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, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-38542

Kezar Life Sciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-3366145
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4000 Shoreline Court, Suite 300

South San Francisco, CA, 94080

(650) 822-5600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	KZR	The Nasdaq Stock Market LLC

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 6, 2024, the registrant had 72,801,359 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statement of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 6.	Exhibits	66

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “potential,” “project,” “plan,” “expect,” “seek,” “target” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

•our plans to develop and commercialize our product candidates;

•the initiation, timing, progress and expected results of our current and future clinical trials and our research and development programs;

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

•our ability to maintain and establish collaborations or strategic relationships or obtain additional funding;

•the timing and likelihood of obtaining regulatory approval of our current and future product candidates;

•the potential milestone and royalty payments under certain of our license agreements;

•our expectations regarding the potential market size and the rate and degree of market acceptance of such product candidates;

•our ability to fund our working capital requirements and expectations regarding the sufficiency of our capital resources;

•the implementation of our business model and strategic plans for our business and product candidates;

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

•developments or disputes concerning our intellectual property or other proprietary rights;

•the scalability and commercial viability of our manufacturing methods and processes;

•our expectations regarding government and third-party payor coverage and reimbursement;

•our ability to compete in the markets for our product candidates;

•general economic, political, and market conditions and overall fluctuations in the financial markets in the United States and abroad, including as a result of bank failures, public health crisis or geopolitical tensions;

•the impact of government laws and regulations;

•developments relating to our competitors and our industry; and

•other factors that may impact our financial results.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements in this report, whether as a result of new information, future events or otherwise, after the date of this report.

Unless the context otherwise requires, the terms “Kezar,” “Kezar Life Sciences,” “the Company,” “we,” “us,” “our” and similar references in this Quarterly Report on Form 10-Q refer to Kezar Life Sciences, Inc. and our wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd.

ii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	March 31, 2024			December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	33,032		$	35,493
Marketable securities		146,766			165,879
Prepaid expenses and other current assets		5,815			5,578
Total current assets		185,613			206,950
Property and equipment, net		3,652			3,912
Operating lease right-of-use asset		4,364			4,778
Other assets		5,501			5,595
Total assets	$	199,130		$	221,235
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	5,059		$	8,251
Accrued and other current liabilities		6,664			6,481
Operating lease liabilities, current		3,134			3,012
Debt, current		1,304			—
Total current liabilities		16,161			17,744
Operating lease liabilities, noncurrent		5,019			5,852
Debt, noncurrent		8,829			10,069
Total liabilities		30,009			33,665
Stockholders' equity:
Common stock, $0.001 par value, 250,000,000 and 250,000,000 shares    authorized as of March 31, 2024 (unaudited) and December 31, 2023, respectively;    72,801,359 and 72,779,077 shares issued and outstanding as of    March 31, 2024 (unaudited) and December 31, 2023, respectively		73			73
Preferred stock, $0.001 par value, 10,000,000 shares authorized; zero shares issued    and outstanding as of March 31, 2024 (unaudited) and December 31, 2023		—			—
Additional paid-in capital		541,824			538,390
Accumulated other comprehensive loss		(355	)		(130	)
Accumulated deficit		(372,421	)		(350,763	)
Total stockholders' equity		169,121			187,570
Total liabilities and stockholders' equity	$	199,130		$	221,235

See accompanying notes to the unaudited condensed consolidated financial statements

1

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

	Three Months Ended
	March 31,
	2024			2023
Operating expenses:
Research and development	$	17,172		$	18,318
General and administrative		6,539			6,206
Total operating expenses		23,711			24,524
Loss from operations		(23,711	)		(24,524	)
Interest income		2,453			2,695
Interest expense		(400	)		(370	)
Net loss	$	(21,658	)	$	(22,199	)
Net loss per common share, basic and diluted	$	(0.30	)	$	(0.31	)
Weighted-average shares used to compute net loss per common    share, basic and diluted		72,799,910			72,328,231

See accompanying notes to the unaudited condensed consolidated financial statements

2

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2024			2023
Net loss	$	(21,658	)	$	(22,199	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(29	)		(12	)
Unrealized (loss) gain on marketable securities		(196	)		412
Total other comprehensive (loss) income, net of tax		(225	)		400
Comprehensive loss	$	(21,883	)	$	(21,799	)

See accompanying notes to the unaudited condensed consolidated financial statements

3

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

(In thousands, except share amounts)

	COMMON STOCK				ADDITIONAL PAID-IN			ACCUMULATED OTHER COMPREHENSIVE			ACCUMULATED			TOTAL STOCKHOLDERS'
	SHARES		AMOUNTS		CAPITAL			LOSS			DEFICIT			EQUITY
Balance at December 31, 2023		72,779,077	$	73	$	538,390		$	(130	)	$	(350,763	)	$	187,570
Issuance of common stock under employee stock incentive plans		22,282		—		—			—			—			—
Stock-based compensation expense		—		—		3,434			—			—			3,434
Other comprehensive loss		—		—		—			(225	)		—			(225	)
Net loss		—		—		—			—			(21,658	)		(21,658	)
Balance as of March 31, 2024		72,801,359	$	73	$	541,824		$	(355	)	$	(372,421	)	$	169,121
	COMMON STOCK				ADDITIONAL PAID-IN			ACCUMULATED OTHER COMPREHENSIVE			ACCUMULATED			TOTAL STOCKHOLDERS'
	SHARES		AMOUNTS		CAPITAL			INCOME (LOSS)			DEFICIT			EQUITY
Balance at December 31, 2022		68,493,429	$	68	$	519,620		$	(923	)	$	(248,893	)	$	269,872
Cashless exercise of pre-funded warrants		2,236,233	$	2	$	(2	)		—			—			—
Issuance of common stock under employee stock incentive plans		86,338		1		153			—			—			154
Stock-based compensation expense		—		—		4,263			—			—			4,263
Other comprehensive income		—		—		—			400			—			400
Net loss		—		—		—			—			(22,199	)		(22,199	)
Balance as of March 31, 2023		70,816,000	$	71	$	524,034		$	(523	)	$	(271,092	)	$	252,490

See accompanying notes to the unaudited condensed consolidated financial statements

4

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(21,658	)	$	(22,199	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		260			259
Stock-based compensation		3,434			4,263
Amortization of premiums and discounts on marketable securities		(1,513	)		(1,713	)
Amortization of debt discount and issuance costs and other    non-cash interest		64			59
Changes in operating assets and liabilities
Prepaid expenses and other current assets		(237	)		1,599
Other assets		94			(4,414	)
Accounts payable, accrued and other current liabilities		(3,009	)		1,353
Operating lease assets and liabilities		(297	)		(67	)
Net cash used in operating activities		(22,862	)		(20,860	)
Cash flows from investing activities:
Purchases of property and equipment		—			(297	)
Purchases of marketable securities		(17,342	)		(54,062	)
Maturities of marketable securities		37,750			70,750
Net cash provided by investing activities		20,408			16,391
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock incentive plans		—			154
Net cash provided by financing activities		—			154
Effect of exchange rate changes on cash and cash equivalents		(7	)		(12	)
Net decrease in cash and cash equivalents		(2,461	)		(4,327	)
Cash and cash equivalents at the beginning of period		35,493			40,456
Cash and cash equivalents at the end of period	$	33,032		$	36,129
Supplemental disclosures of noncash investing and financing information:
Purchases of property and equipment in accounts payable	$	—		$	1,234
Par value of common stock upon cashless exercise of prefunded warrants	$	—		$	2
Supplemental disclosures
Cash paid for interest	$	336		$	310

See accompanying notes to the unaudited condensed consolidated financial statements

5

Kezar Life Sciences, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Description of the Business

Description of Business

Kezar Life Sciences, Inc. (the “Company,” “we,” “us,” or “our”) was incorporated in the state of Delaware in February 2015 and commenced operations in June 2015. The Company is a clinical-stage biotechnology company developing novel small molecule therapuetics to treat unmet needs in immune-mediated diseases and cancer. The Company’s principal operations are in South San Francisco, California, and it operates in one segment.

Liquidity

Since commencing operations in mid-2015, substantially all of the Company’s efforts have been focused on research, development, and the advancement of the Company’s product candidates, zetomipzomib (KZR-616) and KZR-261. The Company’s ultimate success depends on the outcome of these ongoing research and development activities. The Company has not yet generated product sales and as a result has experienced operating losses since inception and had an accumulated deficit of $372.4 million as of March 31, 2024. The Company expects to incur additional losses in the future to conduct research and development and will need to raise additional capital to fully implement management’s business plan. The Company intends to raise such capital through the issuance of additional equity, including through at-the-market (“ATM”) offerings, and potentially through borrowings, strategic alliances with partner companies and other licensing transactions such as Everest Collaboration that was entered into on September 20, 2023. However, if such financing is not available at adequate levels, the Company may need to reevaluate its operating plans. Management believes that its existing cash, cash equivalents and marketable securities will be sufficient to fund the Company’s cash requirements for at least 12 months following the issuance of these financial statements.

In December 2021, the Company entered into a Sales Agreement (the “ATM Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company can offer and sell, from time to time at its sole discretion through Cowen, as its sales agent, shares of its common stock having an aggregate offering price of up to $200.0 million. Any shares of its common stock sold will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-261774). The Company will pay Cowen a commission up to 3.0% of the gross sales proceeds of any shares of its common stock sold through Cowen under the ATM Agreement and also has provided Cowen with indemnification and contribution rights. As of March 31, 2024, we have sold an aggregate of 11,986,003 shares of our common stock for gross proceeds of approximately $131.7 million at a weighted average purchase price of $10.98 per share pursuant to the ATM Agreement. As of March 31, 2024, approximately $68.3 million remains available under the ATM Agreement. No shares were sold under the ATM Agreement during the three months ended March 31, 2024.

2. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 14, 2024 (the “Annual Report”), and there have been no material changes during the three months ended March 31, 2024.

Basis of Presentation and Consolidation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the Company’s accounts and those of its wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd., which is a proprietary company limited by shares. All intercompany balances and transactions have been eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Annual Report.

Unaudited Condensed Consolidated Financial Statements

The accompanying financial information as of March 31, 2024 is unaudited. The interim condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that our management considers

6

necessary for the fair statement of the results of operations for the interim periods covered and of our financial condition at the date of the interim balance sheet. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such judgments, estimates and assumptions include the valuation of marketable securities, impairment of long-lived assets, determining the fair-value of stock-based compensation, and evaluating the progress to completion of external research and development costs. Management bases its estimates on historical experience and on various other market-specific relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its judgments, estimates and assumptions or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-09 Income Taxes (Topic 740) – Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires entities to disclose specific categories in the income tax rate reconciliation annually and provide additional information for reconciling items that meet a qualitative threshold. ASU 2023-09 also requires that entities disclose annually additional information about income taxes paid and disaggregated information for certain items. ASU 2023-09 is effective for the Company beginning on January 1, 2025. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its financial position, results of operations and cash flows.

In November 2023, the FASB issued Accounting Standards Update No. 2023-07 Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires entities to disclose incremental segment information on an annual and interim basis. ASU 2023-07 requires entities with a single reportable segment to provide all the disclosures required by the amendments in ASU 2023-07 and all existing segment disclosures in Segment Reporting (Topic 280). ASU 2023-07 is effective for the Company beginning on January 1, 2024, and interim periods beginning on January 1, 2025. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its financial position, results of operations or cash flows.

There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance that are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.

3. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. The carrying amount of certain financial instruments, including cash, cash equivalents, other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

7

Level 2: Observable inputs other than Level 1 prices, 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 assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are required to be recognized or disclosed at fair value in the financial statements. The Company determines the fair value of Level 1 assets using quoted prices in active markets for identical assets. The Company reviews trading activity and pricing for Level 2 investments as of each measurement date. Level 2 inputs, which are obtained from various third-party data providers, represent quoted prices for similar assets in active markets and were derived from observable market data, or, if not directly observable, were derived from or corroborated by other observable market data.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. The Company did not have any financial assets or liabilities measured using Level 3 inputs as of March 31, 2024 or December 31, 2023.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above (in thousands):

	March 31, 2024
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	32,894	$	32,894	$	—	$	—
Marketable securities:
Certificate of deposit		522		—		522		—
U.S. Treasury securities		48,017		48,017		—		—
Commercial paper		70,757		—		70,757		—
U.S. government agency bonds		27,470		—		27,470		—
Total	$	179,660	$	80,911	$	98,749	$	—

	December 31, 2023
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	35,349	$	35,349	$	—	$	—
Marketable securities:
Certificate of deposit		544		—		544		—
U.S. Treasury securities		54,175		54,175		—		—
Commercial paper		65,070		—		65,070		—
U.S. government agency bonds		46,090		—		46,090		—
Total	$	201,228	$	89,524	$	111,704	$	—

Nonrecurring Fair Value Measurements

The ROU asset associated with Suite 400 of the Company's headquarters in South San Francisco, California, is a separate asset group measured at fair value on a nonrecurring basis as of December 31, 2023 due to an impairment recognized on the ROU asset at that date (see Note 6). The fair value of this asset group calculated as the present value of the estimated future cash flows of sublease income attributable to the ROU asset associated with Suite 400, was classified in Level 3 of the fair value hierarchy. When calculating the present value of the estimated future cash flows, sublease income was estimated to increase at a rate of 3.5% per year, and the cash flows were discounted using a rate of 13.3%.

8

4. Available-for-Sale Securities

The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheets (in thousands):

	March 31, 2024
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	32,894	$	—	$	—		$	32,894
Marketable securities:
Certificate of deposit		522		—		—			522
U.S. Treasury securities		48,041		13		(37	)		48,017
Commercial paper		70,799		10		(52	)		70,757
U.S. government agency bonds		27,484		8		(22	)		27,470
Total	$	179,740	$	31	$	(111	)	$	179,660
Cash									138
Total cash, cash equivalent and marketable securities								$	179,798

	December 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	35,349	$	—	$	—		$	35,349
Marketable securities:
Certificate of deposit		544		—		—			544
U.S. Treasury securities		54,066		151		(42	)		54,175
Commercial paper		65,038		41		(9	)		65,070
U.S. government agency bonds		46,115		27		(52	)		46,090
Total	$	201,112	$	219	$	(103	)	$	201,228
Cash									144
Total cash, cash equivalent and marketable securities								$	201,372

The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of March 31, 2024 and December 31, 2023.

The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of March 31, 2024 and December 31, 2023 (in thousands):

	March 31, 2024
	Less than 12 consecutive months
	Fair Value		Unrealized Losses
U.S. Treasury securities	$	27,596	$	(37	)
Commercial paper		48,128		(52	)
U.S. government agency bonds		20,455		(22	)
Total	$	96,179	$	(111	)

	December 31, 2023
	Less than 12 consecutive months
	Fair Value		Unrealized Losses
U.S. Treasury securities	$	16,261	$	(42	)
Commercial paper		20,789		(9	)
U.S. government agency bonds		39,052		(52	)
Total	$	76,102	$	(103	)

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The Company believes that the individual unrealized losses represent temporary declines primarily resulting from interest rate changes and intends to hold these marketable securities to their maturities.

The Company currently does not intend to sell these securities prior to maturity, and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost basis, which may be at maturity. The Company evaluated securities with unrealized losses to determine whether such losses, if any, were due to credit-related factors and determined that there were no credit-related losses to be recognized as of March 31, 2024. There were no sales of available-for-sale securities in any of the periods presented.

As of March 31, 2024, the amortized cost and estimated fair value of the Company’s available-for-sale securities by contractual maturity are shown below (in thousands):

	Amortized		Estimated
Available-for-sale securities maturing in:	Cost		Fair Value
One year or less	$	176,326	$	176,244
One to two years		3,414		3,416
Total available-for-sale securities	$	179,740	$	179,660

5. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	March 31, 2024		December 31, 2023
Advance for clinical-related costs, current	$	783	$	1,818
Licenses, dues and subscriptions		637		506
Insurance		388		712
Receivable from Everest (Note 10)		2,407		1,596
Interest receivable		648		695
Others		952		251
Total prepaid expenses and other current assets	$	5,815	$	5,578

Property and Equipment, Net

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

	March 31, 2024			December 31, 2023
Leasehold improvements	$	3,488		$	3,488
Furniture, laboratory and office equipment		5,559			5,559
Computer equipment		285			285
Total property and equipment		9,332			9,332
Less: accumulated depreciation and amortization		(5,680	)		(5,420	)
Property and equipment, net	$	3,652		$	3,912

Depreciation expense was $0.3 million for the three months ended March 31, 2024 and 2023, respectively.

Other Assets

Other assets consisted of the following (in thousands):

	March 31, 2024		December 31, 2023
Advance for clinical related costs, non-current	$	4,717	$	4,787
Deposits for operating lease		674		674
Other		110		134
Total other assets	$	5,501	$	5,595

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Accrued and Other Current Liabilities

Accrued liabilities consisted of the following (in thousands):

	March 31, 2024		December 31, 2023
Accrued preclinical and research costs	$	1,293	$	756
Accrued clinical costs		3,291		1,801
Accrued employee-related costs		1,709		3,708
Accrued professional services		236		110
Others		135		106
Total accrued liabilities	$	6,664	$	6,481

6. Lease

In November 2022, the Company entered into an amendment to the lease agreement for its corporate headquarters in South San Francisco, California, which expanded the leased premises in the same building as its corporate headquarters and extended the lease term of the original premises to be coterminous with the expansion premises to July 31, 2026. The transaction was treated as a lease modification as of the effective date and resulted in the recognition of approximately $8.0 million in new lease liabilities and right-of-use (“ROU”) assets.

In December 2023, the Company committed to a plan to sublease Suite 400 of its corporate headquarters in connection with a workforce reduction (see Note 14) and evaluated the recoverability of ROU asset by comparing the carrying amount of the asset to future net undiscounted cash flows associated with the asset. The ROU asset is considered to be impaired as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Consequently, the Company recognized a $2.7 million impairment charge in 2023.

Information related to the Company’s lease liabilities were as follows (in thousands):

	Three months ended March 31, 2024
Cash paid for operating lease liabilities	$	711
Operating lease costs		667
Variable lease costs		449
Maturities of lease liabilities as of March 31, 2024 were as follows:
Less than 12 months	$	3,923
13 - 24 months		4,060
25 - 36 months		1,387
Total undiscounted lease payments		9,370
Less: imputed interest		(1,217	)
Total lease liabilities	$	8,153
Operating lease liabilities, current	$	3,134
Operating lease liabilities, noncurrent		5,019
Total operating lease liabilities	$	8,153

7. Debt

In November 2021, the Company entered into a loan agreement (the “Loan Agreement”) with Oxford Finance, LLC (“Oxford Finance”), which provided the Company up to $50.0 million in borrowing capacity across five potential tranches (each a “Term Loan,” and collectively “Term Loans”). The initial tranche of $10.0 million was funded at the closing of the Loan Agreement. The remaining tranches were dependent on achieving certain clinical trial milestones. The Company declined these remaining tranches in borrowing capacity available to it under the Loan Agreement. The loan facility is secured by all assets except intellectual property, which is subject to a negative pledge, and will mature on November 1, 2026 (the “Maturity Date”). There are no warrants or financial covenants associated with the Loan Agreement.

Until June 30, 2023, the Term Loans bore interest at a floating per annum rate (based on the actual number of days elapsed divided by a year of 360 days) equal to the sum of (a) the greater of (i) 30-day U.S. LIBOR rate reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue and (ii) 0.08%, plus (b) 7.87%. The Company is required to make monthly interest-only payments prior to the amortization date of January 1, 2025, subject to a potential

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one-year extension upon satisfaction of certain conditions. A LIBOR transition event occurred effective July 1, 2023 and Oxford Finance subsequently replaced the LIBOR rate with the 1-month CME term SOFR plus 0.1%. The rate change did not require contract remeasurement at the effective date of the change or a reassessment of any previous accounting determinations pertaining to the facility. The rate change did not have a material impact on the Company’s financial statements.

All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date. The Company has the option to prepay the outstanding balance prior to maturity, subject to a prepayment fee of 1.0% to 2.0% depending upon when the prepayment occurs. Upon repayment of the Term Loans, the Company is required to make a final payment fee to the lenders equal to 6.5% of the original principal amount of the Term Loans funded which will be accrued by charges to interest expense over the term of the loans using the effective interest method.

The Loan Agreement also includes subjective acceleration clauses which permit the lenders to accelerate the Maturity Date under certain circumstances, including, but not limited to, material adverse effects on a Company’s financial status or otherwise. As of March 31, 2024, the Company is in compliance with all covenants in the Loan Agreement.

Interest expense was $0.4 million for the three months ended March 31, 2024, compared to $0.4 million for the three months ended March 31, 2023. The initial effective interest rate on the Term Loans, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 11%. The components of the long-term debt balance are as follows:

	March 31, 2024			December 31, 2023
Principal loan balance	$	10,000		$	10,000
Unamortized debt discount and issuance costs		(216	)		(243	)
Cumulative accretion of final fee		349			312
	$	10,133		$	10,069
Debt, current	$	1,304		$	—
Debt, noncurrent		8,829			10,069
Debt, net	$	10,133		$	10,069

As of March 31, 2024, the estimated future principal payments due were as follows:

Years Ending December 31,
2024	$	—
2025		5,217
2026		4,783
Total	$	10,000

8. Pre-Funded Warrants

In connection with the Company’s previous underwritten public offerings, the Company issued pre-funded warrants to purchase an aggregate of 3,793,706 shares of the Company’s common stock. Each pre-funded warrant entitled the holder to purchase shares of common stock at an exercise price of $0.001 per share and expired 20 years from the date of issuance. These warrants were recorded as a component of stockholders’ equity within additional paid-in capital. In January 2023, warrant holders exercised 2,236,553 shares of outstanding pre-funded warrants at an exercise price of $0.001 per share. In April 2023, warrant holders exercised the remaining 1,557,153 shares of outstanding pre-funded warrants. As of March 31, 2024, there were no pre-funded warrants outstanding.

9. Stock-Based Compensation

Stock Incentive Plans

2022 Inducement Plan

In April 2022, the Company adopted the Kezar Life Sciences, Inc. 2022 Inducement Plan (the “Inducement Plan”), which is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq Listing Rule 5635(c)(4), for the award of nonstatutory stock options (“NSOs”), restricted stock units (“RSUs”) and other equity awards as permitted by the Inducement Plan (collectively, “Inducement Awards”) to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company (“Eligible Recipients”). Under the Inducement Plan, the Company may grant up to 3,000,000 shares of Common Stock in the form of Inducement Awards to Eligible Recipients in compliance with the requirements of Nasdaq Listing Rule 5635(c)(4).

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Awards must be approved by either a majority of the Company’s independent directors or the Company’s independent compensation committee. Consultants and directors are not eligible to received grants under the Inducement Plan.

As of March 31, 2024, options to purchase 1,167,854 shares of common stock were outstanding, and 1,832,146 shares were available for future issuance under the Inducement Plan.

2018 Equity Incentive Plan

In June 2018, the Company’s board of directors adopted and the stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), which became effective as of June 20, 2018, at which point no further grants could be made under the 2015 Equity Incentive Plan (the “2015 Plan”) described below. Under the 2018 Plan, the Company may grant incentive stock options (“ISOs”), NSOs, stock appreciation rights, restricted stock awards, RSUs and other stock-based awards. As of March 31, 2024, options to purchase 13,047,923 shares of common stock and 197,327 RSUs were outstanding, and 2,429,636 shares were available for future issuance under the 2018 Plan.

Initially, subject to adjustment as provided in the 2018 Plan, the aggregate number of shares of the Company’s common stock authorized for issuance pursuant to stock awards under the 2018 Plan was 4,000,000 shares, which is the sum of (i) 1,600,692 shares plus (ii) the number of shares reserved and available for issuance under the 2015 Plan at the time the 2018 Plan became effective and (iii) the number of shares subject to stock options or other stock awards granted under the 2015 Plan that expire, terminate are forfeited or otherwise not issued, or are withheld to satisfy a tax withholding obligation in connection with an award or to satisfy a purchase or exercise price of an award (such as upon the expiration or termination of a stock award prior to vesting). The number of shares of the Company’s common stock reserved for issuance under the 2018 Plan automatically increases on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 5% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors prior to such increase.

The maximum number of shares that may be issued upon the exercise of ISOs under the 2018 Plan is 12,500,000 shares.

2015 Equity Incentive Plan

The 2015 Plan provided for the granting of ISOs and NSOs to employees, directors and consultants at the discretion of the Company’s board of directors. The 2015 Plan was terminated as to future awards in June 2018, although it continues to govern the terms of options that remain outstanding under the 2015 Plan.

No additional stock awards will be granted under the 2015 Plan, and all outstanding stock awards granted under the 2015 Plan that are repurchased, forfeited, expire or are cancelled will become available for grant under the 2018 Plan in accordance with its terms.

Options granted under the 2015 Plan expire no later than 10 years from the date of grant. Options granted under the 2015 Plan vest over periods determined by the Company’s board of directors, generally over four years. The 2015 Plan allows for early exercise of certain options prior to vesting. Upon termination of employment, the unvested shares are subject to repurchase at the original exercise price. As of March 31, 2024, options to purchase 1,363,394 shares of common stock were outstanding under the 2015 Plan.

2018 Employee Stock Purchase Plan

In June 2018, the Company’s board of directors adopted and the stockholders approved the 2018 Employee Stock Purchase Plan (the “ESPP”), which became effective as of June 20, 2018. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 200,000 shares. The ESPP provides for an annual increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the prior fiscal year or (ii) 375,000 shares, or a lesser number of shares determined by the Company’s board of directors prior to such increase. In December 2023, the Company’s board of directors acted such that there was no increase of the number of shares of common stock reserved for issuance under the ESPP as of January 1, 2024. As of March 31, 2024, 589,950 shares of common stock had been issued under the ESPP and 743,274 shares remained available for future issuance under the ESPP.

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The price per share of common stock to be paid by an ESPP participant on the applicable purchase date of an offering period shall be equal to 85% of the lesser of the fair market value of a share of common stock on (i) the applicable offering date or (ii) the applicable purchase date. The Company’s board of directors authorized an initial six-month offering period beginning on November 16, 2018 and ending on May 15, 2019. The Company’s board of directors has subsequently authorized additional six-month offering periods, with the most recent offering period beginning on November 16, 2023.

Option Repricing

On July 24, 2023, the Compensation Committee of the Company’s board of directors approved a stock option repricing (the “Option Repricing”) in which the exercise price of certain outstanding options to purchase shares of the Company’s common stock under the 2018 Plan was reduced to $2.28 per share, the closing price of the Common Stock on July 24, 2023. Outstanding options that were granted under the 2015 Plan and the Inducement Plan were not included in the Option Repricing. The Option Repricing included options granted pursuant to the 2018 Plan that were held by, among others, members of the Company’s board of the directors (other than options granted in June 2023) and the Company’s named executive officers and principal financial officer.

As a result of the Option Repricing, 9,904,755 shares of vested and unvested stock options outstanding as of July 24, 2023, with original exercise prices ranging from $2.44 to $22.85 per share, were repriced to $2.28 per share. The total incremental fair value to be recognized as a result of the repricing was approximately $4.7 million on the date of Option Repricing, of which $2.8 million related to the vested option shares had been recognized as stock-based compensation expense and $0.5 million related to the unvested option shares subsequently cancelled due to termination as of March 31, 2024. The remaining $1.4 million related to the unvested option shares will be amortized over the remaining requisite service periods through the end of 2026.

Stock Option Activity

The following table summarizes activity under the Company’s stock option plans and related information (in thousands, except share and per share amounts):

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2023		13,110,717		$	2.60		7.1	$	118
Options granted		2,985,000		$	0.93
Options exercised		—		$	—			$	—
Options cancelled/forfeited		(516,546	)	$	2.81
Outstanding as of March 31, 2024		15,579,171		$	2.27		7.4	$	63
Vested and exercisable as of March 31, 2024		7,397,723		$	2.63