being less successful commercially.
In the event we evaluate azenosertib or other future product candidates in combination with one or more therapies that have not yet been approved for marketing by the FDA or ex-U.S. regulatory authorities, we will not be able to market and sell any product candidate we develop in combination with an unapproved therapy for a combination indication if that unapproved therapy does not ultimately obtain marketing approval either alone or in combination with our product candidate. In addition, unapproved therapies face the same risks described herein with respect to product candidates currently in development and clinical trials, including the potential for serious adverse effects, delay in their clinical trials and lack of regulatory approval.
If the FDA or ex-U.S. regulatory authorities do not approve these other drugs or revoke their approval of, or if safety, efficacy, quality, manufacturing or supply issues arise with, the drugs we choose to evaluate in combination with our product candidate we develop, we may be unable to obtain approval of or market such combination therapy.
If the market opportunity for azenosertib or any future product candidate that we or our strategic partners develop is smaller than we believe, our revenue may be adversely affected and our business may suffer.
Our projections of addressable patient populations that may benefit from treatment with azenosertib and any future projections we may make with respect to any future product candidates are based on our estimates. These estimates, which have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations and market research, may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these indications. Additionally, the potentially addressable patient population for azenosertib and any future product candidates may not ultimately be amenable to treatment with such product candidate. Our market opportunity may also be limited by future competitor treatments that enter the market. If any
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of our estimates proves to be inaccurate, the market opportunity for such product candidate that we or our strategic partners develop could be significantly diminished and have an adverse material impact on our business.
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.
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary and novel products and product candidates. Our competitors have developed, are developing or may develop products, product candidates and processes competitive with azenosertib and any future product candidates. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the indications for which we are currently developing azenosertib and for the indications for which we may attempt to develop azenosertib and any future product candidates. In addition, our products may need to compete with off-label drugs used by physicians to treat the indications for which we seek approval. This may make it difficult for us to replace existing therapies with our products.
In particular, there is intense competition in the fields of oncology we are pursuing. We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, emerging and start-up companies, universities and other research institutions. We also compete with these organizations to recruit management, scientists and clinical development personnel, which could negatively affect our level of expertise and our ability to execute our business plan. We also face competition in establishing clinical trial sites, enrolling subjects for clinical trials and in identifying and in-licensing new product candidates.
We have chosen to initially address well-validated biochemical targets, and therefore expect to face competition from existing products and products in development for each of our product candidates. There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies. Many of these current and potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources and commercial expertise than we do. Large pharmaceutical and biotechnology companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and manufacturing biotechnology products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical and biotechnology companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies, as well as in acquiring technologies complementary to, or necessary for, our programs. As a result of all of these factors, our competitors may succeed in obtaining approval from the FDA or other comparable ex-U.S. regulatory authorities or in discovering, developing and commercializing products in our field before we do.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors also may obtain marketing approval from the FDA or ex-U.S. regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if the product candidates we develop achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then, resulting in reduced competitiveness. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical. If we are unable to compete effectively, our opportunity to generate revenue from the sale of our products we may develop, if approved, could be adversely affected.
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We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on and current prioritization of azenosertib and any future product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.
Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.
As product candidates progress through preclinical and clinical trials to marketing approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize yield and manufacturing batch size, minimize costs and achieve consistent quality and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commercialize our product candidates, if approved, and generate revenue.
Our business entails a significant risk of product liability and if we are unable to obtain sufficient insurance coverage such inability could have an adverse effect on our business and financial condition.
Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in an FDA or other regulatory authority investigation of the safety and effectiveness of our products, our manufacturing processes and facilities or our marketing programs. FDA or other regulatory authority investigations could potentially lead to a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources and substantial monetary awards to trial participants or patients. We currently have product liability insurance that we believe is appropriate for our stage of development and may need to obtain higher levels prior to marketing any of our product candidates, if approved. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have an adverse effect on our business and financial condition. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, may apply to diagnostic tools, such as companion diagnostics, that we or our collaborators develop.
Any product candidates we develop may become subject to unfavorable third-party coverage and reimbursement practices, as well as pricing regulations.
The availability and extent of coverage and adequate reimbursement by third-party payors, including government health administration authorities, private health coverage insurers, managed care organizations and other third-party payors is essential for most patients to be able to afford expensive treatments. Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and
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internationally, on the extent to which the costs of our product candidates will be covered and reimbursed by third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize an adequate return on our investment. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, for example, principal decisions about reimbursement for new products are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, or HHS. CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare, and private third-party payors often follow CMS’s decisions regarding coverage and reimbursement to a substantial degree. However, one third-party payor’s determination to provide coverage for a product candidate does not assure that other payors will also provide coverage for the product candidate. As a result, the coverage determination process is often time-consuming and costly. This process will require us to provide scientific and clinical support for the use of our products to each third-party payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Further, such payors are increasingly challenging the price, examining the medical necessity and reviewing the cost effectiveness of medical product candidates. There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs. Third-party payors may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication. We may need to conduct expensive pharmaco-economic studies to demonstrate the medical necessity and cost effectiveness of our products. Nonetheless, our product candidates may not be considered medically necessary or cost effective. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be.
In August 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); redesigns the Medicare Part D benefit (beginning in 2024); and replaces the Part D coverage gap discount program with a new manufacturer discount program (beginning in 2025). CMS has published the negotiated prices for the initial ten drugs, which will first be effective in 2026, and has published the list of the subsequent 15 drugs that will be subject to negotiation. For more information about the IRA and pricing regulations at the state level, see “Risks Related to Regulatory Approval and Other Legal Compliance Matters – We may face difficulties from changes to current regulations and future legislation.” below.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of therapeutics such as azenosertib and any of our future product candidates, if approved. In many countries, particularly the member states of the EU, medical product prices are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after a product receives marketing authorization. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In general, product prices under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional ex-U.S. price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our
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products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.
If we are unable to establish or sustain coverage and adequate reimbursement for azenosertib or any future product candidates, if approved, from third-party payors, the adoption of those products and sales revenue will be adversely affected, which, in turn, could adversely affect the ability to market or sell those product candidates, if approved. Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Additionally, we or our collaborators may develop diagnostic tests, including companion diagnostic tests, for use with azenosertib or any of our future product candidates, such as the companion diagnostic test being developed by our diagnostic collaborator to identify patients with Cyclin E1+ PROC relating to our development of monotherapy azenosertib for patients with Cyclin E1+ PROC. Companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical products, will apply to companion diagnostics. If coverage and adequate reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize any product candidates that we develop.
Risks Related to Regulatory Approval and Other Legal Compliance Matters
We may be unable to obtain U.S. or ex-U.S. regulatory approvals and, as a result, may be unable to commercialize azenosertib or any future product candidates.
Azenosertib and any future product candidates we may develop are subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing, safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing and distribution of drugs. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process must be successfully completed in the United States and in many ex-U.S. jurisdictions before a new drug can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. We cannot provide any assurance that azenosertib or any future product candidate we may develop will progress through required clinical testing and obtain the regulatory approvals necessary for us to begin selling them.
We have not conducted, managed or completed large-scale or pivotal clinical trials nor managed the regulatory approval process with the FDA or any other regulatory authority. The time required to obtain approvals from the FDA and other regulatory authorities is unpredictable, and requires successful completion of extensive clinical trials which typically takes many years, depending upon the type, complexity and novelty of the product candidate. The standards that the FDA and its ex-U.S. counterparts use when evaluating clinical trial data can change during drug development, which makes it difficult to predict with any certainty how they will be applied. In addition, the FDA and its ex-U.S. counterparts may require approval or clearance of a companion diagnostic for a particular product candidate and may not approve the product candidate for marketing if such regulatory authority does not approve or clear the companion diagnostic. For example, we expect the FDA and its ex-U.S. counterparts to require regulatory approval of the companion diagnostic test being developed by our diagnostic collaborator to identify patients with Cyclin E1+ PROC relating to our development of monotherapy azenosertib for patients with Cyclin E1+ PROC. We may also encounter unexpected delays or increased costs due to new government regulations, including future legislation or administrative action, or changes in FDA or ex-U.S. regulatory authorities policy during the period of drug development, clinical trials and FDA or ex-U.S. regulatory authorities regulatory review.
Any delay or failure in seeking or obtaining required approvals would have a material and adverse effect on our ability to generate revenue from the particular product candidate for which we are developing and seeking approval. Furthermore, any regulatory approval to market a drug may be subject to significant limitations on the approved uses or indications for which we may market the drug or the labeling or other restrictions. In addition, the
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FDA has the authority to require a REMS as part of approving an NDA or BLA, or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug. Similar requirements may exist in ex-U.S. jurisdictions. These requirements or restrictions might include limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. These limitations and restrictions may significantly limit the size of the market for the drug and affect reimbursement by third-party payors.
We are also subject to numerous ex-U.S. regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The ex-U.S. regulatory approval process varies among countries, and generally includes all of the risks associated with FDA approval described above as well as risks attributable to the satisfaction of local regulations in ex-U.S. jurisdictions. Moreover, the time required to obtain approval in ex-U.S. jurisdictions may differ from that required to obtain FDA approval.
Azenosertib or any future product candidates may cause significant AEs, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.
As is the case with pharmaceuticals generally, it is likely that there may be side effects and AEs associated with our product candidates’ use. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or ex-U.S. regulatory authorities. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
If azenosertib or any future product candidates are associated with undesirable side effects or have unexpected characteristics in preclinical studies or clinical trials when used alone or in combination with other approved products or investigational new drugs, we may need to interrupt, delay or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial, or result in potential product liability claims. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate and may harm our business, financial condition and prospects significantly.
Patients in our ongoing and planned clinical trials may in the future suffer significant AEs or other side effects not observed in our preclinical studies or previous clinical trials. Some of our product candidates may be used as chronic therapies or be used in pediatric populations, for which safety concerns may be particularly scrutinized by regulatory agencies. In addition, if our product candidates are used in combination with other therapies, our product candidates may exacerbate AEs associated with the therapy. Patients treated with our product candidates may also be undergoing surgical, radiation, chemotherapy and other treatments, which can cause side effects or AEs that are unrelated to our product candidate, but may still impact the success of our clinical trials. The inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using or due to the gravity of such patients’ illnesses.
If significant AEs or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to the clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA or ex-U.S. regulatory authorities, or an IRB (or similar body) may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects.
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Moreover, some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance due to its tolerability versus other therapies. Any of these developments could materially harm our business, financial condition and prospects.
Further, if any of our product candidates obtains marketing approval, toxicities associated with such product candidates not seen during clinical testing may also develop after such approval and may lead to a requirement to conduct additional clinical safety trials, additional contraindications, warnings and precautions being added to the drug label, significant restrictions on the use of the product or the withdrawal of the product from the market. We cannot predict whether our product candidates will cause toxicities in humans that would preclude or lead to the revocation of regulatory approval based on preclinical studies or early-stage clinical trials.
The FDA and ex-U.S. regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction.
We are conducting international clinical trials for azenosertib and may in the future conduct international clinical trials for other product candidates. The acceptance of study data from clinical trials conducted outside the U.S. or another jurisdiction by the FDA or ex-U.S. regulatory authority may be subject to certain conditions or may not be accepted at all. In cases where data from ex-U.S. clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of ex-U.S. data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to current GCP requirements; and (iii) the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA's clinical trial requirements, including the adequacy of the patient population studied and statistical powering, must be met. Furthermore, even where the ex-U.S. study data are not intended to serve as the sole basis for approval, the FDA will not accept the data as support for an application for marketing approval unless the study is well-designed and well-conducted in accordance with GCP requirements and the FDA is able to validate the data from the study through an onsite inspection if deemed necessary. Many ex-U.S. regulatory authorities have similar approval requirements. In addition, such ex-U.S. trials would be subject to the applicable local laws of the ex-U.S. jurisdictions where the trials are conducted. There can be no assurance that the FDA or any ex-U.S. regulatory authority will accept data from trials conducted outside of its applicable jurisdiction. If the FDA or any ex-U.S. regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval for commercialization in the applicable jurisdiction.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in ex-U.S. jurisdictions must also approve the manufacturing processes, marketing, promotion and reimbursement of the product candidate in those countries. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Obtaining ex-U.S. regulatory approvals and establishing and maintaining compliance with ex-U.S. regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we or any future collaborator fail to comply with the regulatory
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requirements in international markets or fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements and oversight.
Any regulatory approvals that we may receive for our product candidates will require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of the product candidate, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements. For example, the FDA may require a REMS in order to approve our product candidates, which could entail requirements for a medication guide, physician training and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or ex-U.S. regulatory authorities approve our product candidates, the manufacturing processes, labeling, packaging, distribution, AE reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as on-going compliance with cGMPs or similar ex-U.S. requirements and GCP for any clinical trials that we conduct post-approval. In addition, CMOs and their facilities are subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities for compliance with cGMP regulations or similar ex-U.S. requirements and standards. If we or a regulatory agency discover previously unknown problems with a product, such as AEs of unanticipated severity or frequency, or problems with the facilities where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. In addition, failure to comply with FDA and ex-U.S. regulatory requirements may subject our company to administrative or judicially imposed sanctions, including:
•delays in or the rejection of product approvals;
•restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials by the FDA or ex-U.S. regulatory authorities;
•restrictions on the products, manufacturers or manufacturing process;
•warning or untitled letters;
•civil and criminal penalties;
•injunctions;
•suspension or withdrawal of regulatory approvals;
•product seizures, detentions or import bans;
•voluntary or mandatory product recalls and publicity requirements;
•total or partial suspension of production; and
•imposition of restrictions on operations, including costly new manufacturing requirements.
The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate product revenue and could require us to expend significant time and resources in response and could generate negative publicity.
The FDA’s and ex-U.S. regulatory authorities’ policies or implementation of existing policies may change and additional government regulations may be enacted, including as a result of the new U.S. presidential administration, that could prevent, limit or delay regulatory approval of our product candidates. We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.
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If any of our product candidates is approved and we are found to have improperly promoted off-label uses of those products, we may become subject to significant liability. The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as our product candidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. If we receive marketing approval for a product candidate, physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our product candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.
Changes and/or disruptions at the FDA, the SEC and other government agencies, including as a result of the new presidential administration, funding shortages, staffing changes or limitations, or global health concerns could prevent those agencies from performing business functions as they were previously performed and on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA and other regulatory authorities to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes, changes in presidential administrations, political fluctuations, and other events that may otherwise affect the FDA’s and ex-U.S. regulatory authorities’ ability to perform routine functions. Average review times at the FDA and ex-U.S. regulatory authorities have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Changes and/or disruptions at the FDA, including as a result of the new presidential administration, and other agencies, such as the EMA following its relocation to Amsterdam, and resulting staff changes, may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example in previous years, the U.S. government shut down several times and certain regulatory agencies, such as the FDA and the SEC, had to furlough critical employees and stop critical activities. Further, in our operations as a public company, future government shutdowns or delays could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
If a prolonged government shutdown occurs, if renewed global health concerns prevent the FDA or other regulatory authorities from conducting their regular reviews or other regulatory activities, or if there are delays and slowdowns caused by reductions in force of government employees or for other reasons. Further, the current U.S. presidential administration has issued certain policies and executive orders directed towards reducing the employee headcount and costs associated with U.S. administrative agencies, including the FDA, and it remains unclear the degree to which these efforts may limit or otherwise adversely affect the FDA’s ability to conduct routine activities as they were previously conducted. These actions could significantly impact the ability of the FDA or ex-U.S. regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
If we are unable to obtain accelerated approval or any other form of expedited development or review from the FDA or ex-U.S. regulatory authorities, we may be required to conduct additional clinical trials beyond those that we contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals. Even if we receive accelerated approval from the FDA, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw accelerated approval.
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We plan to seek accelerated approval from the FDA for monotherapy azenosertib for the treatment of Cyclin E1+ PROC, subject to supportive clinical data and FDA review. In addition, we may in the future seek accelerated approval or another form of expedited development or review for azenosertib in another indication or future product candidates. Under the accelerated approval program, the FDA may grant accelerated approval to a product candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional confirmatory studies to verify and describe the drug’s clinical benefit. If such confirmatory studies fail to confirm the drug’s clinical benefit, the FDA may withdraw its approval of the drug on an expedited basis. In addition the Food and Drug Omnibus Reform Act of 2022 provided the FDA statutory authority to mitigate potential risks to patients from continued marketing of ineffective drugs previously granted accelerated approval and additional oversight over confirmatory trials. Under these provisions, the FDA may, among other things, require a sponsor of a product seeking accelerated approval to have a confirmatory trial underway prior to such approval being granted.
In the EU, under the centralized procedure, the EMA’s Committee for Medicinal Products for Human Use may perform an accelerated assessment of a marketing authorization application. Applicants requesting an accelerated assessment procedure must justify that the product candidate is expected to be of major public health interest, particularly from the point of view of therapeutic innovation. Conditional approval is also available in the EU, which is similar to the FDA's accelerated approval program.
Prior to seeking accelerated approval or another form of expedited development or review for any of our product candidates, we intend to seek feedback from the FDA or ex-U.S. regulatory authorities and will otherwise evaluate our ability to seek and receive accelerated approval or another form of expedited development or review. There can be no assurance that after our evaluation of the feedback and other factors we will decide to pursue or submit an NDA or BLA, whichever is applicable, for accelerated approval or another form of expedited development, review or approval. Furthermore, if we decide to submit an application for accelerated approval or another form of expedited development, review or approval for azenosertib or any future product candidate, there can be no assurance that such submission or application will be accepted or that any such expedited development, review or approval will be granted on a timely basis, or at all. The FDA or ex-U.S. regulatory authorities could also require us to conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for azenosertib or any our product candidate would result in a longer time period to commercialization of such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
We may face difficulties from changes to current regulations and future legislation.
Existing regulatory policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of azenosertib and any future product candidates and affect our ability to profitably sell our products for which we receive approval. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, including by executive order, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability. New and changing laws and regulations, including by executive order, may also create uncertainty about how existing laws and regulations will be interpreted and applied, including pricing. If the Company is found to have violated laws and regulations, it could materially adversely affect the Company’s business, results of operations and financial condition.
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For example, in March 2010, the Affordable Care Act, or the ACA, was passed, which substantially changes the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. It is unclear how other healthcare reform measures will impact our business.
Moreover, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in executive orders, several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Most significantly, on August 16, 2022, the IRA was signed into law. This statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption of the ACA in 2010. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023, as applicable); and replaces the Part D coverage gap discount program with a new discounting program (which began in 2025). CMS has published the negotiated prices for the initial ten drugs, which will first be effective in 2026, and has published the list of the subsequent fifteen drugs that will be subject to negotiation. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Each year thereafter, more Part B and Part D products will become subject to the HHS price negotiation program, although the program is currently subject to legal challenges. While the impact of the IRA on the pharmaceutical industry cannot yet be fully determined, it is likely to be significant.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Some states have also enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states.
We expect that other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for biotechnology products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA or ex-U.S. regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
In addition, new and changing laws, regulations, executive orders and other governmental actions, particularly from the new presidential administration, may also create uncertainty about how laws and regulations will be interpreted and applied. Regulatory changes and other actions that materially affect our business may be announced with little or no advance notice, and we may be unable to effectively mitigate all adverse impacts from such measures. Differing interpretations of such legal obligations can expose us to significant fines, government investigations, litigation and reputational harm. If we are found to have violated laws, regulations, or executive orders, it could materially adversely affect our business, reputation, results of operations and financial condition.
Our relationships with healthcare professionals, clinical investigators, CROs and third party payors in connection with our current and future business activities may be subject to fraud and abuse laws and other healthcare laws and regulations.
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Healthcare providers and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, clinical investigators, CROs, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal, state and ex-U.S. healthcare laws and regulations include the following:
•the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation;
•the federal false claims laws, including the civil False Claims Act, which can be enforced by private citizens through civil whistleblower or qui tam actions, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
•the federal Open Payments Act (formerly known as the Physician Payments Sunshine Act) requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information regarding payments and other transfers of value to physicians, as defined by such law, certain non-physician practitioners including physician assistants and nurse practitioners, and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members. The information reported is publicly available on a searchable website, with disclosure required annually; and
•analogous state and ex-U.S. laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.
Some state laws require biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Some state laws require biotechnology companies to report information on the pricing of certain drug products.
Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and ex-U.S. laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal information, such as information that we may collect in connection with clinical trials.
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Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or ex-U.S. laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our business, results of operation, and financial condition.
In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information. We do not believe that we are currently acting as a covered entity or business associate under HIPAA and thus are not directly subject to its requirements or penalties, but we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts and circumstances, we could be subject to significant penalties if we violate HIPAA. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act, or collectively, the CCPA, requires covered businesses that process the personal information of California residents to, among other things: provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information, and enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Similar laws have passed in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that we are subject to or affected by HIPAA, the CCPA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
Our operations abroad may also be subject to increased scrutiny or attention from data protection authorities. For instance, the EU General Data Protection Regulation, or GDPR, went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area, or the EEA, or in the context of our activities in the EEA. In addition, some of the personal data we process in respect of clinical trial participants is special category or sensitive personal data under the GDPR, and subject to additional compliance obligations and to local law derogations. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements, administrative penalties and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. In addition to fines, a breach of the GDPR may result in regulatory investigations, reputational damage, orders to cease/change our data processing activities, enforcement notices, assessment notices (for a compulsory audit) and/or civil claims (including class actions). Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EEA and the United States remains uncertain. On July 10, 2023, the European Commission adopted its Adequacy Decision in relation to the new EU-US Data Privacy Framework, or the DPF, rendering the DPF effective as a GDPR transfer mechanism to U.S. entities self-certified under the DPF. We currently rely on the EU standard contractual clauses, the UK Addendum to the EU standard contractual clauses and the UK International Data Transfer Agreement, as relevant, to transfer personal data outside the EEA and the UK, including to the United States, with respect to both intragroup and third party transfers. We may also rely on individual consent to transfer personal data in certain circumstances. We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue. In particular, we expect the DPF Adequacy Decision to be challenged and international transfers to the United States and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators. As a result, we may have to make certain operational changes and we will have to implement revised standard contractual clauses and other relevant documentation for existing data transfers within required time frames.
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Further, from January 1, 2021, we have had to comply with both the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in United Kingdom national law. The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of £17.5 million or 4% of global turnover. On October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a data transfer mechanism to from the UK to U.S. entities self-certified under the DPF. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
In addition, we selectively use artificial intelligence, or AI, in our business. The regulatory framework for AI is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations. Additionally, existing laws and regulations may be interpreted in ways that would affect the operation of AI. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations. Further, the cost to comply with such laws, regulations, or decisions and/or guidance interpreting existing laws, could be significant and would increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI). Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could adversely affect our business, financial condition and results of operations.
Our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs, CMOs, suppliers and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk that our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs, CMOs, suppliers and vendors may engage in misconduct or other improper activities. Misconduct by these parties could include failures to comply with FDA and other ex-U.S. authorities regulations, provide accurate information to the FDA or ex-U.S. regulatory authorities, comply with federal, state and ex-U.S. health care fraud and abuse laws and regulations, accurately report financial information or data, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the health care industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by these parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any
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resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of hazardous and flammable materials, including chemicals and biological materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or commercialization efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.
Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive.
Our business activities may be subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery and anti-corruption laws of other countries in which we operate, as well as U.S. and certain ex-U.S. export controls, trade sanctions, and import laws and regulations. Compliance with these legal requirements could limit our ability to compete in ex-U.S. markets and subject us to liability if we violate them.
If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. Our business activities may be subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. The FCPA generally prohibits companies and their employees and third party intermediaries from offering, promising, giving or authorizing the provision of anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, hospitals owned and operated by the government, and doctors and other hospital employees would be considered ex-U.S. officials under the FCPA. During the prior U.S. presidential administration, the SEC and the U.S. Department of Justice increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of our employees, agents or contractors, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, disgorgement, and other sanctions and remedial measures, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international activities, our ability to attract and retain employees and our business, prospects, operating results and financial condition.
In addition, our products and activities may be subject to U.S. and ex-U.S. export controls, trade sanctions, tariffs and import laws and regulations. Governmental regulation of the import or export of our products, or our failure to obtain any required import or export authorization for our products, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding
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the export of our products may create delays in the introduction of our products in international markets or, in some cases, prevent the export of our products to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. If we fail to comply with export and import regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges. Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or products targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export our products to existing or potential customers with international operations. Any decreased use of our products or limitation on our ability to export or sell access to our products would likely adversely affect our business.
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business
Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees.
To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, technical and management personnel, and we face significant competition for experienced personnel. We are highly dependent on the principal members of our management and scientific and medical staff. If we do not succeed in attracting and retaining qualified personnel, particularly at the management level, it could adversely affect our ability to execute our business plan and harm our operating results. In particular, the loss of one or more of our executive officers could be detrimental to us if we cannot recruit suitable replacements or otherwise address the loss in a timely manner. The competition for qualified personnel in the biotechnology field is intense and as a result, we may be unable to continue to attract and retain qualified personnel necessary for the future success of our business. We could in the future have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts.
Many of the other biotechnology companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better prospects for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can discover, develop and commercialize our product candidates will be limited and the potential for successfully growing our business will be harmed.
In addition, losing employees, including as a result of a workforce reduction such as the one announced in January 2025, subjects us to a number of risks, including the failure to transition responsibilities and tasks, the need to adapt or create systems and processes, the impact on corporate culture, and the loss of historical knowledge.
If we are unable to establish effective sales or marketing capabilities or enter into agreements with third parties to sell or market our product candidates, we may not be able to successfully sell or market our product candidates that obtain regulatory approval.
We have never commercialized a product candidate. In order to commercialize any product candidates, if approved, for which we retain commercialization rights, we must build marketing, sales, distribution, market access, managerial and other non-technical capabilities or make arrangements with third parties to perform these services for each of the territories in which we may have approval to sell or market our product candidates. We may not be successful in accomplishing these required tasks. In addition, for product candidates for which we do not retain commercialization rights, we will rely on the assistance of collaborators to successfully commercialize any product candidates that are approved.
Establishing internal sales, marketing and market access teams with technical expertise and supporting distribution capabilities to commercialize our product candidates will be expensive and time-consuming, and will require significant attention of our executives to manage. Factors that may affect our ability to commercialize our product candidates on our own include recruiting and retaining adequate numbers of effective sales and marketing
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personnel, obtaining access to or persuading adequate numbers of physicians to prescribe our product candidates and other unforeseen costs associated with creating an independent sales and marketing organization. Any failure or delay in the development of our internal sales, marketing, market access and distribution capabilities could adversely impact the commercialization of any of our product candidates that we obtain approval to market, especially if we also do not have arrangements in place with third parties to provide such services on our behalf. Alternatively, if we choose to collaborate, either globally or on a territory-by-territory basis, with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems, we will be required to negotiate and enter into arrangements with such third parties relating to the proposed collaboration. If we are unable to enter into such arrangements when needed, on acceptable terms, or at all, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval or any such commercialization may experience delays or limitations. If we are unable to successfully commercialize our approved product candidates, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.
In order to successfully implement our long-term plans and strategies, we will need to grow the size of our organization, and we may experience difficulties in managing this growth.
In order to successfully implement our long-term development and commercialization plans and strategies, and as we continue to operate as a public company, we expect to need additional managerial, operational, sales, marketing, financial, legal, compliance and other personnel in the long- term. Future growth would impose significant added responsibilities on members of management, including:
•identifying, recruiting, integrating, maintaining and motivating additional employees;
•managing our internal development efforts effectively, including the clinical, FDA and ex-U.S. regulatory agencies’ review process for our product candidates, while complying with any contractual obligations to contractors and other third parties we may have; and
•improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance and our ability to successfully develop and, if approved, commercialize, our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including key aspects of clinical development and manufacturing. We cannot assure you that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by third party service providers is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain marketing approval of our product candidates or otherwise advance our business. We cannot assure you that we will be able to manage our existing third party service providers or find other competent outside contractors and consultants on economically reasonable terms, or at all.
If we are not able to effectively expand our organization if and when we need to by hiring new employees and/or engaging additional third party service providers, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.
Our business and operations may suffer in the event of information technology system failures, cyberattacks or deficiencies in our cybersecurity.
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We collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business, including our mobile and web-based applications. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information, clinical trial data, and personal information, or collectively, Confidential Information, of customers and our employees and contractors.
Despite the implementation of security measures, our information systems and those of our current and any future contract research organizations, or CROs, CMOs and other contractors, consultants, collaborators and third-party service providers, are vulnerable to attack, damage and interruption from computer viruses and malware (e.g., ransomware), malicious code, misconfigurations, “bugs” or other vulnerabilities, natural disasters, terrorism, war, telecommunication and electrical failure, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization. Attacks upon information technology systems are also increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. As a result of the continued hybrid working environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. There can be no assurance that our and our current and any future CROs’, CMOs’ and other contractors’, consultants’, collaborators’ and third-party service provider’s cybersecurity risk management program and processes, including policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems, networks and Confidential Information.
We and certain of our service providers are from time to time subject to cyberattacks and security incidents. If such an event were to occur and cause interruptions in our operations or result in the unauthorized acquisition of or access to our Confidential Information, it could result in a material disruption of our drug development programs. Some federal, state and ex-U.S. government requirements include obligations of companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have formed strategic relationships. Notifications and follow-up actions related to a security breach could impact our reputation, cause us to incur significant costs, including legal expenses and remediation costs. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the lost data. We also rely on third parties to manufacture our product candidates, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of Confidential Information, we could be exposed to litigation and governmental investigations, the further development and commercialization of our product candidates could be delayed, and we could be subject to significant fines or penalties for any noncompliance with certain state, federal and/or international privacy and security laws.
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption, failure or security breach. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention.
Ex-U.S. pricing, drug marketing and reimbursement regulations may materially affect our ability to market and receive coverage for our products in the European member states.
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We may seek approval to market our product candidates in both the United States and in selected ex-U.S. jurisdictions. If we obtain approval in one or more ex-U.S. jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In some ex-U.S. countries, particularly those in the EU, the pricing of drugs is subject to governmental control and other market regulations which could put pressure on the pricing and usage of our product candidates. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of our product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our product candidates and may be affected by existing and future healthcare reform measures.
Much like the federal Anti-Kickback Statute prohibition in the United States, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to physicians is governed by the national laws of EU member states, such as the UK Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain EU member states must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and/or approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of the individual EU member states. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the EU member states. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.
The requirements governing drug pricing and reimbursement vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. In some countries, we may be required to conduct a clinical study or other studies that compare the cost-effectiveness of any of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. There can be no assurance that any country that has price controls or reimbursement limitations for biopharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the United States and generally prices tend to be significantly lower. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if reimbursement of our products is unavailable or limited in scope or amount, our revenues from sales and the potential profitability of any of our product candidates in those countries would be negatively affected.
Unfavorable U.S., global, political or economic conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the U.S. and global economy and in the U.S. and global financial markets. For example, the recent global economic downturn has caused rising inflation and interest rates and has led to extreme volatility and disruptions in the capital and credit markets. A worsening or prolonged economic downturn or recession could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, and cause the prices of our supplies to increase or cause our customers to delay making payments for our services. In addition, current military conflicts and/or civil unrest could disrupt or otherwise adversely impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions have and may in the future be initiated by nations including the United States, the EU or Russia (e.g., potential cyberattacks, disruption of energy
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flows, etc.), which could adversely affect our business and/or our supply chain, our CROs, CMOs and other third parties with which we conduct business. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Increasing scrutiny and changing expectations from governments and other stakeholders with respect to ESG policies and practices may cause us to incur additional costs or expose us to additional risks.
There has been increasing public focus and scrutiny from investors, patients, activists, the media, governmental and nongovernmental organizations, and other stakeholders on a variety of environmental, social and related matters, including diversity and inclusion practices. Expectations regarding ESG continues to evolve rapidly. A failure, or perceived failure, to respond to related expectations could subject us to litigation or activism, cause harm to our business and reputation and have a negative impact on the market price of our securities. Additionally, we may be subject to new or varied laws or regulations which could result in new or more stringent forms of ESG oversight and disclosures, which may lead to increased expenditures for compliance or otherwise impact our business, including risk of fines, investigation and litigation.
Business interruptions could adversely affect our operations.
Our operations are vulnerable to interruption by fire, severe weather conditions, power loss, telecommunications failure, terrorist activity, public health crisis and pandemic diseases, natural disasters, man-made disasters or events beyond our control. Our facilities are located in regions that experience severe weather from time to time. We have not undertaken a systematic analysis of the potential consequences to our business and financial results due to hurricane, tornado, flood, fire, earthquake, landslide, other severe weather events, power loss, terrorist activity, public health crisis, pandemic diseases or other disasters, and do not have a comprehensive recovery plan for such disasters. In addition, we do not carry sufficient insurance to compensate us for actual losses from interruption of our business that may occur, and any losses or damages incurred by us could harm our business. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2024, we have U.S. federal and state net operating losses, or NOL, carryforwards of approximately $404.2 million and $212.4 million, respectively. The U.S. federal NOL carryforwards generated prior to January 1, 2018 begin to expire in 2035. The U.S. federal NOL generated after 2017 of $390.0 million can be carried forward indefinitely and be available to offset up to 80% of our taxable income in future periods. This limitation may require us to pay U.S. federal income taxes in future years despite generating U.S. federal NOLs in prior years. Our U.S. federal NOLs generated in tax years beginning prior to January 1, 2018 are not subject to this limitation, but are only permitted to be carried forward for 20 taxable years under applicable U.S. federal tax law, and will start to expire in 2035 if not utilized. Our state NOLs begin to expire in 2035.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a cumulative change in its ownership by one or more “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period), the corporation’s ability to use its pre-ownership change federal NOLs and certain other pre-change tax attributes, including tax credits, to offset its post-change taxable income and income tax liabilities may be limited. Similar rules may apply under state tax laws. We may have experienced such ownership changes in the past and we may experience ownership changes in the future as a result of shifts in our stock ownership, some of which are outside our control. We have completed a Code Section 382 analysis through June 30, 2023 regarding the limitation of NOL carryforwards and other tax attributes. Under the Section 382 rules, we experienced ownership changes in 2015, 2019 and 2022. Additionally, several of our subsidiaries experienced an ownership change in 2020 based on the Section 382 rules for the time period prior to when we were a consolidated group for tax purposes. Our attributes are subject to annual limitations, and some could expire unused prior to expiration. There is a risk that additional ownership changes may occur in the future. If a future change in ownership occurs, our NOL carryforwards and other tax attributes could be limited or restricted. Additionally, our NOLs prior to the tax consolidation are also subject to the separate return loss year, or SRLY, rules. The SRLY rules may limit one member from offsetting taxable income with losses generated from another member prior to joining the consolidated group. Consequently,
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even if we attain profitability in the future, we may not be able to utilize a material portion of our NOLs and certain other tax attributes, which could have a material adverse effect on our cash flows and results of operations.
A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.
We may seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we would be subject to additional risks related to operating in ex-U.S. countries if we obtain the necessary approvals, including:
•differing regulatory requirements and reimbursement regimes in ex-U.S. countries;
•unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;
•economic weakness, including inflation, or political instability in particular ex-U.S. economies and markets;
•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
•ex-U.S. taxes, including withholding of payroll taxes;
•ex-U.S. currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;
•difficulties staffing and managing ex-U.S. operations;
•workforce uncertainty in countries where labor unrest is more common than in the United States;
•potential liability under the FCPA or comparable ex-U.S. regulations;
•challenges enforcing our contractual and intellectual property rights, especially in those ex-U.S. countries that do not respect and protect intellectual property rights to the same extent as the United States;
•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
•business interruptions resulting from geopolitical actions, including war and terrorism.
These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
From time to time, we may evaluate various acquisition opportunities and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:
•increased operating expenses and cash requirements;
•the assumption of additional indebtedness or contingent liabilities;
•the issuance of our equity securities;
•assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;
•the diversion of our management’s attention from our existing programs and initiatives in pursuing such a strategic merger or acquisition;
•retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships;
•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and marketing approvals; and
•our inability to generate product revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
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In addition, if we undertake acquisitions or pursue partnerships in the future, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities, and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
The requirements of being a public company may strain our resources, result in more litigation and divert management’s attention.
As a public company, we are and will continue to be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Stock Market, LLC, or Nasdaq, and other applicable securities rules and regulations. Complying with these rules and regulations has increased and will increase our legal and financial compliance costs, make some activities more difficult, time consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are required to disclose material changes made in our internal control over financial reporting on a quarterly basis. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may also need to hire employees or engage outside consultants to comply with these requirements, which will increase our costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We have invested and intend to continue to invest in resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.
These new rules and regulations may make it more expensive for us to obtain director and officer liability insurance and, in the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our Audit Committee and Compensation Committee, and qualified executive officers. By disclosing information in filings required of us as a public company, our business and financial condition will continue to become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If those claims are successful, our business could be seriously harmed. Even if the claims do not result in litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business.
A portion of our manufacturing of azenosertib takes place in ex-U.S. countries, including China, through third-party manufacturers. A significant disruption in the operation of those manufacturers, a trade war or political unrest in such ex-U.S. countries, including China, could materially adversely affect our business, financial condition and results of operations.
We currently contract manufacturing operations to third parties, and clinical quantities of azenosertib are manufactured by certain of these third parties outside the United States, including in China, and we expect to
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continue to use such third-party manufacturers for azenosertib. Any disruption in production or inability of our manufacturers in such ex-U.S. countries, including in China, to produce adequate quantities to meet our needs, whether as a result of a natural disaster or other causes, could impair our ability to operate our business on a day-to-day basis and to continue our development of azenosertib. Furthermore, since these manufacturers are located outside the United States, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies of the United States or ex-U.S. governments, political unrest or unstable economic conditions in such ex-U.S. countries, including in China. For example, the current trade war between the United States and ex-U.S. governments could lead to tariffs on the chemical intermediates we use that are manufactured in such countries. With the 2025 change in the presidential administration, the U.S. government has imposed additional tariffs on a broader range of imports from certain countries, and in response to these tariffs, those countries have taken further retaliatory trade measures. These actions could potentially disrupt or increase costs associated with our existing supply chains for clinical quantities of azenosertib and impose additional costs on our business. Furthermore, in January 2024, the U.S. House of Representatives introduced the BIOSECURE Act (H.R. 7085) and the Senate advanced a substantially similar bill (S.3558). Though such legislation was not enacted into law in 2024, Congress could re-introduce similar measures, which, if passed and enacted into law, would have the potential to restrict the ability of U.S. biopharmaceutical companies to purchase services or products from, or otherwise collaborate with, certain Chinese biotechnology companies “of concern” without losing the ability to contract with, or otherwise receive funding from, the U.S. government. Although we do not currently anticipate that supply of azenosertib will be affected by the enactment and implementation of legislation similar to the BIOSECURE Act, the impact of the BIOSECURE Act or any related legislation remains uncertain, and we are continuing to monitor proposed changes to law. Any of these matters could materially and adversely affect our business and results of operations. In addition, manufacturing interruptions or failure to comply with regulatory requirements by any of these manufacturers could significantly delay clinical development of potential products and reduce third-party or clinical researcher interest and support of proposed trials. These interruptions or failures could also impede commercialization of our product candidates and impair our competitive position. Further, we may be exposed to fluctuations in the value of the local currency in the ex-U.S. countries. Future appreciation of the local currency could increase our costs. In addition, our labor costs could continue to rise as wage rates increase due to increased demand for skilled laborers and the availability of skilled labor declines in the ex-U.S. countries, including in China.
Risks Related to Our Intellectual Property
Our success depends on our ability to protect our intellectual property and our proprietary platform.
Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for azenosertib and any future product candidates, proprietary technologies and their uses, our and our licensors’ ability to operate without infringing the proprietary rights of others, and our and our licensors’ ability to successfully defend our patents, including those that we have in-licensed, against third-party challenges. If we or our licensors are unable to protect our intellectual property rights or if our intellectual property rights are inadequate for our technology or azenosertib or any future product candidates, our competitive position could be harmed. We and our licensors generally seek to protect our proprietary position by filing patent applications in the United States and outside of the United States related to our product candidates, proprietary technologies and their uses that are important to our business. Our or our licensors’ patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover the technology. There can be no assurance that our or our licensors’ patent applications will result in patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents, if issued, will be infringed or will not be designed around by third parties. Even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our and our licensors’ proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our or our licensors’ rights or permit us or our licensors to gain or keep any competitive advantage. These uncertainties and/or limitations in our and our licensors’ ability to properly protect the intellectual property rights relating to our product candidates could have a material adverse effect on our financial condition and results of operations.
Although we in-license issued patents in the United States and ex-U.S. countries, we cannot be certain that the claims in our other U.S. pending patent applications, corresponding international patent applications and patent
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applications in certain ex-U.S. countries will be considered patentable by the United States Patent and Trademark Office, or USPTO, courts in the United States or by the patent offices and courts in ex-U.S. countries, nor can we be certain that the claims in our issued patents will not be found invalid or unenforceable if challenged.
The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or our licensors or any of our potential future collaborators will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
•the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the noncompliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdictions;
•patent applications may not result in any patents being issued;
•patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage;
•our competitors, many of whom have substantially greater resources than we or our licensors do and many of whom have made significant investments in competing technologies, may seek, may have filed patent applications, or may have already obtained patents that will limit, interfere with or block our ability to make, use and sell our product candidates;
•there may be significant pressure on the U.S. and ex-U.S. governments and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and
•countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing ex-U.S. competitors a better opportunity to create, develop and market competing products.
The patent prosecution process is also expensive and time-consuming, and we or our licensors may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions where protection may be commercially advantageous. It is also possible that we or our licensors may not identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, directed to technology that we in-license, including those which we in-license from our licensors and from third parties. We also may require the cooperation of our licensors in order to enforce the licensed patent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. We cannot be certain that patent prosecution and maintenance activities by our licensors have been or will be conducted in compliance with applicable laws and regulations, which may affect the validity and enforceability of such patents or any patents that may issue from such applications. If they fail to do so, this could cause us to lose rights in any applicable intellectual property that we in-license, and as a result our ability to develop and commercialize products or product candidates may be adversely affected and we may be unable to prevent competitors from making, using and selling competing products.
In addition, although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, outside scientific collaborators, CROs, CMOs, consultants, advisors, licensors, and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from our licensors and third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
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We are a party to license agreements under which we are granted rights to intellectual property that are important to our business and we may enter into additional license agreements in the future. For example, our wholly owned subsidiary, ZMI, is party to a license agreement with Recurium IP under which we have an exclusive license to certain intellectual property rights, including certain intellectual property covering azenosertib.
This and our other existing license agreements impose on us, and we expect that any future license agreements where we in-license intellectual property will impose on us, various development, regulatory and/or commercial diligence obligations, payment of milestones and/or royalties and other obligations. If we fail to comply with our obligations under these agreements, or we are subject to bankruptcy-related proceedings, the licensors may have the right to terminate the licenses, in which event we would not be able to market products covered by the licenses.
We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we cannot provide any assurances that third-party patents do not exist that might be enforced against our product candidates in the absence of such a license. We may fail to obtain any of these licenses on commercially reasonable terms, if at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including:
•the scope of rights granted under the license agreement and other interpretation-related issues;
•whether and the extent to which our technology and processes infringe intellectual property of the licensor that is not subject to the licensing agreement;
•our right to sublicense patents and other rights to third parties;
•our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations;
•our right to transfer or assign the license; and
•the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and their affiliates and sublicensees and by us and our partners and sublicensees.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may not be able to successfully develop and commercialize the affected product candidates, which would have a material adverse effect on our business.
In addition, certain of our agreements may limit or delay our ability to consummate certain transactions, may impact the value of those transactions, or may limit our ability to pursue certain activities. For example, if we choose to sublicense or assign to any third parties certain patent rights exclusively in-licensed under the Recurium Agreement, we will be required to pay to Recurium a specified percentage of certain sublicensing income to be received in connection with such transaction.
If the scope of any patent protection our licensors obtain is not sufficiently broad, or if our licensors lose any of the patent protection we license, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.
The patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the existence, issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and
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future patent applications may not result in patents being issued that protect our product candidates or that effectively prevent others from commercializing competitive product candidates.
Moreover, the scope of claims in a patent application can be significantly reduced before any claims in a patent issue, and claim scope can be reinterpreted after issuance. Even if patent applications we in-license currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we in-license may be challenged or circumvented by third parties or may be narrowed or invalidated as a result of challenges by third parties. Consequently, we do not know whether our product candidates will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our or our licensors' patents by developing similar or alternative technologies or products in a non-infringing manner, which could materially adversely affect our business, financial condition, results of operations and prospects.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our in-licensed patents may not cover our product candidates or may be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant review, or PGR, and inter partes review, or IPR, or other similar proceedings in the USPTO or ex-U.S. patent offices challenging our patent rights. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity of our or our licensors' patents, for example, we cannot be certain that there is no invalidating prior art, of which we or our licensors and the patent examiner were unaware during prosecution. There is no assurance that all potentially relevant prior art relating to our patents and patent applications or those of our licensors has been found. There is also no assurance that there is not prior art of which we or licensors were or are aware of, but which we do not believe affects the validity or enforceability of a claim in our patents and patent applications or those of our licensors, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our patent rights, allow third parties to commercialize our product candidates and compete directly with us, without payment to us. Such loss of in-licensed patent rights, loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our product candidates. Such proceedings also may result in substantial costs and require significant time from our scientists and management, even if the eventual outcome is favorable to us. In addition, if the breadth or strength of protection provided by our patents and patent applications or those of our licensors is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
The patent protection and patent prosecution for some of our product candidates may be dependent on our licensors and third parties.
We or our licensors may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to strengthen our patent position. It is possible that defects as to form in the preparation or filing of our patents or patent applications or those of our licensors may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, written descriptions, claim scope, or requests for patent term adjustments, patent term extensions or any foreign equivalents thereof. If we or our licensors, whether current or future, fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation, prosecution, or enforcement of our in-licensed patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
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As a licensee, we may rely on third parties to file and prosecute patent applications and maintain patents and otherwise protect the in-licensed intellectual property under some of our license agreements. We may not have primary control over these activities for certain of our patents or patent applications or those of our licensors and other intellectual property rights. We cannot be certain that such activities by third parties have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights. Pursuant to the terms of the license agreements with some of our licensors, the licensors may have the right to control enforcement of our in-licensed patents or defense of any claims asserting the invalidity of these patents and even if we are permitted to pursue such enforcement or defense, we will require the cooperation of our licensors. We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the in-licensed patents. Even if we are not a party to these legal actions, an adverse outcome could harm our business because it might prevent us from continuing to in-license intellectual property that we may need to operate our business. If any of our licensors or any of our future licensors or licensees or future collaborators fails to appropriately prosecute and maintain patent protection for patents covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products.
In addition, even where we have the right to control patent prosecution of patents and patent applications we have acquired or in-licensed from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensors and their counsel that took place prior to us assuming control over patent prosecution.
Our technology acquired or in-licensed from various third parties, including our licensors, may be subject to retained rights. Our licensors often retain certain rights under their agreements with us, including the right to use the underlying technology for use in fields other than the fields licensed to us or for use in noncommercial academic and research use, to publish general scientific findings from research related to the technology, and to make customary scientific and scholarly disclosures of information relating to the technology. It is difficult to monitor whether our licensors limit their use of the technology to these uses, and we could incur substantial expenses to enforce our rights to our in-licensed technology in the event of misuse.
If we are limited in our ability to utilize acquired or in-licensed technologies, or if we lose our rights to critical in-licensed technology, we may be unable to successfully develop, out-license, market and sell our products, which could prevent or delay new product introductions. Our business strategy depends on the successful development of in-licensed and acquired technologies into commercial products. Therefore, any limitations on our ability to utilize these technologies may impair our ability to develop, out-license or market and sell our product candidate.
Some of our intellectual property may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies if it is determined that our intellectual property has been discovered through government-funded programs. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S. manufacturers.
Some of the intellectual property rights we have acquired or in-licensed or may acquire or license in the future may have been generated through the use of U.S. government funding and may therefore be subject to certain federal regulations. These U.S. government rights include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right, under certain limited circumstances, to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”). The U.S. government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources. In addition, the U.S. government requires that any products embodying any of these inventions or produced through the use of any of these inventions be
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manufactured substantially in the United States. This preference for U.S. industry may be waived by the federal agency that provided the funding if the owner or assignee of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. industry may limit our ability to contract with non-U.S. product manufacturers for products relating to such intellectual property. To the extent any of our future intellectual property is also generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
•others may be able to develop products that are similar to our product candidates but that are not covered by the claims of the patents that we own or license;
•we or our licensors might not have been the first to make the inventions covered by the issued patents or patent application that we own or in-license;
•we or our licensors might not have been the first to file patent applications covering certain of our inventions;
•others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
•it is possible that our licensors’ pending patent applications will not lead to issued patents;
•issued patents that we own or in-license may be held invalid or unenforceable, as a result of legal challenges by our competitors;
•our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
•we may not develop additional proprietary technologies that are patentable; and
•the patents of others may have an adverse effect on our business.
•Should any of these events occur, it could significantly harm our business, results of operations and prospects.
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.
Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties. However, our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. Other entities may have or obtain patents or proprietary rights that could limit, interfere or block our ability to make, use, sell, offer for sale or import azenosertib, any future product candidates, and products that may be approved in the future, or impair our competitive position. There is a substantial amount of litigation and administrative proceedings, both within and outside the United States, involving patent and other intellectual property rights in the biopharmaceutical industry, including patent invalidity and infringement lawsuits, oppositions, reexaminations, IPR proceedings and PGR proceedings before the USPTO, ex-U.S. patent offices and/or in a court of law. Numerous third-party U.S. and ex-U.S. issued patents and pending patent applications exist in the fields in which we are developing azenosertib and any future product candidates. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.
As the biopharmaceutical industry expands and more patents issue, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Because patent applications
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are maintained as confidential for a certain period of time, until the relevant application is published we may be unaware of third-party patents that may be infringed by commercialization of any of our product candidates, and we cannot be certain that we were the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes these patents. Any claims of patent infringement asserted by third parties would be time consuming and could:
•result in costly litigation that may cause negative publicity;
•divert the time and attention of our technical personnel and management;
•cause development delays;
•prevent us from commercializing azenosertib and any future product candidates until the asserted patent expires or is held finally invalid or unenforceable or not infringed in a court of law;
•require us to develop non-infringing technology, which may not be possible on a cost-effective basis;
•subject us to significant liability to third parties; or
•require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all, or which might be non-exclusive, which could result in our competitors gaining access to the same technology.
Although no third party has asserted a claim of patent infringement against us as of the date of this periodic report, others may hold proprietary rights that could prevent our product candidates from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin activities relating to our product candidates or processes could subject us to potential liability for damages, including treble damages if we were determined to willfully infringe, and require us to obtain a license to manufacture or develop our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and employee resources from our business. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. Moreover, even if we or our future strategic partners were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. In addition, we cannot be certain that we could redesign our product candidates or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing and commercializing our product candidates, which could harm our business, financial condition and operating results.
Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful. Further, our issued patents or the patents of our licensors could be found invalid or unenforceable if challenged in court.
Competitors may infringe our intellectual property rights or those of our licensors. To prevent infringement or unauthorized use, we and/or our licensors may be required to file infringement claims, which can be expensive and time-consuming. Further, our licensors may need to file infringement claims, but they may elect not file such claims. In addition, in a patent infringement proceeding, a court may decide that a patent we own or license is not
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valid, is unenforceable and/or is not infringed. If we or any of our licensors or potential future collaborators were to initiate legal proceedings against a third party to enforce a patent directed at one of our product candidates, the defendant could assert that such a patent is invalid, not infringed and/or unenforceable in whole or in part. In patent litigation, defendant allegations of invalidity and/or unenforceability of asserted patents are commonplace. Grounds for a validity challenge include an alleged failure to meet any of several statutory requirements, including patent-ineligible subject matter, lack of utility, lack of novelty, obviousness or lack of written description, or non-enablement. Grounds for an unenforceability assertion could include an allegation of inequitable conduct that someone connected with prosecution of the patent intentionally withheld material information from the USPTO or an ex-U.S. patent office or made a misleading statement during prosecution.
If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on such product candidate. In addition, if the breadth or strength of protection provided by our patents and patent applications or those of our licensors is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Such a loss of patent protection would have a material adverse impact on our business.
Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other legal proceedings relating to our intellectual property rights, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or other proceedings.
Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common shares to decline.
During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our existing products, programs or intellectual property could be diminished. Accordingly, the market price of shares of our common stock may decline. Such announcements could also harm our reputation or the market for our future products, which could have a material adverse effect on our business.
Derivation or interference proceedings may be necessary to determine priority of inventions, and an unfavorable outcome may require us to cease using the related technology or to attempt to license rights from the prevailing party.
Derivation or interference proceedings provoked by third parties or brought by us or our licensors, or declared by the USPTO or similar proceedings in ex-U.S. patent offices may be necessary to determine the priority of inventions with respect to our or our licensors’ patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our or our licensors’ defense of such proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with such proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties or enter into development or manufacturing partnerships that would help us bring our product candidates to market.
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Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our or our licensors' patent applications and the enforcement or defense of our or our licensors' issued patents.
In September 2011, the Leahy-Smith America Invents Act, or Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first inventor to file” system in which, assuming that other requirements of patentability are met, the first inventor to file a patent application will be entitled to the patent regardless of whether a third party was first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013 but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Furthermore, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our technology and the prior art allow our technology to be patentable over the prior art. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (1) file any patent application related to our product candidates or (2) invent any of the inventions claimed in our patents or patent applications of those of our licensors.
The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications are prosecuted and also affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including PGR, IPR, and derivation proceedings. An adverse determination in any such submission or proceeding could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.
Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Changes in U.S. patent law, or laws in other countries, could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves a high degree of technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time-consuming and inherently uncertain. Changes in either the patent laws or in the interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property and may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. We cannot predict the breadth of claims that may be allowed or enforced in our or our licensors' patents or in third-party patents. In addition, Congress or other ex-U.S. legislative bodies may pass patent reform legislation that is unfavorable to us.
For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our or our licensors’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the U.S. federal courts, the USPTO, or similar authorities in ex-U.S. jurisdictions, the laws and regulations governing patents could change in unpredictable ways that would weaken our
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or our licensors’ ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future.
We or our licensors may be subject to claims challenging the inventorship or ownership of our or our licensors' patents and other intellectual property.
We or our licensors may be subject to claims that former employees or other third parties have an ownership interest in our or our licensors' patents or other intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Such an outcome could have a material adverse effect on our business. Even if we or our licensors are successful in defending against such claims, litigation could result in substantial costs and distraction to management and other employees.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the term of a patent, and the protection it affords, is limited. Even if patents directed to our product candidates are obtained, once the patent term has expired, we may be open to competition from competitive products. Given the amount of time required for the development, testing and regulatory review of product candidates, patents directed to our product candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we or our licensors do not obtain patent term extension for azenosertib and any future product candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of azenosertib and any future product candidates, one or more of our U.S. patents may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. A maximum of one patent may be extended per FDA-approved product as compensation for the patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only those claims covering such approved drug product, a method for using it for an FDA-approved indication or a method for manufacturing it may be extended. Patent term extension or equivalents thereof may also be available in certain ex-U.S. countries upon regulatory approval of our product candidates. However, we or our licensors may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, failing to act with due diligence to develop product and seek regulatory approval or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we or our licensors are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.
We may not be able to protect our intellectual property rights throughout the world.
Although we have issued patents and pending patent applications in the United States and certain other countries, filing, prosecuting and defending patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than
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those in the United States. In addition, the laws of some ex-U.S. countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we or our licensors have patent protection but enforcement is not as strong as that in the United States. These products may compete with our product candidates, and our or our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in ex-U.S. jurisdictions. The legal systems of many ex-U.S. countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our or our licensors’ patents or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our or our licensors’ patent rights in ex-U.S. jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our or our licensors’ patents at risk of being invalidated or interpreted narrowly and our or our licensors’ patent applications at risk of not issuing and could provoke third parties to assert claims against us. We or our licensors may not prevail in any lawsuits that we or our licensors initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our or our licensors’ efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by regulations and governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to the USPTO and various ex-U.S. patent offices at various points over the lifetime of our or our licensors' patents and/or applications. We have systems in place to remind us to pay these fees, and we rely on third parties to pay these fees when due. Additionally, the USPTO and various ex-U.S. patent offices require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with rules applicable to the particular jurisdiction. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on our business.
If we are unable to protect our trade secrets, our business and competitive position would be harmed.
In addition, we rely on the protection of our trade secrets, including unpatented know-how, technology and other proprietary information to maintain our competitive position. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants, licensors and advisors, we cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade
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secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
Moreover, third parties may still obtain this information or may come upon this or similar information independently, and we would have no right to prevent them from using that technology or information to compete with us. If any of these events occurs or if we otherwise lose protection for our trade secrets, the value of this information may be greatly reduced and our competitive position would be harmed. If we or our licensors do not apply for patent protection prior to public disclosure or if we cannot otherwise maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.
We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.
As is common in the biopharmaceutical industry, in addition to our employees, we engage the services of consultants to assist us in the development of our product candidates. Many of these consultants, and many of our employees, were previously employed at, or may have previously provided or may be currently providing consulting services to, other biopharmaceutical companies including our competitors or potential competitors. We may become subject to claims that we, our employees or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely affect our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management team and other employees.
Risks Related to Our Dependence on Third Parties
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 azenosertib or any future product candidates and our business could be substantially harmed.
We have relied upon and plan to continue to rely upon third parties, including independent clinical investigators, consultants and third-party CROs, to conduct certain aspects of our preclinical studies and clinical trials and to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties for execution of our preclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies and trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. We and our third-party contractors, including CROs, are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and ex-U.S. regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or ex-U.S. regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations and similar ex-U.S. requirements. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be adversely affected if any of these third parties violates federal, state or ex-U.S. fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
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Further, these investigators, CROs and other third parties are not our employees and we will not be able to control, other than by contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities, which could affect their performance on our behalf. If independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed or precluded entirely.
Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors, or if we are liquidated.
If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Additionally, CROs may lack the capacity to absorb higher workloads or take on additional capacity to support our needs. They may also suffer from high staff turnover which may leave them at least temporarily unable to sufficiently meet our needs. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
We contract with third parties for the manufacture of azenosertib for preclinical studies and our ongoing clinical trials, and expect to continue to do so for additional clinical trials and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of azenosertib or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not currently have the infrastructure or internal capability to manufacture supplies of azenosertib or any future product candidates for use in development and commercialization. We rely, and expect to continue to rely, on third-party manufacturers for the production of azenosertib and any future product candidates for preclinical studies and clinical trials under the guidance of members of our organization. We do not have long-term supply agreements, and we purchase our required supply on a purchase order basis. Furthermore, the raw materials for azenosertib are sourced, in some cases, from a single-source supplier. We currently mitigate potential supply risks for azenosertib, if any, through inventory management. If we were to experience an unexpected loss of supply of azenosertib or any of our future product candidates for any reason, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials.
We expect to continue to rely on third-party manufacturers for the commercial supply of azenosertib and any future product candidates for which we obtain marketing approval. We may be unable to maintain or establish required agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
•the failure of the third-party manufacturers to manufacture our product candidates according to our schedule, or at all, including if our third-party manufacturers give greater priority to the supply of
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other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them;
•the reduction or termination of production or deliveries by suppliers, or the raising of prices or renegotiation of terms;
•the termination or nonrenewal of arrangements or agreements by our third-party manufacturers at a time that is costly or inconvenient for us;
•the breach by the third-party manufacturers of our agreements with them;
•the failure of third-party manufacturers to comply with applicable regulatory requirements;
•the failure of the third-party manufacturers to manufacture our product candidates according to our specifications;
•the mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified;
•clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and
•the misappropriation of our proprietary information, including our trade secrets and know-how.
We do not have complete control over all aspects of the manufacturing process of, and are dependent on, our third-party contract manufacturing partners for compliance with cGMP regulations or similar ex-U.S. requirements for manufacturing both active drug substances and finished drug products. Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the United States. If our third-party contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain marketing approval for the use of their manufacturing facilities for the manufacture of our product candidates. In addition, we do not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or an ex-U.S. regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain marketing approval for or market our product candidates, if approved. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates or drugs and harm our business and results of operations. Our current and anticipated future dependence upon others for the manufacture of our product candidates or drugs may adversely affect our future profit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.
The manufacture of drugs is complex and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented.
Manufacturing drugs, especially in large quantities, is complex and may require the use of innovative technologies. Each lot of an approved drug product must undergo thorough testing for identity, strength, quality, purity and potency. Manufacturing drugs requires facilities specifically designed for and validated for this purpose, and sophisticated quality assurance and quality control procedures are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, stock recovery or spoilage. Any stock recovery of the manufacturing lots or similar action regarding our product candidates used in clinical trials could delay the trials or detract from the integrity of the trial data and its potential use in future regulatory filings. When changes are made to the manufacturing process, we may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the products before and after such changes. If microbial, viral or other contaminations are discovered at the facilities of our manufacturer, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm our business. If our
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manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization as a result of these challenges, or otherwise, our development and commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects.
If we decide to establish collaborations in the future, but are not able to establish those collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans.
Our drug development programs and the potential commercialization of azenosertib and any future product candidates will require substantial additional cash to fund expenses. We may continue to seek to selectively form collaborations to expand our capabilities, potentially accelerate research and development activities and provide for commercialization activities by third parties. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business.
We would face significant competition in seeking appropriate collaborators and the negotiation process is time-consuming and complex. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or ex-U.S. regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing drugs, the existence of uncertainty with respect to our ownership of intellectual property and industry and market conditions generally. The potential collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such collaboration could be more attractive than the one with us for our product candidate. Further, we may not be successful in our efforts to establish a collaboration or other alternative arrangements for future product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view them as having the requisite potential to demonstrate safety and efficacy.
In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. Even if we are successful in entering into a collaboration, the terms and conditions of that collaboration may restrict us from entering into future agreements on certain terms with potential collaborators.
If and when we seek to enter into collaborations, we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.
Risks Related to Ownership of Our Common Stock
The price of our stock may be volatile, and you could lose all or part of your investment.
The trading price of our common stock is likely to be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. The stock market in general, and pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.
Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In addition to the factors discussed in this “Risk Factors” section, these factors include:
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•the timing and results of preclinical studies and clinical trials of our product candidates or those of our competitors;
•the success of competitive products or announcements by potential competitors of their product development efforts;
•regulatory actions with respect to our products or product candidates or our competitors’ products or product candidates;
•actual or anticipated changes in our growth rate relative to our competitors;
•regulatory or legal developments in the United States and other countries;
•developments or disputes concerning patent applications, issued patents or other proprietary rights;
•the recruitment or departure of key personnel;
•announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations or capital commitments;
•actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
•fluctuations in the valuation of companies perceived by investors to be comparable to us;
•market conditions in the pharmaceutical and biotechnology sector;
•changes in the structure of healthcare payment systems;
•speculative trading in and short sales of our common stock, as well as trading phenomena such as the "short squeeze";
•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
•announcement or expectation of additional financing efforts;
•sales of our common stock by us, our insiders or our other stockholders;
•expiration of market stand-off or lock-up agreements; and
•general economic, industry and market conditions.
In addition, the trading prices for common stock of other biopharmaceutical companies have been highly volatile as a result of U.S. and global economic conditions. The extent to which these events may impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section, could have a dramatic and adverse impact on the market price of our common stock.
Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
•variations in the level of expense related to the ongoing development of azenosertib or future development programs;
•results of clinical trials, or the addition or termination of clinical trials or funding support by us or potential future partners;
•our execution of any collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under potential future arrangements or the termination or modification of any such potential future arrangements;
•any intellectual property infringement, misappropriation or violation lawsuit or opposition, interference or cancellation proceeding in which we may become involved;
•additions and departures of key personnel;
•strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
•if azenosertib or any future product candidates receives regulatory approval, the terms of such approval and market acceptance and demand for such product candidates;
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•regulatory developments affecting our product candidates or those of our competitors; and
•changes in general market and economic conditions.
If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
Our principal stockholders and management own a significant percentage of our stock and are able to exert significant influence over matters subject to stockholder approval.
As of March 31, 2025, our executive officers and directors, combined with our stockholders who owned more than 5% of our common stock, together with their respective affiliates, owned a significant percentage of our outstanding common stock. As a result, if these stockholders were to choose to act together, they would be able to significantly influence all matters submitted to our stockholders for approval, as well as matters related to our management and affairs. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. Outstanding shares of our common stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act, or to the extent that such shares have already been registered under the Securities Act and are held by non-affiliates of ours. We also register all shares of common stock that we may issue under our equity compensation plans or that are issuable upon exercise of outstanding options. These shares can be freely sold in the public market upon issuance and once vested, subject to volume limitations applicable to affiliates. If any of these additional shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates on unfavorable terms to us.
We may seek additional capital through a variety of means, including through public or private equity, debt financings or other sources, including up-front payments and milestone payments from strategic collaborations. For example, in August 2020, July 2021, May 2022 and June 2023, we completed underwritten public offerings of our common stock and in April 2022, we completed a direct offering of our common stock. To the extent that we raise additional capital through the sale of equity or convertible debt or equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Such financing may result in dilution to stockholders, imposition of debt covenants, increased fixed payment obligations or other restrictions that may affect our business. If we raise additional funds through up-front payments or milestone payments pursuant to strategic collaborations with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
If securities or industry analysts do not publish research or reports, or if they publish adverse or misleading research or reports, regarding us, our business or our market, our stock price and trading volume could decline.
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The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us, our business or our market. If any of the analysts who cover us issue adverse or misleading research or reports regarding us, our business model, our intellectual property, our stock performance or our market, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the market price of our common stock.
Our certificate of incorporation and bylaws contain provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions, among other things:
•establish a classified Board of Directors so that not all members of our Board of Directors are elected at one time;
•permit only the Board of Directors to establish the number of directors and fill vacancies on the Board of Directors;
•provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
•authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan (also known as a “poison pill”);
•eliminate the ability of our stockholders to call special meetings of stockholders;
•prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
•prohibit cumulative voting;
•authorize our Board of Directors to amend the bylaws;
•establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and
•require a super-majority vote of stockholders to amend some provisions described above.
In addition, Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for:
•any derivative action or proceeding brought on our behalf;
•any action asserting a claim of breach of fiduciary duty;
•any action asserting a claim against us arising under the DGCL, our certificate of incorporation or our bylaws; and
•any action asserting a claim against us that is governed by the internal-affairs doctrine.
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This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. If a court were to find this exclusive-forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business. Nothing in our certificate of incorporation precludes stockholders that assert claims under the Securities Act or the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation of the value of our common stock.
We have never declared or paid any cash dividends on our equity securities. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to any appreciation in the value of our common stock, which is not certain.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We are required to disclose material changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. Undetected material weaknesses in our internal controls over financial reporting could lead to restatements of our financial statements and require us to incur the expense of remediation.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock has been and may continue to be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
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Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Insider Trading Arrangements and Policies.
On February 7, 2025, Mark Lackner, the Company’s Chief Scientific Officer, who ceased being an officer and an employee of the Company in April 2025, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of at least 104,221 shares of the Company’s common stock until March 29, 2026.
Item 6. Exhibits.

Exhibit Number |  | Description | Incorporated by Reference |
| Form | File No. | Exhibit | Filing Date | Filed/Furnished Herewith
2.1 |  | Plan of Conversion Converting Zentalis Pharmaceuticals, LLC (a Delaware limited liability company) into Zentalis Pharmaceuticals, Inc. (a Delaware corporation) | 10-Q | 001-39263 | 2.1 | 05/15/2020 |
2.2 |  | Certificate of Conversion Converting Zentalis Pharmaceuticals, LLC (a Delaware limited liability company) into Zentalis Pharmaceuticals, Inc. (a Delaware corporation) | 10-Q | 001-39263 | 2.2 | 05/15/2020 |
3.1 |  | Certificate of Incorporation of Zentalis Pharmaceuticals, Inc. | S-8 | 333-237593 | 4.1 | 04/07/2020 |
3.2 |  | Certificate of Amendment to Certificate of Incorporation of Zentalis Pharmaceuticals, Inc., dated June 16, 2023 | 8-K | 001-39263 | 3.1 | 06/16/2023 |
3.3 |  | Amended and Restated Bylaws of Zentalis Pharmaceuticals, Inc. | 8-K | 001-39263 | 3.1 | 02/15/2024 |
31.1 |  | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a). |  |  |  |  | *
31.2 |  | Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a). |  |  |  |  | *
32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |  |  |  |  | **
32.2 |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350. |  |  |  |  | **
101.INS |  | Inline XBRL Instance Document |  |  |  |  | *
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document |  |  |  |  | *
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  | *
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  |  |  |  | *

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Exhibit Number |  | Description | Incorporated by Reference |
| Form | File No. | Exhibit | Filing Date | Filed/Furnished Herewith
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  |  |  |  | *
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  | *
104 |  | Cover Page Interactive Data file (formatted as inline XBRL and contained in Exhibit 101) |  |  |  |  | *

* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| Zentalis Pharmaceuticals, Inc.
Date: May 14, 2025 | By: | /s/ Julie Eastland
|  | Julie Eastland
|  | President and Chief Executive Officer
|  | (principal executive officer)
Date: May 14, 2025 | By: | /s/ Vincent A. Vultaggio
|  | Vincent A. Vultaggio
|  | Senior Vice President, Finance and Principal Accounting Officer
|  | (principal financial and accounting officer)

97